Three Key Risks Affecting Insurance Pricing for Health Care Organizations

Despite a generally stable insurance market, health care organizations face several changes as they adapt their businesses to changing payment models.

The US health care industry is experiencing generally favorable insurance pricing in 2015 and is expected to continue to remain stable, according to Marsh’s US Insurance Market Report 2015.

Despite generally stable insurance market conditions, health care organizations are facing three principal risks in 2015:

1. Patient safety/quality: Although the transition to a fee-for-value payment model is expected to improve patient outcomes through collaborative care models, malpractice risk could increase in the short term. Factors include the potential conflict of improving quality while seeking cost reductions, clinical integration through the employment of physicians, strategic alliances across different providers, a greater reliance on nurse practitioners, new standards of care, heightened patient expectations, and a reliance on new forms of information from electronic medical records.
2. Physician/provider strategy: The move to employ large numbers of physicians may help health care systems improve the bottom line, but it changes their risk profiles. Organizations now include employed physicians in self-insured retentions, trusts, and captives, and place excess towers of insurance above a growing exposure base without the buffer of individual physician limits. Health systems have increased involvement in first-dollar medical malpractice events, and many provide claims-made tail coverage for physicians at the time of employment, which could result in potential liability for physicians’ prior acts.
3. Reimbursement risk: The move from a fee-for-service to a fee-for-value payment model creates significant risks for health care providers. They are forming the strategic partnerships and joint ventures necessary to achieve the economies of scale to weather the downward pressure from reimbursement cuts, capture market share, and incentivize savings payments under the “at-risk” reimbursement plans.

Managing the Risks

To mitigate the impact of changing care models on patient safety, many organizations are forming care teams, which are responsible for providing comprehensive and collaborative patient care, increasing training for allied health team members, and building in hard stops within electronic medical records to query providers about care protocols.

Strong contract review is critical when assessing strategic-alliance partners and physician employment contracts. Appropriate levels of insurance should be verified with partners for not only medical professional liability but also emerging risks such as cyber and directors and officers liability.

Robust case management and billing- and coding-practice reviews can help mitigate immediate concerns around reimbursement risk, but reviewing the need for coverage for fines and penalties should be a part of any mitigation strategy. In addition, as more reimbursement contracts move to shared savings plans or capitated risk, an assessment should be made to consider capping the volatility of those contracts with provider excess loss cover.

For more information on insurance market conditions and risk trends for health care organizations, read our US Insurance Market Report 2015.

About the Insurance Market Report

The US Insurance Market Report is one of six regional reports that analyze insurance market conditions and risk trends in 62 countries worldwide. All of the reports can be accessed at imr.marsh.com.