Managed Care Liability: Why are antitrust issues making renewals a battle?

That’s a question I’ve been asking myself for the last 12 months.  Every insurance placement I’ve worked on for Managed Care Organizations (MCOs) has become a battle.  Underwriters are raising rates and cutting back coverage on most renewals.  Anyone hoping for the return of a ‘hard’ insurance market should realize their wish has been granted, at least in the MCO sector of the healthcare liability market.

My carrier partners who write MCOs are lamenting the rise of anti-trust claims they are paying.  It appears the rise of hospital and physician group mergers after the passage of the Affordable Care Act (ACA) is mostly to blame.  Antitrust laws deal with issues of fair competition and trade. Large hospital systems are falling under attack by allegations of gaining too much control over a region’s healthcare delivery system, thus stifling fair competition and creating possible anti-trust violations.

Much attention has been paid recently to the case in Idaho where the Federal Trade Commission (FTC) took up the charge in suing St. Luke’s Health System for such violations.  The FTC’s co-plaintiffs where made up of some of St. Luke’s major competitors.  The courts ultimately determined that St. Luke’s had indeed violated some anti-trust laws and ordered an unwinding of the St. Luke’s merger with some of the physician groups it had acquired.  This became a landmark decision that many popular outlets have followed closely (for example, a New York Times article, “Health Law Goals Face Antitrust Hurdles”).

The rise of new Accountable Care Organizations (ACOs) is also adding to the caution seen by managed care underwriters who are trying to figure out how their existence will further affect antitrust exposures.  ACOs are charged to find ways to coordinate care among many providers while also reducing costs.  This could introduce added layers of complexity in how physicians and hospitals work together to achieve those goals successfully.  Since most ACOs are new and virtually untested in court, underwriters are exercising a lot of caution in their approach to insuring ACOs, too.

I see no indication of any coming relief on this issue.  And, it’s the Directors and Officers (D&O) line of coverage that’s causing most of the angst because that’s where antitrust coverage lies.  The managed care liability insurance market has never had an overabundance of carriers willing to take these risks.  There’s really only been a five or six key markets for many years now, and this is one of the few insurance sectors where I have not seen any new carrier(s) willing to enter the market.

In the meantime, I suggest preparing for battle. Not because our underwriters really want to fight with brokers over each renewal, but because insureds must face the reality of today’s managed care liability market.  There aren’t enough carriers willing to enter the arena while antitrust claims heat up.

So, here are a couple of points to consider when making our battle preparations:

• Remember that managed care liability is already a complex policy because it usually seeks to combine E&O, D&O and EPL coverage all under one policy.  The underwriters who put these policies together have a lot to consider among those three different coverages.

• Expect to see limitations on the D&O coverage as it relates to antitrust issues.  Higher retentions or even separate retentions just for antitrust claims are becoming the new normal.

• Don’t be surprised if underwriters want to include co-insurance clauses on the D&O, which increases the insured’s sharing of risk with the carrier.

• Most renewals are seeing increases in rates, so consider working well in advance of your renewals to give yourself ample time to work through the renewal process.

General George Patton was once quoted as saying “Accept the challenges so that you can feel the exhilaration of victory.”  Since it looks like the managed care market is in for a potentially long ride, I’ll continue to accept these challenges.  Feel free to contact me if you want help getting to a point of victory!