Law Firm Insurance Guru

Stop buying health insurance, start buying Health Care – Your Four Point Strategy for 2012

January 18th, 2012 No Comments

Your firm has a comprehensive costly top tier insurance plan with unlimited benefits. When a catastrophic illness or injury impacts you, your medical insurance will LIKELY fail your needs. Why? Even top of the line expensive health insurance policies are no longer structured to fully cover your health care needs. There are so many limitations and protocols in group health insurance policies that more and more people are experiencing for the first time, the pain of the growing gap between health insurance coverage and their health care needs.

When you or your family members are faced with a life threatening illness or sudden injury, you will work non-stop to be treated by the best medical professionals in the quickest time possible utilizing the best of the medical system. Issues of costs, insurance company procedures: doctor limitations, facility limitations, and even the hours needed to get appointments with the right people take large amounts time.

Months later, when the bills are totaled, your health insurance policy will likely cover 50-60% of the total costs. Non covered charges, cost sharing provisions, large copays, non-network doctors (particularly surgeons) and non-network facilities are commonly part of your health care solutions to complex issues.

Out of Network = Out of Coverage

Insurance companies have limited the out of network reimbursable coverage through artificially low limits on what fees are “reasonable”. While historically, out of network coverage fees were calculated based on a metric called “usual and customary” (70^th or 80^th percentile being recognized as appropriate), many insurance companies have moved to a method of calculation using 140% of the Medicare rates as appropriate. We estimate the 140% method of calculations to a 30-40% reduction in fee coverage! On a complex medical issue, this is an additional $30,000 – $40,000 out of your pocket.

Your 2012 Strategy:

Your simple health insurance policy is not enough to cover your health care needs. While health insurance plans are the foundation for your total health care needs, today’s buyers need to consider:

1) Tax Optimized Plans – Out of pocket costs X your tax rate, ie 1.45 = real cost of out of pocket health care spending. Know your numbers.

2) HSA, FSA, HRA type plans – these are critical tools to consider in your new vision for funding health care, not health insurance.

3) Group health care supplemental plan – A correctly implemented Group supplemental plan for you and your key staff members is fully insured, compliant with tax rules, a tax deductible business expense for the firm and is not taxable income to the employees. The basic benefit plan covers out of pocket expenses on a “per occurrence” basis each year.

4) Concierge medical advisors. Group plans can be set up for your firm where you receive unbiased, up to date medical information when faced with a new illness or condition. They can also assist you in getting timely appointments with the right doctors when time is critical to respond to your condition.

Make 2012 the year you stopped buying health insurance and start buying smart health care solutions. The right planning now will set you up to be financially secure when you are hit with health challenges in the future.

Surprise! Your professional liability insurance underwriter doesn’t understand the practice of law.

November 30th, 2011 No Comments

Have you ever felt that your professional liability insurance underwriter does not know how a real law firm works? The shocking truth is that most are not lawyers, have never practiced law, and therefore are misguided as to how a law firm works and how legal services are provided. This causes unnecessary questions, erroneous overpricing, and fewer options for a law firm seeking excellent coverage at a fair price.

Three recent examples:

1) An underwriter thinks all SEC work (think IPO risk) is the same so overcharges for a firm that advises on small private placements. Another recent SEC misunderstanding was an underwriter who classified a firm that does complex corporate litigation as an SEC firm and required them to complete a long (completely unrelated) Securities supplement (1933/34 issues) since a tiny fraction of their practice is representing defendants from SEC actions.

2) A firm’s insurance was cancelled since the underwriter didn’t understand that in a given year a large IP litigation can make the regular 10% (in a general practice firm) go up to 20% in one year. The underwriter judged the firm as becoming an IP firm (think Patent).

3) An insurance company canceled a mid size General Practice / Commercial firm since they deemed them a Class Action law firm (higher rates than commercial). Their “crime”? They defended one of their clients who are one of many defendants in one class action suit.

So what can you do to protect yourself from being negatively impacted by underwriters? The first step is to consider if what you are being told makes sense. If not, question your insurance company and question your broker. All too often, brokers act like messengers from insurance companies and parrot the insurance company nonsense. Assuming that your broker understands themselves these issues, they must work to educate the insurance underwriter.

The bad news is that some underwriters cannot be educated enough to insure complex law firms. The good news is that the New York law firm professional liability insurance market is so competitive that a specialist law firm insurance broker can manage a 15 company reverse auction. You’ll never persuade all 15 insurance companies, but if done right you will have good options every year.

Law Firm Landlord – 5 General Liability strategies to keep the rent money and avoid the risk – Part II

November 3rd, 2011 No Comments

In our last post about the Law Firm Landlord, we addressed the Law Firm Landlord’s professional liability exposures and in part II below, we will address the general liability insurance risks involved when subleasing your office space to another firm. While it is tempting to receive the rental income, you must follow certain steps to insure that you are not exposing your firm to additional costs and liabilities.

Let’s consider this scenario – your tenant has a visitor who gets hurt after tripping and falling over files on the floor in your tenant’s office. You, as the law firm landlord, could be involved if this scenario resulted in a lawsuit. Here are five ways you can help reduce the impact of these and other types of general liability risks for your firm:

1) Make sure your tenant has their own Commercial General Liability Insurance for the leased space. Require the tenant to name your firm as an additional insured on their General Liability policy. The additional insured status gives you some protection if you are brought into a suit due to your tenant’s negligence as it relates to the office space. Typically there is no cost for the tenant law firm to have their landlord named as an additional insured for General Liability.

2) Have the tenant provide you with a certificate of insurance showing their current General Liability policy and your firm as an additional insured. Your firm should be listed on the certificate as the certificate holder. Obtaining a copy of their policy helps to make sure they have insurance, but it is not enough. By being named as a certificate holder, you can be notified if their policy is canceled. You should ask for a certificate every year. Set a reminder in your calendar to request an updated certificate from the tenant about 30 days prior to their policy expiration date.

3) The General Liability, additional insured and certificate requirements should actually be part of your tenant’s lease.

4) Make sure the tenant understands you are not providing insurance for their office equipment. The tenant must purchase their own property insurance. Typically, they can purchase what’s called an Office Package policy which can provide coverage for both their General Liability and Property. These policies are inexpensive and easy to obtain.

5) If you are providing the tenant with any office equipment, you should have some type of agreement in place detailing who is responsible for repairing or replacing the property if it is damaged or destroyed (for example due to a fire caused by the tenant).

These tips will help your firm collect the rent without collecting the lawsuits. If you have any other tips on this issue, please share them by commenting below. What’s worked and what hasn’t worked in your situation?

Public Service Announcement: Empire Blue Cross Ending the Plus Wraparound Plan

November 2nd, 2011 No Comments

The Tradition PLUS Wraparound Plan from Empire Blue Cross (the plan you didn’t mind paying a fortune for), will be disappearing in January.

Partners, S-Corp owners, LLC members loved this plan. Yup, the one that lets you go to any doctor or hospital with a $200 deductible and $400 coinsurance cap, not to mention the $7 drug copay and private duty nursing coverage the plan had. Even though the plan’s cost was really high – over $15k a year for single coverage, many people found that it was worth paying the pre-tax premium instead of paying for expenses with post-tax dollars.

Blue Cross is now alerting these loyal customers that they will no longer be allowed to keep this plan past December 31. As companies look for a suitable replacement, they soon realize that buying standard plans off a spreadsheet in the managed care arena just doesn’t work. The good news is that there are solutions, but you’ll need to move fast because it could take a bit more time to put it together right.

Get started now. Discuss with your broker today.

Law Firm Landlord – 5 strategies to keep the rent money and avoid the liability risk – Part I

November 2nd, 2011 No Comments

It is very common for a law firm to sublease its extra space to a smaller law firm or solo practitioner. While it is tempting to receive the rental income, you must follow certain steps to insure that you are not exposing your firm to additional costs and liability. From a risk management perspective, there are two main areas of concern: professional liability risk and general liability risk. In this post, we will deal with the professional liability risk and our next post will deal with the general liability risks.

When your tenant gets sued for malpractice, it is common for the plaintiff (the one suing your tenant) to include you in the suit. Since you are usually the larger firm, the plaintiff (the one suing your tenant) will assume that you have more assets and more insurance coverage. The courts have viewed these issues from the perspective of the expectations the client had at the time the services were performed. That is, did the client think that your lawyer tenant was part of your firm? If yes, he may have a valid claim that in fact your firm was representing him, and you might be held liable under an apparent agency theory.

While the good news is that the law firm landlord usually gets out of these cases eventually without a finding of liability, your goal is to get out of the case earlier and cheaper in the lawsuit process. There are five easy to implement strategies that you can employ to lessen the impact of this risk:

1) Physically demonstrate where one firm ends and the other firm starts. Tenants should have their own office area, staff, equipment, phone lines, web domains, email addresses, etc. Behind the scenes technology (i.e. internet provider) sharing can be okay.

2) Avoid any possible confusion by clients. Tenants must make it verbally clear to any potential and actual clients that they are not part of your firm.

3) If the client has retained both you and your tenant for a related transaction or problem, you must have an extra clear engagement letter detailing the work to be done.

4) Never share letterhead with your tenant. If you do this, you can bet your deductible that this will be Exhibit A against you in a professional liability claim.

5) Insurance Requirement: In your sublease, require your tenant to maintain a certain amount of professional liability insurance. Though it might not be entirely practical if the tenant is a much smaller firm, it is a good idea to require the same limits of coverage that you have on your policy. If the tenant has adequate insurance, it lessens the likelihood that the plaintiff will try to reach your policy. Don’t accept copies of their declarations page to prove coverage, ask for a certificate of coverage.

These tips will help your firm collect the rent without collecting the lawsuits. Our next post will cover what you need to do to protect your firm from the general liability risks involved in being a Law Firm Landlord.

What’s the most common claim against law firms? Hint: 50% of all law firms think it would NEVER happen to them so they don’t insure against it.

September 20th, 2011 No Comments

Employment practices liability claims and circumstances are the most frequent legal claims against law firms today. The insurance policy for these claims, called Employment Practices Liability Insurance, is cheap and with the right law firm industry customization (details below) can protect these headline grabbing cases from turning into your worst nightmare.

What is it? Employment practices liability insurance policies (EPLI) provides defense coverage (legal fees) and settlement / judgment reimbursement for employment related claims such as allegations of harassment, discrimination, wrongful termination, wrongful discipline, etc. The policy is relatively inexpensive – around $200 per employee covered. While often these claims do not have any merit, there is still the expense of defending your firm and its reputation.

Every law firm EPLI policy should include:

Third party coverage. This provides coverage for discrimination and harassment claims from people other than your employees (i.e. vendors, court reporters, clients). Watch out for policies that include Third party coverage but exclude claims made by clients.
Coverage for failure to make partner/ promote should be provided. Some policies that are not specific to law firms may not include this coverage.
Prior Acts Coverage. As a new policy, it is far more valuable with this clause.
Wage and hour law defense sub-limit – most policies exclude wage and hour law claims for law firms. Some policies will give you a sub-limit to defend these types of claims. If available, it’s usually a very minimum or no cost to have it added to your policy. Ask about it.

The most common excuses why law firm don’t buy the coverage:

“But we would just defend ourselves anyway”

Reality check: Think about how much time that takes away from other (billable) work you could be doing.

“But we have great long term employees and partners that wouldn’t do anything wrong and all get along well together”

Reality check: Even disgruntled prospective employee who feels they were wrongly denied an opportunity to work at your firm can cost you money without the coverage.

“We don’t have an employee handbook? The application is asking about our handbook – now what?”

Reality check: Don’t worry. Some insurance companies will allow you to purchase the policy and give you a certain time period to get an employee handbook in place. Some insurance companies even have online programs with sample handbooks, policies and procedures to help you create a handbook.

Employment Practices Liability Insurance is one area of insurance firms often dismiss until AFTER they have a claim. Speak to your broker today – don’t let that happen to your firm.

Goodyear Tire saved 6% on their benefit costs without a single plan change – Here’s how you can do it too

July 25th, 2011 No Comments

With health care costs continuing to rise at a pace that far exceeds inflation, firms are looking for additional ways to reduce benefit costs. One option is a dependent eligibility audit. This is a systematic approach to making sure that your health plan covers only those who are eligible. This can be a significant cost saver. Goodyear Tire & Rubber reported reducing their dependant rolls by 13% and overall costs by 6% by implementing a dependant audit. These audits are really important for self-insured plans but also benefit fully-insured plans as well.

The purpose of the audit is to identify dependents that should no longer be covered such as children that have met the maximum age limit, divorced spouses or children impacted by a change in custody arrangements. In addition to the cost savings, not doing an audit may risk noncompliance with ERISA from failure to comply with plan eligibility rules as specified in plan documents.

The firm can do the audit internally or hire a third-party. As with anything related to benefits there are certain things to be considered in the planning and rollout of the employee communications. The audit is usually done in a two step process: an amnesty phase and then the documentation review phase. While disenrollment is not a COBRA qualifying event, the employer may decide to offer it provided that your insurer will permit it.

We are all looking for ways to make our benefit dollars go further. Eliminating the ineligible dependants makes sense.

Oops one of your lawyers isn’t really a lawyer! It just happened again to another firm. What should you do?

July 15th, 2011 No Comments

There is a new fraudster exposed who was posing as a lawyer. While it’s early in the investigation, it seems as if Mark Pastuszak has worked at two prestigious NY law firms claiming to be a lawyer admitted inNew YorkandNew Jersey. In truth, he was admitted in neither. At blog press time, his law school graduation and claimed clerkship is being confirmed. Both firms are investigating and likely contacting clients and others to see how to proceed.

The previous case a few years back was an actual Partner in an AMLAW 250 firm. The fact pattern is a bit different as unlike the current example of a lateral hire, the fraudster progressed in the firm from being hired as a paralegal claiming to go to law school at night. In reality, he did not even go to law school (and obviously did not pass the bar). It was reported at the time, that the firm made amends to their clients by reviewing his billing records while posing as a lawyer (Associate and Partner) and refunded the difference between the lawyer rate and the paralegal rate to all client work for his tenure at the firm.

The fallout from both of these cases is terrible for the firm. The firms suffer great reputational harm as well as a very large financial loss. The differential paid in the previous case (lawyer vs. paralegal) was probably hundreds of thousands per year worked.

So what can management do to avoid these problems? As part of the due diligence process in both promoting paralegals who become lawyers (and former clerks) AND laterals, you must check with each states’ licensing authorities to confirm the admissions. Put it on your new hire checklist and eliminate the risk.

Out of Network Doctors – Four Strategies That Work

June 22nd, 2011 No Comments

In our last post http://wp.me/pLc5O-1L, we described this year’s significant changes to Out of Network coverage. Insurance companies are reducing their out of network reimbursements from usual, customary and reasonable (UCR) to a percentage of Medicare. If you will be continuing to use out of network doctors, here are four strategies to minimize the impact of using out of network providers:

1) First the obvious. Make sure that the plan you select will base their out of network reimbursements on UCR (not Medicare). There are a few companies and plans in the market that still provide this.

2) Consider a Health Savings Account (HSA) plan. These plans allow all individuals even partners to pay for the high deductible with pre-tax dollars through a bank account. HSA’s are most likely to still use UCR as a basis for out of network reimbursement.

3) If you must be on a plan that reimburses out of network claims at a percentage of Medicare, supplement it with an insured Executive Medical Reimbursement plan for select individuals. If set up correctly, this can escape the nondiscrimination rules slated for Health Care Reform.

4) Check out the website www.faircaremd.com. It is a healthcare marketplace where you can shop for doctors and services. It gives access to ratings, fair prices and reviews. Even if you already have an out of network doctor, you can use this information to negotiate pricing based on knowing what other doctors charge.

In today’s changing health insurance market, you must strategize and custom design your health plan options to your healthcare spending.

Out of Network, Out of Line – What Happened Here?

May 26th, 2011 No Comments

Out of network, out of line – If you ever use out of network benefits on your medical plan, brace yourself for a huge shock when you get your bill.

One of the most significant coverage cutbacks that health insurers are making in 2011 is how they’ll treat medical expenses from out-of-network providers. Insurers have now reinvented the term “usual, customary, & reasonable” or commonly known as “UCR” to be anything but that. Historically, UCR levels were related to actual charges made by doctors in specified geographical areas. Charges from all doctors, both those that participate with insurer networks and those that don’t, were put into a common data base that captured the full range of fees from the lowest charge to the highest and then insurers decided at what percentile cutoff to use as their maximum ”UCR” level. For example, a 70th percentile would mean that charges from the top 30% pricier doctors would see some of their fees disallowed and a 90th percentile would mean that charges from the top 10% pricier doctors would see some of their fees disallowed.

Insurers have now quietly decided to instead use a percentage above Medicare fees – which have absolutely no relationship to what doctors really charge, as the basis of what is considered “usual, customary, & reasonable”. Whether a company is using 110% of Medicare (Aetna) or 140% of Medicare (Oxford), the criteria is a downward moving target each year so the already large spread between what doctors really charge and the “UCR” levels will widen every year.

Why do you care? The gap between what the doctor charges and what insurers now deem as acceptable charges (based on Medicare fee schedules) are 100% paid by the patient! Especially on procedures, this gap can be thousands of dollars. Ask your doctor what Medicare’s allowable charge for a particular procedure is and don’t be shocked to hear that it’s only about 20% of a typical 70th percentile fee. You’ll soon see that insurers will now blame their UCR cutbacks on Medicare. Out-of-network plan users who can’t use network providers will see their uncovered medical expenses soar and will need to find alternate ways to cover it.

In our next post, we’ll outline the various methods of dealing with this and other uncovered medical costs.