Is reducing your malpractice coverage worth the risk?

Let's face it. Even if you're among the lucky majority whose liability insurance costs have remained relatively stable in recent years, carrying malpractice coverage is incredibly expensive. In states that don't expressly require physicians to carry malpractice insurance, physicians have a number of options to drop or reduce coverage, thus saving money and potentially becoming less attractive to plaintiff's attorneys seeking deep pockets.

Of course, with the statistical likelihood of a physician facing a malpractice suit nearly inevitable at 95 percent, no coverage-reduction strategies is without risk. A recent article from Medscape Today lays out the pros and cons of the following tactics used by some physicians:

  • Going bare. Some states, as an alternative to requiring physicians to carry a minimum level of medical liability insurance, allow physicians to secure a letter of credit (often for $500,000), almost always backed by a physician's personal assets, as well as his or her personal guarantee. In the event of a malpractice suit, all of this is on the line to come out of the physician's own pocket.
  • Self-insurance. 'Self-insurance' is supposed to mean that, instead of paying premiums to an insurance company to reap coverage in the event of a claim, a physician builds this pot of money independently. It should not be code for, "I have no professional liability insurance, so don't bother suing me." Nonetheless, some physicians go so far as to post signs in their offices notifying patients of as much, potentially putting a strain on the relationship while offering no real protection from a claim of medical negligence.
  • Defense-only coverage. These policies cover the defense of a malpractice suit only, but do not provide any coverage for a payout. Such a ruling could lead to a lien on assets or wage garnishment.

To learn more:
- read the article in Medscape Today