Rates for directors and officers (D&O) liability coverage for healthcare organizations climbed in the third quarter due in part to antitrust concerns arising from the industry's changing business models pursued in response to the healthcare law, according to Marsh.
In a Marsh Risk Management Research briefing, Marsh says, “Since passage of the ACA in 2010, the healthcare industry has undergone rapid consolidation. Many healthcare organizations have formed accountable care organizations (ACOs), joint ventures and loose alliances and networks aimed at better coordinating services, reducing costs and improving the quality of care.”
However, because these changes mean the organizations are working more closely together and sharing information, “some insurers have expressed concerns about antitrust issues.”
Marsh says average primary D&O rates for midsize and large health systems increased 9.6% in the quarter. The broker says 73% of organizations saw rate increases, while 13% saw decreases and 13% remained flat.
For smaller healthcare organizations—which Marsh defines as $150 million or less in assets or annual revenues, and fewer than 1,000 employees—Marsh says D&O rates were up 12.7% in the quarter, with 96% of renewals showing increases.
Marsh says not all insurers were seeking dramatic changes, but some are pulling back on offering full policy limit defense coverage.
“Regulators have made clear their intentions to continue pursuing antitrust cases in healthcare,” Marsh notes, stating that Federal Trade Commission Chairwoman Edith Ramirez has identified healthcare, technology and energy as major areas of focus.
“Although the ACA provides for formal safe harbors for federally recognized ACOs and the FTC has said it will generally recognize similar protections for such arrangements that are not federally recognized, this area has yet to be tested,” states Marsh.
Aside from antitrust concerns, Marsh says the industry's shift to ACOs can “alter the risk profiles of healthcare organizations,” prompting insurers to seek more information about ACO formation and strategy.
For 2014, Marsh says healthcare risk managers should expect additional rate increases for D&O and should be ready to answer underwriters' questions about strategies related to the formation of ACOs and other networks.
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