Column: Weighing the options: Protecting your assets during a medical malpractice crisis

August 1, 2008

You don't need to read another article telling you how terrible the malpractice crisis is. You already know that lawsuits are on the rise, jury awards are out of control, malpractice premiums are escalating to the point of being unaffordable, and the practice of medicine as we know it is severely threatened.

Key Points

You don't need to read another article telling you how terrible the malpractice crisis is. You already know that lawsuits are on the rise, jury awards are out of control, malpractice premiums are escalating to the point of being unaffordable, and the practice of medicine as we know it is severely threatened.

What you do need are alternatives and solutions. To best judge the choices, you need to understand the pros and cons, as well as the costs and benefits of each option.

As authors of The Doctor's Wealth Protection Guide and contributing authors to more than 200 medical journals, we get a lot of feedback from physicians just like you who are fed up with what is going on today.

Quit medicine

When the time is right, go see a financial planner who can help you comfortably plan your well-deserved retirement. You might be surprised how close you actually are. For now, let's look at the options you have - assuming you still want (or need) to work.

Pay up

The easiest option is to just pay the premiums on the table from your malpractice carrier.

We recently attended a conference in San Diego that was devoted solely to the "hard-to-place" medical malpractice market.

Because of our contacts, we have helped quite a few doctors find malpractice coverage after they were canceled or non-renewed. One organization actually has the capability to help doctors in 30 states.

The key point is that, even if you think you aren't insurable, there might be a carrier out there willing to write a policy for you - thus preserving your privileges at the hospital and your relationships with your insurance payers.

Self-insure

Many large groups are considering self-insurance.

You can join an existing Risk Retention Group (RRG) or set up your own Captive Insurance Company (CIC).

Though most medical groups find alternative means of protecting themselves from medical malpractice, a growing number of medical practices are utilizing the risk management, asset protection and tax-favored benefits of self-insuring with CICs.

Typically, medical groups use CICs to self-insure for risks other than traditional medical malpractice. These risks might include legal defense (medical malpractice), HIPAA violations, Medicare fraud, insurance fraud, loss of medical license and other similar risks.

Recent changes in the law on captives make it important for a physician to find someone with a great deal of experience in captive insurance and with the healthcare industry.

Go bare

Though many doctors are considering captives - especially in Florida and other high-risk states - there are many pitfalls to going bare.

The main benefit of going bare is that you will be a less-attractive lawsuit target if you don't have insurance.

This is true if, and only if, you have implemented a comprehensive asset protection plan prior to any action that could potentially result in a lawsuit.

Placing assets in a spouse's name or into a living trust does NOT provide asset protection.

Furthermore, your brokerage accounts and rental real estate are NOT protected in any state!

Lastly, your practice assets (such as equipment, real estate and accounts receivable) may be at risk to lawsuits from the actions of you or any of your partners.

Are you the worst doctor in your group? If not, then there is someone out there whose potential liability may cost you dearly.