BOP Packages Property and Liability Coverage

By Jillian Brandt, CIC
OMIC Insurance Agency and Group Products Manager

[Digest, Spring 1998]

Purchasing property and general liability insurance for an ophthalmic practice used to mean sorting through a laundry list of optional coverages to supplement the basic policy. In addition to the base policy premium, a practice could expect to spend hundreds of dollars on individual supplemental policies and still not be sure it was covered for all daily operating exposures. Relief arrives in the 1960s in the form of a commercial package policy that allowed two or more property and liability coverage lines to be combined within a single policy. What later became known in the insurance industry as a BOP (Business Owners Policy) made it possible for carriers to charge a single premium for a broad range of coverages at rates that were usually lower than what those coverages would cost if purchased separately. Ophthalmic practices and other small businesses could obtain coverage for exposures they otherwise might not be able to afford with fewer gaps and overlaps in coverage.

Who Needs this Coverage?

Anyone operating a business who could be held legally, financially or professionally liable for losses resulting from damage to the building housing the business and the property within it (such as that caused by fire, theft, vandalism or water damage) or from the illegal actions of persons employed by that business needs business owners insurance. Most ophthalmologists carry business owners insurance because they are legally required to do so: building landlords require it under the terms of a lease, medical equipment companies require it in their contracts, banks require it as part of loan agreements. Under the terms of a BOP, coverage extends to an individual (and the individual’s spouse) in the conduct of business of which that individual is the sole owner. It also extends to partnerships, joint ventures, limited liability companies and any other organization with executive officers and/or stockholders.

What is Covered?

Under a BOP, property exposures are covered for loss, damage or destruction, property being any item of value that is owned, leased, used or depended upon as source of income or service. Examples of insurable property include medical equipment, office furniture, computers and office record systems. Coverage can be extended to such items as property in transit, valuable papers, computer programs and data, and personal property.

General liability exposures also are covered under a BOP. In an ophthalmic practice, liability exposures can arise from a number of situations: automobile liability exposures caused by or to their parties, premises operations (slips and falls), and personal injuries caused by false or misleading advertising, among other things.

More than other lines of insurance, BOPs tend to vary considerably from one carrier to the next as insurance companies have tailored their BOP programs over the years to meet the specific coverage needs of the businesses they insure. The office form BOP allows for protection of almost anything in an ophthalmic practice from almost any peril. Special form perils coverage covers all causes of loss unless specifically excluded by the policy. This is the broadest coverage form available in the marketplace today and is the form available to members of the American Academy of Ophthalmology through OMIC and The Hartford Insurance Company.

How are Rates Determined?

BOP rates are determined by the amount of coverage selected and the value of the property insured. Underwriters look at a number of factors when developing a premium: amount of property to be insured, office location and building construction. They also consider an organization’s overall management and risk classification, taking into account past loss experience, employee selection, training and supervision, and housekeeping and safety procedures. Ophthalmic practices have a better than average risk classification for office programs.

In 1997, OMIC and the American Academy of Ophthalmology teamed with The Hartford to offer a Spectrum BOP program for ophthalmologists. This program provides the most comprehensive property and general liability package available for the ophthalmic practice. Included are 15 coverages especially packaged for office building owners and occupants, including coverage for losses associated with accounts receivable, computers and media, employee dishonesty, forgery and alterations, and property off premises and in transit. Through the Spectrum BOP, these coverages are available at a cost of hundreds of dollars less than if they were purchased separately.

For information on this program, please contact the Underwriting Department at (800) 562-6642, extension 639 oromic@omic.com.

Fraud Busters – Who You Going to Call?

By Kimberly Wittchow, JD

Ms. Wittchow is an associate with OMIC’s insurance and group products department.

[Digest, Winter 1999]

It was a whistle-blower who triggered the 1996 criminal investigation of an ophthalmologist on charges that he faked laser surgery and defrauded Medicare. Shining a light into their eyes, the ophthalmologist told patients he was performing laser surgery. Without access to any of the instruments necessary to perform such procedures, he billed for 37 trabeculoplasties, 63 iridotomies/iridectomies, 12 photocoagulations, and 1 other retinal procedure. Between 1995 and 1997, he fraudulently billed Medicare and his patients nearly $118,000 for services that either were not necessary or not performed. Last year, he pleaded guilty to three criminal charges, including mail fraud and submitting false claims to Medicare. A related civil suit was settled for $700,000, $105,000 of which was rewarded to the whistle-blower. The ophthalmologist surrendered his state license to practice, was banned from all Medicare/ Medicaid and federal health care plans for five years, and had his hospital staff privileges revoked.

Flagrantly fraudulent reimbursement claims such as this one are the target of the federal government’s stepped-up Medicare/Medicaid fraud and abuse enforcement efforts. In the war against fraud and abuse, however, inadvertent billing errors are also being discovered and punished. Investigations typically begin when a third party payor detects an anomaly in billing patterns or when a competitor, patient or employee lodges a complaint. Some investigations are the result of random samplings. Both criminal and civil investigations may ensue, involving on-site visits, employee interviews, document reviews and accounting audits.

Even practitioners who comply with Medicare and Medicaid regulations to the best of their knowledge and ability are susceptible to devastating enforcement repercussions. In one case, an employee who was terminated by a physician retaliated by contacting the state department of insurance and local law enforcement agency regarding the physician’s alleged fraudulent billing practices. The ex-employee alleged that the physician was submitting false claims for nonexistent patients. The police took over the physician’s office, removed all of her files, and turned her patients away at the door. After much personal trauma and $20,000 in legal fees, the innocent physician was vindicated. However, she is still attempting to recover her confiscated medical files and repair the damage to her reputation and business.

Sometimes a clinical event may give rise to a complaint that becomes a compliance issue, and often there are parallels between the documentation required by the government for Medicare reimbursement and that which might be useful in malpractice risk management. In fact, CPT coding requirements can be a helpful reminder to the physician of the importance of thorough documentation, both to avoid potential liability suits and, ultimately, to benefit the patient.

Compliance Plans: Why have one?

Since the passage of the Health Insurance Portability and Accountability Act (HIPAA) in 1996, a plethora of new laws, fines, penalties and other sanctions have been added to the government’s stepped-up attack on health care fraud. No segment of health care is immune from these enforcement initiatives. Because of the escalating pace of legislative and administrative reform activities, virtually all providers are likely to be in technical violation of at least one law at any given time no matter how scrupulous and thorough their billing procedures.

An appropriate corporate compliance program, besides facilitating the prevention and detection of health care fraud and abuse in the first place, is invaluable if an organization nevertheless runs afoul of health care fraud and abuse laws. The compliance program must be in place at the time the violation occurs, however. Hastily instituting a program after notification of a violation will not help your case.

What are the benefits of having a compliance program in place during an investigation?

• It is the best means of convincing regulators not to exclude you from a federally funded program.
• It is the single most important factor in influencing a prosecutor not to proceed with a criminal prosecution when Medicare/Medicaid violations have occurred. (Prosecutors will have difficulty convincing a jury of fraudulent intent if a compliance plan is in place.)
• It may help you negotiate a less damaging civil settlement.

What is a Compliance Plan?

A compliance program is a bundle of policies and procedures used to identify legal and regulatory problems, correct identified deficiencies, prevent future violations and assure regulatory compliance. The Office of the Inspector General (OIG) has developed several model compliance programs for different types of providers (download at www. dhhs.gov/progorg/oig). The degree of formality required depends on the size and structure of the organization. The OIG emphasizes a strong organizational commitment to the detection, reporting and resolution of wrongful conduct. Additionally, the existence of benchmarks that demonstrate implementation and achievement are essential to any effective compliance program.

To be effective, a compliance plan must be legitimately implemented; otherwise, it is simply window dressing and worse than no plan at all. A practice may be required to present auditing logs and meeting minutes from compliance committee sessions to demonstrate implementation.

AMA 7-point System

The AMA Division of Health Law has developed the following 7-point system that serves as a skeleton for an effective compliance program:

1. Written compliance standards and procedures. The compliance program development team must create written standards and procedures that are reasonably capable of promoting the group’s commitment to compliance and that are to be followed by all employees and other agents.
2. Oversight responsibilities. It is no longer enough for doctors and hospitals to rely on internal billing clerks and bookkeepers to find mistakes. Specific, trustworthy individuals in high-level positions must be assigned overall responsibility for operating and monitoring the compliance program. A chief compliance officer and other appropriate oversight bodies should be designated.
3. Employee training and education. The compliance team must effectively communicate the compliance standards and procedures to all employees and agents. This will require the development and implementation of regular, effective education and training programs and materials for all affected employees and agents.
4. Monitoring and auditing claims. The compliance program must be reasonably designed to detect errors or criminal conduct by employees and other agents. Thus, claims development and submission must be monitored and evaluated by audit or other techniques.
5. Internal communications process. A reporting system, such as a confidential hotline, must be in place and publicized whereby employees and other agents can report criminal conduct by others without fear of retribution.
6. Investigation and enforcement. A system should be developed to respond to and investigate allegations of improper activities. Standards and procedures should be enforced through meaningful and consistent disciplinary mechanisms, including discipline of individuals responsible for failure to detect the offense.
7. Response and prevention. All reasonable steps must be undertaken to respond appropriately to the offense and to prevent similar offenses from occurring in the future. This includes necessary corrective action such as modifications to the compliance program.

If You Are Investigated

If you have fraud and abuse insurance, notify your carrier at once when a governmental proceeding is instituted against you or your entity. OMIC provides Medicare/ Medicaid Fraud and Abuse Legal Reimbursement Insurance coverage free of charge to all its professional liability insureds. (See Policy Issues.) OMIC will provide expert attorneys to assist insureds in responding to the government’s investigation or suit. Even if a governmental proceeding has not been instituted, OMIC will provide risk management services on other fraud and abuse liability questions or concerns. These services will include preliminary assessments of fraud and abuse liability issues by one of the leading health care law firms in the country. Please call (800) 562-6642, extension 652 to initiate these services.

Resources for Compliance Planning

American Academy of Ophthalmology’s Compliance Program Planner for the Ophthalmic Practice available from OMIC, (800) 562-6642.

Compliance Program for Physician Practices developed by Arent, Fox, Kintner, Plotkin & Kahn, PLLC law firm, available from the American Society of Ophthalmic Administrators, (800) 451-1339.

Medical Group Management Association’s Compliance Programs: A Resource Guide for the Small Group Practice available for $10 through the American Academy of Ophthalmology, (415) 561-8540.

Academy Web site, www.eyenet.org, provides coding information and resources to assist with coding compliance planning.

AMA Web site, www.ama-assn.org.

Medicare Web site on Fraud and Abuse, www.hcfa.gov.

Malpractice Coverage Extended to Eye Banks

By Betsy Kelley, OMIC Underwriting Manager

[Digest, Spring 1999]

Qualified eye banks may now purchase professional liability coverage from OMIC for direct and vicarious liability arising out of services they render. There are close to 100 eye banks in the U.S. to which OMIC might offer coverage and which might benefit from OMIC’s extensive expertise in ophthalmic underwriting, claims handling and risk management.

OMIC began exploring the feasibility of insuring eye banks last year at the request of a large insured network and its affiliated eye bank. A major factor in being able to sign on networks and other large ophthalmic groups is an insurer’s ability to provide coverage for eye banks, surgery centers and other related provider organizations affiliated with the network or group. After assessing the coverage needs and potential liability exposures of eye banks, the Underwriting Committee and Board of Directors determined that eye bank coverage would be a reasonable expansion of OMIC’s services to the eye care profession.

Who Qualifies?

Unlike other carriers that treat eye banks like any other “medical entity,” OMIC has carefully tailored an application form and underwriting guidelines specific to the activities and exposures of eye banks. To qualify for coverage, an eye bank must be a member of the Eye Bank Association of America or the American Association of Tissue Banks. As members of these organizations, eye banks must adhere to the medical standards developed by these organizations. OMIC has adopted these and other guidelines intended to reduce the likelihood of potential claims and to aid in the defense of any resulting claims. Additionally, the medical director or at least one board member must be a member of the American Academy of Ophthalmology for the eye bank to be eligible for coverage.

What is Covered?

OMIC also has crafted an Eye Bank Amendatory Endorsement to modify the standard policy terms and address the special liability issues of eye banks. For example, the definition of “professional services” has been modified to specifically include activities that eye banks perform: procuring, processing, testing, storing and distributing donor ocular tissue. In addition, the definition of “injury” has been broadened to include the possible allegations of disfigurement or mutilation of a cadaver and wrongful removal of tissue. Claims against eye banks are not common, but when they occur, most generally revolve around allegations that the donor tissue was obtained without the permission of authorized next of kin.

Coverage applies to the eye bank and its non-physician staff for their direct liability arising out of services they render. In addition, the eye bank is insured for its vicarious liability arising from services rendered on its behalf. Vicarious liability coverage arising from services rendered by employed or volunteer physicians applies provided these physicians maintain professional liability coverage themselves.

Policy Limits

Premiums for eye banks are based on a per-donation rate and vary based on the limits of liability selected and the eye bank’s retroactive date. OMIC offers a variety of limits ranging from $500,000 per claim/$1,500,000 aggregate to $5,000,000 per claim/$10,000,000 aggregate. (Lower limits of liability are available for eye banks that participate in their state’s patient compensation fund.) Limits apply on an indemnity-only basis. Defense costs are paid in addition to the limits, and unlike the coverages offered by other carriers that write eye bank coverage, OMIC’s coverage is “first dollar.” No deductible applies.

In addition to professional liability coverage, qualified eye banks also are eligible to purchase other insurance products available through OMIC, including coverage for directors and officers, errors and omissions, employment practices, Medicare/Medicaid fraud and abuse, workers’ compensation and business owners liability.

For more information on OMIC’s professional liability coverage for eye banks or other OMIC insurance products, please contact Betsy Kelley at (800) 562-6642, extension 630 or bkelley@omic.com.

Coverage Evolves To Meet New Risks

By Betsy Kelley
OMIC Underwriting Manager

Digest, Summer 1999

Technological advances, demographic shifts, and socioeconomic forces over the past decade have brought about profound changes in the practice of ophthalmology and the resulting liability exposure. Through the years, OMIC has responsibly modified its coverage features and liability limits to meet these changes.

Refractive Surgery

Until 1995, virtually the only surgical option for treatment of myopia was radial keratotomy (RK). Then in 1995, the FDA approved the Summit laser for photorefractive keratectomy (PRK). Since that time, LASIK has essentially become the procedure of choice for many. Meanwhile, several other refractive surgery options have emerged, and OMIC has extended coverage to insureds who perform these procedures: RK/AK, PRK, ALK, LASIK, Intacs, Clear Lens Extractions, and Phakic Implants for refractive purposes.

In the past year, OMIC has modified at least six existing guidelines for refractive surgery and developed guidelines for Intacs. Recent policy modifications include:

The maximum degree of myopia for PRK and LASIK was increased in recognition of changes in FDA-approved guidelines.

The minimum age for PRK using the Summit laser was lowered to 18.

The required one-week interval between primary PRK and LASIK procedures may be waived for experienced surgeons who qualify, subject to special consent requirements.

The 10 surface PRK requirement was discontinued to allow physicians with limited or no prior PRK experience to qualify for LASIK coverage provided they are certified on the laser and are proctored for their first five LASIK cases.

Cosmetic Surgery

Many ophthalmologists have expanded the scope of their practice to include laser skin resurfacing, laser hair removal, and other cosmetic surgery procedures, including facelifts and liposuction. Subject to underwriting review and adherence to guidelines, coverage for such cosmetic procedures is now available to qualified ophthalmologists.

Part-time and Tail Coverage

While OMIC has always offered part-time rates to ophthalmologists who limit their practice to medical ophthalmology, recently this discount was extended to qualified insureds who perform surgery as well. Eligibility for a part-time discount is based upon the number of practice hours, scope and volume of practice, and claims history, among other things.

Recognizing that an increasing number of ophthalmologists may elect to retire at an earlier age, OMIC discontinued its age requirement for free tail coverage upon retirement and, more recently, reduced the length-insured requirement. Now, an insured who retires permanently from the practice of medicine at any age qualifies for a free tail provided he or she has been continuously insured with OMIC for at least one year (see note below). OMIC also provides a free tail upon death or disability, regardless of age or length of time insured with OMIC.

Liability Limits

Legislative changes have prompted requests for more flexible coverage options in certain states. OMIC now offers limits of $400,000 per claim/$1,200,000 aggregate to insureds who practice in Pennsylvania; $250,000/$750,000 in Indiana; and $1,500,000/$4,500,000 in Virginia. OMIC also considers, on a case-by-case basis, requests by insureds for non-traditional limits. (Note: the limits noted here applied in 1999 – limits in PA and VA have increased since this article was written)

New Entity Exposures

OMIC realized the need to develop guidelines accommodating the liability exposures associated with shared management of post-operative patients. OMIC will directly insure qualified employed optometrists as additional insureds under the physician’s policy and, in certain limited circumstances, may extend coverage to the entity and/or optometrist in cases where the optometrist owns a portion of the practice.

To remain financially viable, ophthalmic surgery centers often must allow other specialists to use their facility. Thus, OMIC has developed appropriate underwriting guidelines and rates that permit the company to insure the surgery center for its vicarious liability exposures arising from ophthalmic and non-ophthalmic procedures. At the request of an insured network, OMIC also developed a program for coverage of qualified eye banks.

Fraud and Abuse Coverage

In response to the federal government’s zealous efforts to root out health care fraud and abuse, OMIC now provides its professional liability insureds with a Medicare/Medicaid Fraud and Abuse Legal Expense Reimbursement Insurance policy free of charge. Academy members insured elsewhere for their professional liability coverage may purchase fraud and abuse coverage from OMIC for a nominal premium.

For more information or to request changes to your coverage, please contact any of OMIC’s Underwriting Department representatives at (800) 562-6642. For information regarding OMIC’s fraud and abuse coverage, please contact Kim Wittchow at ext. 653.

UPDATED (1/13/2013):  OMIC’s retirement premium waiver was modified in 2003 to increase the required minimum period of continuous insurance from 1 year to 5 years for all new policies incepted on or after 6/1/2003 and for all individual insureds added to existing group policies on or after 6/1/2003.

Plan Ahead for Long-Term Care

By Michael Meyers
Mr. Meyers is a freelance writer in Charlottesville, VA. He has written extensively about the insurance industry.

[Digest, Fall 1999]

Most doctors and other professionals would never dream of going without life, auto, homeowners, and medical insurance for their families. Yet they risk the assets they’ve worked so hard to build up by overlooking another equally important personal insurance protection: long-term care insurance. They often believe that a nursing home represents a loss of independence, that it is the only form of long-term care available, and that long-term care insurance is too expensive.

Nursing homes are not the only long-term care option. More and more people are taking advantage of assisted-living facilities, senior housing with services, adult foster care, home health care, and other innovative forms of long-term care to avoid the high cost of a nursing home stay. According to the Health Care Financing Administration, the average annual cost of a nursing home stay is $47,000 and rising. Of course, the cost of alternative services can add up quickly too, and even a single year of long-term care paid for out-of-pocket can be more costly than insurance.

Changes in federal income tax incentives in 1997 allowed qualified long-term care insurance premiums to be deducted as medical expenses, in whole or in part, subject to certain limits, provided the plan meets federal guidelines. Employers who pay premiums for an employee and/or spouse can deduct them as a business expense. Solo practitioners or doctors in a partnership, including S corporations, may deduct long-term care premiums to the same extent they do health insurance premiums.

The younger a person is at the time long-term care insurance is purchased, the lower the premium. Many people wait too long to buy this coverage. Not only does this raise the premium, it increases the likelihood of developing a chronic illness that will disqualify the applicant for coverage. When evaluating the need for long-term care insurance, take into account the individual’s personal situation, retirement plans, and family relationships. Ask yourself the following questions:

How Long Should Coverage Last?

Given the statistics on lengths of nursing home stays, you probably want to shop for a long-term care policy that provides two to four years of care. More coverage may be a waste, less a big risk.

How Do I Decide on a Daily Benefit Amount?

Research the costs of nursing home care where you live, keeping in mind that it is likely you will need to pay a nursing home more than the basic rate each month because of added charges for drugs and special services. One approach is to select a daily benefit equal to the nursing home’s published rate and plan to pay out-of-pocket for extra services. You also may want to take into account your projected discretionary income and how much you will be able to afford to pay out-of-pocket.

How Much Can I Afford Out-of-Pocket?

Even with this insurance, you will have to pay some costs yourself. First, you must meet a deductible (elimination period). Then, some plans pay a fixed amount for each day you are in a nursing home, regardless of how much your nursing home care cost, while other plans pay actual charges up to a fixed amount. How a plan pays its benefits will influence how large a benefit you select, so factor this into your decision.

What Coverage Benefits Should I Look For?

The company behind the coverage.
The carrier’s financial stability and experience providing long-term care insurance are the first things to consider. You want assurance that the company will be around in ten or fifteen years if you need to apply for benefits. A.M. Best, Moody’s, or Standard & Poor’s rating systems can help you judge.

Type of coverage provided.
Look for a plan that covers skilled, intermediate, and custodial nursing home care.

Home health care.
You’ll most likely want a plan that offers home health care as an option or as one of its regular benefits in situations where nursing home care is not necessary.

Definition of a covered stay.
A good plan should cover your nursing home stay not only if you are injured or sick but also if you need continual help with two “activities of daily living” (i.e., dressing, toileting, continence, transferring, or feeding) or you need supervision because of cognitive impairments like Alzheimer’s Disease.

Choice, choice, choice.
Different people have different needs based on their income and assets, nursing home costs where they live, and how much they can or want to “self-insure.” Select a plan that gives you a choice of daily benefit options, elimination periods (deductibles), and benefit limits. That way you can build a plan to meet your individual needs.

Inflation protection.
Because you are purchasing insurance today to meet tomorrow’s costs, you probably will want inflation protection. There are two types of inflation protection available: one automatically increases your benefit level by an equal percentage each year; the other compounds the benefit increases.

Guaranteed renewable.
This means you can always renew your coverage as long as you pay your premiums on time, even if your health condition worsens. In most cases, however, the insurer will reserve the right to change premiums for all persons in a given class or state.

Waiver of premium.
This allows you to continue coverage without cost after you have been receiving benefits for a certain period of time, such as 90 days. Some plans offer a “return of premium” or nonforfeiture benefit in case you die or terminate your coverage. However, this provision can add significantly to the cost of a plan.

If you need additional help shopping for long-term care insurance, contact the National Association of Insurance Commissioners at (816) 374-7259 for a copy of the Shoppers Guide to Long-term Care.

The American Academy of Ophthalmology offers comprehensive long-term care plans to active Academy members and their spouses, parents, and grandparents. To learn more about these plans, call the Academy Insurance Center at (800) 906-7607 for a free consultation.