Lamb McErlane partner Vasilios (Bill) Kalogredis was interviewed, featured and quoted in the September 2024 edition of DermWorld, the American Academy of Dermatology Association’s monthly publication.

Peace of mind

Finding the right insurance coverage to protect your practice.

 By Andrea Niermeier, Contributing Writer

While the adage goes, “By failing to prepare, you are preparing to fail,” this simple witticism has grown complicated for dermatologists looking to protect themselves, their practices, and their patients. For dermatologists who own and run their own practices, mitigating liabilities may feel like wading in a large sea of coverage expectations — with types including health, general, property, and life insurance just for starters. Nowadays dermatology practices have a plethora of insurance protections from which to choose. Analyzing the risks, understanding the available options, and evaluating those choices regularly can help a practice safeguard itself from accidents, crime, damage, liability, and loss of income.

Workers’ compensation insurance

One type of insurance mandatory for private practices in nearly all states is workers’ compensation. This policy provides coverage to employees for workplace accidents, injuries, and occupational diseases that arise out of, or during, employment. Faiza Wasif, the Academy’s associate director of practice management, described some of the important components of solid workers’ compensation insurance plans for a dermatology practice: coverage for medical expenses, income replacement benefits for employees unable to work due to work-related injuries, disability benefits for temporary or permanent impairments, and legal coverage against claims of employer negligence.

As the requirements for workers’ compensation can vary slightly from state to state, Wasif added, “The policy should also include safety programs and compliance with legal requirements to ensure comprehensive protection for both employees and the practice.” In many states, workers’ compensation is required not only for practice staff, but also for staff working in a physician’s home, including cooks, caregivers, or housekeepers. Checking with a lawyer is the best way to determine needed coverage. While workers’ compensation insurance is important, Atty. Vasilios (Bill) Kalogredis, chairman of Lamb McErlane, PC’s health law department, suggested that dermatologists look carefully at the coverage because sometimes physician owners are not covered by the policy.

Disability insurance

Unlike workers’ compensation insurance, disability insurance is only required by a handful of states but is still crucial for dermatologists and perhaps other staff members to carry. The February 2021 DermWorld article, “Watch Your Back!” highlighted the prevalence of musculoskeletal disorders (MSDs) and microtraumas in dermatologists. These types of illnesses and injuries can potentially lead to short-term and long-term breaks from performing surgeries. Disability insurance is designed to replace a portion of income when a person is unable to work due to long-term illness or severe injury and can also cover a dermatologist’s living expenses to help ensure financial stability.

Wasif mentioned that practices should look for policies that cover their specific medical specialty, define disability clearly, offer long-term benefits, and have stable premiums that fit budget and risks. Kalogredis agreed, “The definition of disability is something to note very carefully in a policy. Does it mean you can’t do any kind of job, or does it mean you can’t practice cosmetic surgery or perform Mohs surgery as you could before?” Not only is the definition of disability important, but who pays the disability benefit premium can have tax implications on the recipient: If the employer pays the disability benefit premium, the benefit is taxable; however, if the individual pays it, the disbursement is not taxable.

When a dermatologist cannot work either in the short or long term, disability insurance covers the individual physician but not the practice that may depend on the income generation of that physician. Kalogredis emphasized the potential benefit of office overhead expense insurance in private practice for these situations. “If a partner in a two doctor practice is out for six months, the other dermatologist in the Practice may try to keep things going but will not be able to do two times his/her regular volume, and therefore the practice will generate less topline income. However, the overhead for that practice often remains the same.” Therefore, the bottom line will be less. This type of insurance policy would help fill that void.

Key employee insurance is another type designed to protect a practice against the loss of income resulting from the death of an employee in a significant or key position. ​​For this insurance, a practice purchases a life insurance policy on an employee, pays the premiums, and is the beneficiary of the policy. As life insurance policies can have tax consequences, a practice should consult a tax advisor when considering this policy.

Malpractice insurance

Even for insurances that dermatologists may be more familiar with and commonly carry — such as malpractice — different coverage options may not be clear to busy physicians. Kalogredis stressed the importance of covering not only the individual dermatologist in a malpractice policy but also their entity because of the assets within it. Furthermore, he recommends taking the time to understand the various types of malpractice insurance. While occurrence coverage means a dermatologist can pay a premium for a particular year and be covered for any services provided during that year no matter when they are sued, claims-made coverage only covers claims that happen in that given year or in future years while that particular policy is still in place. When that policy period ends without renewal, to protect past acts, an extended reporting endorsement (often called tail coverage) must be obtained.  Contracts need to be carefully reviewed to determine who will be responsible for payment of this tail premium. This can be especially important when a dermatologist is negotiating an employment agreement with a medical practice or institution. “If the employer carries a claims-made policy, the dermatologist should try to have the employer pay the tail premium so that he/she is protected against claims made outside of the policy period. It’s a distinction people ought to know because it could cost them tens of thousands of dollars at the end of the day,” Kalogredis highlighted.

A type of malpractice insurance that has gained popularity in recent years is telehealth malpractice insurance. With the expansion of these services, insurance agencies have begun to offer these policies to protect liabilities and risks associated with virtual patient consultations and digital health platforms. Malpractice costs for this type of medicine continue to evolve as policies adapt to telemedicine litigation and policy developments.

Cyber liability insurance

When Mary Lupo, MD, FAAD, dermatologist at the Lupo Center for Aesthetic and General Dermatology, decided to sell her practice to private equity, she had many reasons; however, one of the main ones involved protecting health information. “One of the issues that was heavily on my mind was cybersecurity.” Cyber liability is a newer insurance based on a rising need to protect sensitive information from data breaches, cyberattacks, and accidental data disclosures.  In fact, breaches have increased over recent years with cybercriminals causing 280 breaches of protected health information (PHI), each affecting 500 or more people, in the first half of 2024 alone, according to the U.S. Department of Health and Human Services. Wasif also noted the increasingly important role of cyber liability insurance with advancing technology. “This insurance is crucial as practices increasingly rely on electronic health records (EHRs) and face regulatory requirements to protect patient information.”

Cyber liability insurance mitigates financial and reputational risks associated with cyber threats and provides a safety net against the potentially heavy consequences of a cyber-attack or data breach. It typically includes the costs for investigating the breach, notifying patients, acquiring legal representation, and providing credit monitoring services. When it comes to the details of the policy, Kalogredis urged, “A practice has to look at a cost-benefit analysis, often with the help of an insurance agent, and determine how much risk they are willing to take.” Assessing coverage limits, exclusions, and incident response support are all essential to choosing a policy with comprehensive protection against cyber risks.

Employment Practices Liability Insurance (EPLI)

Another liability protection today’s practices may want to consider is employment practices liability insurance (EPLI), which protects a practice in the event that it is sued by an employee claiming violation of their legal rights. “People are suing others for that type of stuff more than ever,” Kalogredis pointed out. “You can’t put your head in the sand and not worry about it.” This may include sexual harassment, toxic work environment, wrongful termination, or discrimination. Wasif stated that a typical plan includes legal defense costs, settlements, and judgements coming from claims filed by current or former employees. Moreover, the policy protects against financial losses and even reputational damage from employment disputes. Again, Kalogredis proposes a cost-benefit analysis to build an appropriate policy for a practice.

EPLI differs from directors and officer insurance, designed to protect directors and officers of a practice in the event they are sued for failing to perform their duties or properly manage the practice. Kalogredis explained, “As a director or officer of an entity, an individual has certain responsibilities and decisions to make. If he/she hires someone that one should have known would not be good for the company based on their history, one can be sued along with that employee not only because they were this entity’s employee, but because he/she made a poor choice in hiring this person. The doctor is getting sued , not as physician, but as management.” As this type of insurance can include several types of coverage, consulting an insurance broker or agent specializing in health care or professional liability can help a practice develop a policy based on specific leadership risks within the practice.

Business interruption service

Fires, winds, floods, hurricanes, and tornadoes are just some of the reasons a practice may find itself closed for an extended period. Other emergencies, such as a staff strike, equipment failures, or even a pandemic, may interrupt business hours and lead to a loss in revenue. Dr. Lupo cautions practitioners to revisit exactly what is in their property insurance plans to lessen business interruption. “If you have an extended loss of electricity resulting in the spoiling of biologics or other perishable items, will the company replace those for you? Are your expensive lasers and other equipment appropriately covered in your insurance plan?”

While practices have property insurance, and perhaps even flood insurance to adequately cover their physical losses with natural disasters, they may not be prepared for the loss of income associated with these events. Business interruption insurance affords a practice the ability to continue paying the bills should a disaster strike, and offsets a portion of lost revenue while rebuilding, restoring, or relocating damaged property. Understanding the events covered in a policy and the timeline for imbursement is important when developing a plan for these emergency situations. Dr. Lupo warned, “Business interruption service does not kick in on the very first day. The specific period of time detailed in the policy can vary and impact the cost of the policy.”

After experiencing such a loss in revenue after hurricane Katrina, Dr. Lupo was reminded that securing a practice’s future from a myriad of events beyond one’s control is about more than just taking out policies. “Having a cash reserve in your personal and business life is extremely important — not only for yourself but for your employees. I recommend a six-month reserve.” Having these savings can be even more important in hard-hit areas. After Hurricane Katrina, the policy minimums for business interruption service jumped from two weeks to six weeks.

Umbrella insurance

Even if a dermatology practice has many types of insurance policies, they may consider an umbrella insurance policy if they need additional liability coverage beyond their primary policies.  “An umbrella policy offers broad coverage above the basic limits at a reasonable cost, providing peace of mind and safeguarding practice assets against significant legal claim or expenses,” Wasif said. Kalogredis recommends umbrella policies for both personal and professional insurance. “At the very least, physicians should have umbrella policies over their car, homeowner’s liability, and potentially second home liability. For practices, the extra protection is valuable for managing higher liability risks and potential catastrophic losses, as well as fulfilling contract requirements. He acknowledged that where a dermatologist or practice is financially plays a part in determining whether umbrella coverage is necessary.

To determine the right amount of coverage, a practice should consult with an insurance professional specializing in medical professional liability who can develop an umbrella policy based on their specific risks and needs. As with the other types of policies, carefully reviewing coverage limits, exclusions, cost, and terms is important for comprehensive protection.

Other insurance to consider

Other liability protections can range from products sold within the office to billing.

• Product liability insurance is designed to protect a practice if someone is harmed by a product purchased from the practice.
• Fiduciary liability insurance protects the practice and/or its administrator — the fiduciary of the practice’s benefits plan — against claims for losses in the benefit plan based on errors, omissions, or breach of duty.
• Billing errors and omissions insurance provides legal and audit expense reimbursement as well as coverage for fines and penalties associated with medical billing errors. Kalogredis cautions that if a practice uses an outside billing company, they should read the contract carefully to make sure the contractor is properly insured and responsible for any liability regarding billing.

Choosing and budgeting for coverage

The cost of insurance for a dermatology practice varies widely, with factors such as a practice’s size, location, services, number of employees, and coverage limits impacting the amount. Over the last 20 years, insurance costs for physicians have gone up significantly. Wasif commented, “This increase is mainly because of higher malpractice premiums from more claims and lawsuits, the need for more types of insurance coverage like cyber liability and employment practices liability, changes in health care law, overall higher health care costs, and changes in how insurance companies work.” Smaller practices can now expect to pay up to $100,000 for all insurance fees with larger practices exceeding that.

In addition to costs, some plans, however necessary, can be difficult for dermatology practices to acquire. These may include medical malpractice insurance due to claim history and high-risk procedures, cyber liability for protecting patient data, business interruption insurance tailored to health care-specific risks, employment practices liability amid potential disputes, and potentially general liability insurance based on practice specifics.

To help navigate difficulties with obtaining insurance and determine which policies a practice needs, Dr. Lupo, Wasif, and Kalogredis all agree that working closely with an insurance broker or agent who specializes in medical practice insurance is essential. “These professionals can help navigate the complexities of insurance requirements, assess specific risks faced by dermatology practices, and find insurers willing to provide the necessary coverage at competitive rates,” Wasif explained. Additionally, Kalogredis observed the importance of having another set of eyes read over any insurance contract. “This can be a health law or business attorney or even a high-powered office manager in a larger practice. Reviewing a policy critically prevents practices from signing up for insurances and just hoping the policy is what they think it is.”

Furthermore, he suggested revisiting policies and shopping around for better terms every few years to validate the current policy expense or evaluate coverage. In addition to this practice, Wasif says that maintaining a strong risk-management program can demonstrate to insurers that the practice is proactive in minimizing risks, potentially improving access to certain types of coverage.

“The truth of the matter is that you can never be completely compared for every contingency,” Dr. Lupo emphasized. However, by analyzing and prioritizing the biggest risks to the practice, spending time fully understanding policies, and utilizing resources to get the best comprehensive coverage, dermatology practices can not only succeed in preparing but prepare to succeed despite any hardships or challenges faced.

AAD insurance program

The American Academy of Dermatology in conjunction with Aon Affinity Insurance Service Inc. has seven custom-designed insurance programs to help protect your future and the future of your family. This includes level term life, group disability income, group business overhead expense, long-term care, health insurance options, and coverage for your business. Visit www.aad.org/member/practice/managing/vendors/insurance to learn more.

**This alert is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, contact Vasilios J. (Bill) Kalogredis, Esq. 

DermWorld is published monthly by the American Academy of Dermatology to a circulation of more than 16,000 which includes the domestic members of the AAD and all dermatology residents.