Many physicians are still not able to go bare due to restrictions in hospital regulations. In South Florida, this situation is limited to mostly hospital-based specialties such as radiology or anesthesiology. In Tampa, Jacksonville, and other northern cities, the majority of hospitals still have not modified their bylaws to allow doctors to self-insure. After being involved in discussions on this issue with hospital CEOs, we have developed a strategy that seems to meet the needs of both the administration and the physician. 

Essentially, hospitals are worried that they will become not just the deep pocket, but also the only pocket to sue. We feel that their concern is that bare physicians won't have any funds available to pay for defense or settlement costs after being sued. Unfortunately, since many physicians' personal budgets are tight in this economy, even if they save $50,000 per year in malpractice premiums, they may spend it mostly on living expenses. 

We have been successful in convincing administrators that a physician is taking financial respons-ibility seriously by establishing what we call a "Financial Responsibility Reserve Account". This involves setting up a segregated annuity (a protected asset) in the personal name of the physician or group of physicians, and funding this annuity monthly with the money that would have been used to pay for malpractice premiums. We strongly recommend utilizing a no-load annuity for this program; this allows for withdrawals in any amount, with no surrender charges or commissions.  This becomes important in case these reserves ever need to be withdrawn. These funds either go directly from the PA to the annuity, or may first pass through the wage account (a protected asset) of each individual doctor. The most effective part of this program is that the malpractice savings end up being protected from a malpractice claim, and are available to a plaintiff on a purely voluntary basis by the physician. Thus, we avoid the problem of creating a reserve fund with a large bull's-eye for lawyers.

Not paying $50,000 per year in premiums could compound to $1.4 million in only 10 years.

It should be noted that the contributions to your annuity are not tax-deductible. Earnings within annuities are tax-deferred until withdrawal at which time only the interest is taxable, not the principal. Withdrawals prior to age 591⁄2 have a 10% tax penalty on the interest portion. Offsetting this is the fact that any payments to a plaintiff are fully tax-deductible when paid. In reality, it will probably never be necessary to tap into your annuity reserves. If your assets are adequately protected, it should be possible to negotiate a modest settlement to a malpractice claim.

Perhaps one of the best advantages of this program is seeing your malpractice premiums grow in your own investment account, rather than feeling like money was thrown out the window. As an example, a physician who saves $50,000 / year in current premiums, with assumed 10% annual increases, earns 8%on their annuity reserves. A staggering $1.4 million will be accumulated in only 10 years. Our experience over the last 17 years shows that a physician client has never had expenses of malpractice claims exceed 30% of their malpractice premium savings over the long term. In other words, self-insuring seems to have reduced the cost of malpractice coverage by approximately 70%!

By demonstrating this plan of action to hospitals, and showing financial and fiscal responsibility on the part of physicians, we have been able to convince many to allow physicians to go bare, on a case-by-case basis