$1M Professional Liability (E&O) Insurance for Medical Coding Companies

Practices, hospitals and health plans often ask medical coding companies for $1M in Professional Liability (E&O) before coders touch their charts, and each client sets its own per claim and aggregate limits.

What does a $1M requirement mean for medical coding companies?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your services caused a client a financial loss. In a coding services agreement, the clause often reads like this:

• Per claim: the most the policy pays for any one claim.
• Aggregate: the yearly total the policy pays for all claims in one policy year. A $1M/$1M policy would fall short of this sample clause. A $1M/$2M policy would meet its limits, but the clause may add other terms, such as covered services.
• Claims-made: the policy covers claims made and reported while it is active, for work done on or after the retroactive date (the earliest date of work the policy covers). Claims can come in after the work is done, so clauses often ask for coverage to continue after the contract ends.

For more on reading limits, see Professional Liability (E&O) limits explained.

Who asks medical coding companies for $1M?

You will often see $1M from:

• Physician groups and specialty practices that send out coding or coding audits.
• Surgery centers, imaging centers, labs and community hospitals that outsource their coding.
• Billing companies that subcontract coding work to you (see $1M Professional Liability for medical billing companies).
• Larger hospital systems and health plans. They may ask for $2M instead, because one risk adjustment or inpatient error can touch many charts (see $2M Professional Liability for medical coding companies).

How is $1M built?

At $1M, one primary policy (the policy that pays first) is usually enough. Coding companies usually buy Miscellaneous Professional Liability, a form for service firms. A firm that mainly sells coding software may need Technology E&O instead. Licensed clinicians usually buy medical malpractice insurance.

Before you buy, check that the policy lists coding and coding audits as covered services, and that the aggregate matches the clause. A commercial umbrella almost never covers Professional Liability. A standard policy does not make your client an additional insured (a party that gets coverage under your policy) automatically. Some insurers may add one on request, usually only for the client's liability from your services, so check whether your contract asks for it and whether the quote offers it.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. For coding work, they often ask:

• Your services (professional fee coding for doctor visits, facility coding for hospital stays, risk adjustment coding for health plans, coding audits, training), with a rough share of revenue from each.
• Your clients by type and specialty, your largest client's share of revenue, and chart volume.
• How many coders hold a national coding credential, and how you review quality.
• Whether coders are employees, contractors or offshore, and whose systems they use.
• Whether you sign business associate agreements (contracts on protecting patient information) and how you control remote access.
• Your contracts, prior claims, anything that could become a claim, and your retroactive date.

What affects the cost?

• Service mix. Coding for health plans and hospital stays usually costs more to insure than doctor-office coding or training alone.
• Client type and volume. Health plans, hospitals and high-dollar specialties usually mean bigger possible losses.
• Staffing, controls and claims history. Uncredentialed staff, heavy subcontracting, weak quality review or prior claims can raise the price.
• Aggregate and defense terms. $1M/$2M usually costs more than $1M/$1M. Many policies pay defense costs (legal fees) inside the limit, which leaves less for a settlement.

Frequently asked questions

Do I need $1M Professional Liability as a medical coding company?

Often yes, if your client contracts say so, because many practices, hospitals and health plans ask for it. Your contract sets the limit, so read its insurance section. Hypothetical example, not a real case: your coders undercode a practice's office visits for a year, and the practice says it lost revenue.

Does Professional Liability cover money a health plan recoups from my coding company?

Sometimes, but it depends on the wording. Recoupment means a health plan takes back money it already paid. Many policies exclude fines, penalties and the return of fees. A client's claim against you for its losses may still be covered.

Is $1M/$1M enough if my coding contract says $1M/$2M?

No, a $1M/$1M policy would fall short of a $1M/$2M requirement. Request new quotes for a $1M/$2M policy. Morrow can request quotes for it and ask insurers to keep your retroactive date and prior acts coverage (coverage for work you did before the new policy starts) where the market allows. In many cases it makes sense to keep your current policy in force until a new one starts, so there is no gap. Check your policy wording and the new quote's terms first. Report anything that could become a claim to your current insurer before that policy ends.

This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.