A refresher course on the types of insurance you should have for your practice

If you’re like most plastic surgeons, you’ve never filed a claim with your insurance company. In most practices, insurance is reviewed—or should be reviewed—once per year when the invoice arrives and is paid as a cost of doing business. Insurance has its own language, and insurance people seem to be the only ones who understand it.

We all do what it takes in our practices to limit our risks and exposures, and insurance is a primary risk-management tool. In our increasingly litigious society, having the proper insurance is more important than ever. Therefore, you need to understand the kind of insurance you have, and you need to have an insurance agent or broker who speaks your language. Your carrier also needs to have a high rating so that you can be sure that it will be there in the future if a patient files a claim or suit.

I cannot make any blanket statements about insurance in this article, because insurance is governed in each state by the state’s insurance department. Insurance companies must be registered with the state where they are located and receive approval to sell in that state. Some states even have an insurance commissioner, who is a watchdog over the solvency of insurance companies that operate within that state. You can clarify insurance issues through your state’s insurance department.

Insurance companies are rated based on their assets and performance by the AM Best Co. The highest rating is “A.” Be­cause insurance claims are paid in the future, you must be sure that your carrier will be there in the event a payment is required. Always ask about your carrier’s rating at each renewal.

In the event of a claim or a lawsuit, your insurance company will often represent you in court. Here again, you need to be sure that your carrier will have the appropriate resources to defend the claim effectively.

Practice Insurance
It’s very important that you have “tight” insurance with no “gaps.” Usually, you will need different types of insurance for your specific practice, as well as malpractice insurance for your actual work.

Be sure that you have coverage for every type of surgical procedure you might perform. If your practice is limited to facial plastic surgery and you perform a surgery on a patient’s leg, you might not be covered.

If you have an office and a staff, you need additional insurance. Most states require workers’ compensation insurance for all employees, which pays the medical costs and lost work time in the event an employee is injured on the job. Most states have minimum requirements for workers’ compensation insurance, but as a plastic surgeon, you would probably want to look at higher limits. The premium for a much higher limit is a bit higher, but this represents better risk management.

You may also wish to offer health, life, and disability insurance for your employees and their families. Some surgeons purchase insurance for their employees, whereas others pay a portion of it and the employees pay the remainder.

Usually, there is a benefit for you, as the practice owner, to offer such employee benefits through a section 125 plan. This allows payroll deductions for qualified employee benefits to be made before taxes, which reduces your employee’s taxable income and your practice’s matching FICA taxes.

Offering such benefits is a great employee-retention tool. Surveys have shown that employees feel better about their employer when a comprehensive package of employee benefits is available—even if the employees pay for some or all of it.

You will also need liability insurance for your office, which protects you in the event that a patient or a visitor is injured there. Liability is often part of a general-business package policy that will also cover such risks as property damage, fire, theft, and vandalism. The best option is to purchase an “all-risk” policy.

Business interruption may also be included in such a package. This type of insurance protects you in the event that your practice must be closed for a period of time, causing you to lose income. For example, a burst pipe might cause your office to be flooded, requiring you to close your practice for a week or two while repairs are made. Business-interruption insurance will pay you a portion of your lost revenues.

You should have disability insurance for yourself. As you know, if you were to become disabled in a way that you were no longer able to perform surgery, your income potential would be severely reduced. Here again, good risk management dictates that you purchase a disability policy that is specific to your work so that you would be paid if you were unable to perform your usual and customary work (as opposed to “any” work).

Medical-Spa Insurance
Many plastic surgeons are opening medical spas. In some cases, a plastic surgeon may be the medical director for a medical spa outside his or her practice, while in other cases, a plastic surgeon will open a medical spa inside his or her practice. Be sure to talk with your insurance agent if any of these situations applies to you.

If you are the medical director of someone else’s medical spa, your current malpractice insurance may not cover you. If you intend to perform procedures at this spa, be sure to communicate with your insurance agent or carrier so that you are covered for those procedures.

Be specific about what you are doing. If you are covered for injectables, mesotherapy may not be included under the general-business package policy by all carriers. If the medical spa’s owner with whom you will be working says that you are covered under his or her policy, be sure to request an insurance certificate showing you as a named insured. Insurance is in effect as long as the premiums are paid, so I recommend that you request these certificates on a quarterly basis.

The field can be so confusing that the International Medical Spa Association (IMSA) has created a partnership with an insurance-brokerage company to offer insurance packages for medical-spa operators. I recently spoke to Gina Meyer of the law firm Scanlon, Guerra, Jacobsen, and Burke, located in Woodland Hills, Calif. She told me, “The field is changing all the time. Some companies cover procedures that others don’t. Doctors who make assumptions about their coverage can find themselves open to risks they didn’t expect. It’s so important to review your coverage with a good agent monthly or quarterly.”

For a new practice or a new operation such as a medical spa, one of the mistakes often made is seeking quotes from several agents at the same time. Because the medical-spa insurance market is not very big, the same information may end up on the desk of an underwriter from several different agents. This reduces the chance of obtaining the best insurance rate.

The best strategy when starting a new practice or a new operation, or when seeking competitive quotes at renewal time, is to use one broker who has good relationships in the entire market so that you can obtain the best rates.

Premiums are high, but financing is available. Some carriers offer payment plans, and many brokers offer access to credit providers for insurance payments.

Patient Insurance and Financing
The last area I will discuss is patient insurance. You may perform some procedures that are paid by patients’ insurance plans and others that are not. We are all painfully aware of the way health-insurance companies limit payments for covered surgeries; hence, the trend toward aesthetic surgery, which is paid by the patient.

When there are medical complications as a result of aesthetic surgery, patients’ regular health insurance will normally not cover their treatment. You should be prepared for this eventuality by purchasing a type of insurance that covers specified complications for a defined set of elective procedures. The covered complications include infection, hemorrhage, and pulmonary embolism, pulmonary dysfunction, arrhythmia, and others. To be covered, the complication must occur within a specified period after the procedure.

We have found that patients who are willing to pay for procedures may not have the full amount available to them at the time the payment is due. Offering a patient payment plan will help you make the sale and allow the patient to move forward with his or her procedure. In turn, your practice receives payment within 2 business days. Some patient-financing plans offer 0% interest financing for up to 18 months, so patients feel they are receiving a great deal—especially when general finance companies may charge them upward of 18% APR.

You may have to pay a small fee for this service, but the increased business for you and the convenience for your patients will make this a smart investment. A patient-financing service enables you to attract a larger number of patients that you might not otherwise reach. PSP

Cheryl Whitman, a beauty-industry consultant for more than 20 years, is the founding board member of the Medical Spa Society and an active member of the Day Spa Association. She can be reached at (201) 541-5405 or via her Web site, www.medicalspaconsultant.com.