Medical malpractice insurance protects doctors and other health-care providers from litigation related to their practice of medicine. The insurance pays the cost of defending providers from malpractice lawsuits and pays damages awarded by courts. A survey by Americans for Insurance Reform found that the cost of medical malpractice insurance averaged about $11,150 per doctor in 2008. A provider's premiums are closely tied to the type of medicine he practices and the laws of the state in which he works.
According to the Robert Wood Johnson Foundation, nearly every state requires doctors to carry medical malpractice insurance in order to practice. The rest usually require that physicians have coverage in order to gain hospital privileges. Still, in some states a provider can go without malpractice insurance in many circumstances. Florida, for example, allows a doctor to be uninsured as long as he informs patients of that fact, says the Florida-based McMillen Law Firm. The Robert Wood Johnson Foundation says about 5 percent of Florida doctors "go bare."
Providers can purchase individual malpractice coverage or receive coverage through their employer, if they are employed directly by a hospital or some other organization. Individual coverage may be more expensive than a policy subsidized by an employer, but it ensures that a provider will have her own lawyer looking out for her interests, not those of her employer, says the American Academy of Physician Assistants.
Policies come in two basic types: "claims made" and "occurrence." A claims-made policy will cover the provider for as long as the policy is in effect. If the policy lapses and the provider is sued over something he did while under the policy, the insurer won't cover it. Providers can buy "tail insurance" that ensures that the claims-made insurer will continue to cover them for claims stemming from the policy period. An occurrence policy covers the provider for all claims that stem from the policy period, regardless of when the claim is made or whether the policy has lapsed.
Medical malpractice insurers take several factors into account when setting premiums. One of the biggest is the type of work a health-care provider does. Some specialties have a significantly higher rate of claims than others and will thus pay higher premiums. CoverMD, a malpractice insurance referral service, says the highest-risk specialties are neurosurgery, followed by obstetrics/gynecology. Other factors include the state where a provider practices, the coverage amounts purchased and the specific type of coverage. A provider's past record of claims -- how often he's been sued -- receives some consideration, but not as much as you might think. As CoverMD puts it, insurers recognize how litigious society has become. Any provider can be sued at any time, even for a case in which she had minimal involvement. That's one reason why the Robert Wood Johnson Foundation says individual providers' claims histories are generally too variable to base premiums on them.