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Business Opportunities from the PPACA

By Robert Allen
Torus Insurance Company

In the healthcare arena, we are watching  the actions taken to prepare for an environment under the Patient Protection and Affordable Care Act (PPACA).  The strategies vary by region and by type of provider.  We definitely know that the PPACA will mean changes in medical professional liability and the following is a brief overview of the opportunities that will present themselves for producers and underwriters.

Since being passed the healthcare industry has been in a state of transformation that cannot be overturned, even if the PPACA itself becomes “defunded”.   We are watching our clients’ businesses change through merger and acquisition (M&A) activity, the creation of new entities, and IT investments.  As underwriters and brokers of medical professional liability(MPL), it is our responsibility to assess the impact of the Act on our insureds and on our own businesses. As this historic development continues to unfold, insurers must prepare for wide-reaching underwriting implications, through 2014 and beyond.

We hear a good deal about the disappearance of the individual/small group physician practice, but very little is said about the resulting opportunities.  As an example, hospitals with large self-insured retentions are acquiring these physicians and covering them as employees.  The aggregation of these physicians under one buyer has enabled the right producers and the right markets to created dedicated insurance products to cover these employed physicians under an insurance policy that dovetails with the hospital’s insurance program.  By developing a joint-defense strategy, all parties can be comfortable with their approach to settling cases with multiple defendants.  Through this innovation,  a physician insurer has gained the employed group as new clients…physicians that would otherwise be out of the MPL insurance market for years.

There has been M&A activity among physician groups.  In specialties heavily hit by Medicare cuts (e.g., cardiology and radiology), we are seeing physicians come together into large groups as multi-specialty groups and as single-specialty groups.  The opportunity comes because there is a lack of planning for the integration of new physicians into big group insurance programs.  In some cases, the new physicians have not completed individual applications for coverage.  In other cases, centralized risk management and patient safety are not addressed.  By creating a workflow that simplifies the application and underwriting process, producers can differentiate themselves from the rest of the marketplace. 

As we know, the physician insurance market includes several RRGs and reciprocals.  In many cases,  hospitals that are acquiring physician groups require the tail/extended reporting period (ERP) to be provided through an A.M. Best rated carrier.  The opportunity to place or underwrite stand-alone tail coverage is something that we may continue to see for the next two years.  Opportunities also arise when the acquiring entity demands a separate limit (or higher limits) to apply for the ERP.  Please note, this type of activity is also developing when health systems are buying smaller community hospitals. 
Ultimately, the buyer wants to make sure all liabilities are resolved and assumed by a third party.  In the hospital segment, requests to remove all liabilities through a loss portfolio transfer (LPT) are becoming common.  An LPT is a financial transaction where existing case reserves (within the self-insured retention or captive) are assumed and ultimately paid by a (re)insurer.  The goal is similar to the purchase of an ERP but in a layer where no insurance policy exists.

For those who specialize in MPL for physician extenders (e.g.  nurse practitioners and physician assistants), you are going to be very busy.  Several states have bills that will expand the access or practice of nurse midwives or  offer NPs and PAs the ability to prescribe certain medications.  Some argue that the growth in responsibilities/services will lead to higher loss costs and higher premiums for physician extenders.  Other say that the need for these practitioners to address low acuity patients will create a new generation of retail medical clinics that will need MPL products.  It is safe to say that both will lead to opportunities for premium growth in this segment. 

The PPACA is driving a need for specialized risk and insurance products. These policies will need to address both historical and prospective liabilities.   As long as we do our research, we should look at the PPACA as an opportunity for MPL organizations to grow. 



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About NIF Group

NIF Group is a national program manager and regional wholesale broker. Based in NY with offices nationwide, NIF underwrites programs for nonprofits, social service agencies, bowling centers, and contractors; as well as offering access to specialty property casualty, such as contractors, difficult products, environmental, property and management/professional liability.

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