Indemnification agreements are simple contractual agreements requiring the physician to indemnify the MCO in certain circumstances. This can range from agreeing to reimburse the MCO for any costs related to the physician’s malpractice to broad agreements to reimburse the MCO for any costs that result from any behavior by the physician. Even narrowly drawn, indemnification agreements can be troublesome. For example, many malpractice insurance policies will not cover a physician’s indemnification agreement with an MCO. Even if the MCO does not have to pay any damages for the physician’s negligence, it may have $500,000 in attorney’s fees related to the case; for which the physician may be personally liable. More broadly drawn agreements can impose open-ended liability, including liability for administrative sanctions against the MCO for activities over which the physician was nominally in charge.

Indemnification agreements should be avoided if possible. Physicians who are forced to sign such an agreement should ensure that they have adequate umbrella insurance coverage, and that the insurer will pay indemnification claims. This may require a commercial insurance broker and a very high umbrella policy. It is especially important that physicians review all of their contracts with MCOs to identify any indemnification or other commercial risk clauses, and to do so when each contract is renewed. In many practices, the practice manager deals with MCOs and physicians just sign the papers placed in front of them. Many of these physicians do not know that they may have assumed significant uninsured financial risks.