Using Group Captives to Control Health Insurance Costs
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Preparing for Change - With professional liability costs increasing, the US Healthcare Sector has seen the largest growth rate in captives since 2003, by Erik Johnson and Nancy Gray, Captive Review, March 2011
[Excerpt] "As trailblazers of self-insurance, healthcare providers are sophisticated in the ways of professional liability risk-taking ... Detecting changes in the HPL (Hospital professional Liability) ... is a challenge. Insurance of long-tailed risks such as HPL is characterised by a long delay between the obligation to pay for claims and the time when payments are determined and eventually made," states the authors. From 2000 to 2006, the industry experienced six consecutive years of declining claim frequency (dropping 28%). This prolonged period of decrease in claim frequency can be attributed to three factors: tort reform, patient safety initiatives and concern over healthcare availability. Since 2006, HPL claim frequency has been increasing. This coincides with successful challenges to state's implementing tort reform and the economic downturn. Another lesser known trend contributing to the increase is hospital systems are employing more physician employees and incorporating physician professional liability into hospital self-insurance captive vehicles. This trend will likely continue under health care reform. Claims are shifting from physician professional liability coverage to hospital professional liability coverage. Along with claim frequency, claim severity has been increasing. "Healthcare risk managers and finance teams are presented with many new risks in the current environment. The uncertainty associated with healthcare reform and the prospects for economic recovery strongly play into the strategic planning process," the authors conclude.
