Doctors want pre-tax accounts for tail coverage

AMA delegates push for a tax code change and agree to study "loser pays" legislation.

By Amy Lynn Sorrel, AMNews staff. July 3, 2006.

Chicago -- The American Medical Association's House of Delegates wants the Internal Revenue Code to include pre-tax savings accounts to help physicians buy tail coverage so they can afford liability insurance at a time when premiums have risen to unaffordable levels.

Much of the insurance industry has discontinued selling open-ended "occurrence" policies in favor of "claims-made" policies, which cover only alleged negligent incidents that are reported during the policy period, according to an AMA Board of Trustees report presented at the Association's Annual Meeting in June. That's left doctors whose policies end with one insurance company in a position where they have to purchase tail coverage to protect them for claims made after a policy expires.

The tail coverage premiums have increased to between 150% to 200% more than the annual price of other general medical liability insurance, according to the board's report.

Delegates voted to have the AMA push for a change in the tax code that would let doctors set up pre-tax savings accounts to use toward the purchase of tail coverage. Under the current structure of the Internal Revenue Code, physicians may, in certain circumstances, deduct medical liability insurance premiums as business expenses, but only if they exceed 2% of their adjusted gross income. However, the code does not recognize the newly proposed ERE savings accounts.

"What we found is, whether doctors are retiring or moving from one practice to another, they often have to buy certain coverage wherever they go," said Edward L. Langston, MD, AMA Board of Trustees chair-elect. "This is one way to help physicians meet their responsibility when costs have gone up."