2016 Insurance Market Preview: Reform Continues to Shape Health Care Industry Risks
Nearly six years after becoming law, the Affordable Care Act (ACA) continues to shape the health care industry. The ACA changed the way that health care providers and payers operate, driving the adoption of new approaches to patient care, a move toward new risk-based contracting, industry consolidation, and more.
These shifts have affected every aspect of the health care industry, including insurance and risk management. The ongoing transition to accountable care models — coupled with other regulations and industry trends — will have several implications for buyers of commercial insurance coverage in 2016, including:
- Cyber liability: The continued loss or theft of protected health information was highlighted by several high-profile breaches in 2015.
- Medical professional liability: Some insurers have expressed concern about the growing frequency and severity of batch or large-value claims post-reform.
- Directors and officers liability (D&O): Health care companies continue to merge with or acquire other entities or enter into other partnerships, such as accountable care organizations (ACOs) and joint ventures (JVs). The increase in mergers and acquisitions in the industry has contributed to a rise in antitrust and similar litigation.
- Managed care errors and omissions (E&O): Many insurers are seeking to narrow coverage terms related to new business models, cyber risk, and regulatory activity.
- Provider excess loss: The shift toward risk-based contracting could expose providers to higher financial losses associated with patients requiring treatment for catastrophic accidents or illnesses.
In the fourth quarter of 2015, rates were generally stable across the above insurance lines, with some buyers able to secure rate decreases at renewal. Cyber insurance was an exception, as demand remained strong, but rates continued to generally increase.
For health care companies renewing their insurance programs this year, one key to success will be to stand out from the crowd — and that means providing underwriters with detailed information about specific risks. Risk managers should be prepared to:
- Involve chief information security officers and other senior leaders in cyber underwriting meetings, and share details about technology safeguards and employee training.
- Explain policies and procedures for effectively integrating new entities and physician practices to ensure effective quality of services and patient safety.
- Provide D&O underwriters with details related to ownership, operating and indemnity agreements, and professional services responsibilities under any ACOs, JVs, or other business partnerships.
- Provide managed care E&O underwriters with summaries of operations, types of services provided, and current/forecast numbers of enrolled members.
- Share details about at-risk contracts that their organizations have entered into.
For more information, read Marsh’s United States Insurance Market Report 2016.