Who Pays for Medical Malpractice Insurance Premiums?

Employed Physicians: Hospitals, Health Systems, and Large Group Practices

Physicians employed by a hospital, health system, or large group practice are typically covered under the employer’s malpractice policy. The employer usually selects the carrier, sets the coverage limits, and pays the premiums as part of the physician’s overall compensation package. In most cases, the employed physician has little or no input into the policy details.

Employer-provided malpractice coverage is typically claims-made, meaning the policy only covers incidents reported while the policy is active. A physician who leaves a position without arranging tail coverage may have no protection for claims that are reported after the policy ends.

For a deeper look at malpractice insurance policy types, see Claims-Made vs. Occurrence Medical Malpractice Insurance.

Independent Practitioners: Private Practice, Solo Practice, and Small Groups

Physicians in private practice, solo practice, or smaller group settings are generally responsible for securing and paying for their own malpractice coverage. For physicians in a group practice, the practice may pay the premium, but that cost is effectively deducted from the physician’s compensation.

Independent practitioners have greater control over policy selection, including policy type and coverage limits, but they also bear administrative and financial responsibility for maintaining coverage. That includes shopping for a carrier, understanding the differences between policy types, and ensuring coverage does not lapse between practice transitions.

Independent practitioners and small group physicians who purchase coverage on their own may also want to explore association-based options. AMA Insurance works with top-rated national carriers to provide competitive medical professional liability coverage, and offers a variety of discounts — including claims-free, part-time, and new doctor discounts. Coverage is available in all 50 states; discounts vary by state and carrier.

Locum Tenens, Telemedicine, and Hybrid Arrangements

Malpractice coverage and premium responsibility in locum tenens, telemedicine, and other hybrid settings can be more fragmented than in traditional employment, and should be confirmed before starting an assignment.

Some locum tenens staffing agencies provide malpractice coverage for physicians working on assignment through the agency, but the coverage is typically limited to work performed through that specific agency. A physician working assignments through two different agencies at the same time may need separate coverage for each.

Physicians who arrange locum tenens assignments directly with a facility, without going through a staffing agency, are generally responsible for securing and paying for their own medical malpractice coverage.

Payment for malpractice coverage in telemedicine arrangements varies. Some telemedicine companies include malpractice coverage for their physicians. Others expect physicians to carry their own. Physicians should confirm that their malpractice policy explicitly covers telemedicine services — including care services across state lines and in any state where the telemedicine platform operates — before engaging in telemedicine practice.

Tail coverage is a medical malpractice insurance endorsement that allows a physician to report claims after a claims-made policy ends, for incidents that occurred while the policy was active. It is typically needed when a physician changes jobs, switches carriers, or retires.

Tail coverage is not cheap. Purchasing it separately can cost 1.5 to 2 times the amount of the final year’s premium on the policy — though the cost varies by specialty and carrier — making it a significant financial exposure at a career transition.

Who Pays for Tail Coverage?

Either the employer or the physician pays for tail coverage, or in some cases both, depending on what is dictated in the employment contract. Common arrangements for tail coverage payment include:

• Employer pays in full: Larger institutions, hospitals, and health systems are more likely to cover the full cost of tail coverage, in part because they have the most at stake if a physician leaves without it.
• Physician pays in full: Some employers, particularly smaller practices, require the physician to purchase tail coverage independently upon departure.
• Graduated responsibility based on tenure: Some contracts reduce the physician’s share of tail costs over time, with the employer covering a larger percentage after more years of continuous employment.
• Contract is silent: When a contract does not address tail coverage at all, responsibility is typically assumed to fall on the physician. This can be a common point of confusion for physicians leaving a first attending position.

The circumstances of departure can also determine who pays for tail coverage. Many contracts specify that the physician is responsible for tail costs when the physician chooses to leave or is terminated for cause, and that the employer covers the cost in other circumstances. Addressing tail coverage responsibility is an important part of contract negotiations for physicians.

Before starting a new position or arrangement, physicians should ask a few questions to understand who pays their medical malpractice insurance premiums, who controls the policy, and where gaps may occur:

• What type of malpractice policy does the employer carry? Claims-made and occurrence policies have different cost structures and tail coverage requirements.
• Who is responsible for purchasing tail coverage, and does that change depending on how employment ends? Many contracts distinguish between voluntary resignation, termination for cause, and other circumstances.
• Does the employer’s malpractice insurance policy cover all of my clinical work? Outside work, moonlighting, and telemedicine services through a separate platform may not be included.
• For physicians working through a staffing agency: Does coverage apply only to assignments arranged through that agency? Who is responsible for tail coverage when the arrangement ends?
• For physicians arranging a locum tenens assignment directly with a facility: Who is responsible for securing malpractice insurance coverage?

For a deeper look at malpractice insurance costs, including how specialty and state affect premiums, see A Closer Look at Medical Malpractice Premiums.

Learn more about medical professional liability insurance options or to speak with a specialist about your specific situation.