January 1 marked the beginning of an expansion of healthcare coverage for drug and alcohol addiction treatment under the Affordable Care Act (ACA). This expansion is leading to a growth in the rehabilitation facilities market but what that growth looks like has yet to be determined, according to one industry expert.
“Although the recession negatively affected industry revenue and wages, rehabilitation clinics have largely recovered, despite a slight dip in 2012 resulting from a drop in federal funding of Medicare and Medicaid, due to a rise in premiums,” according to a recent report by IBISWorld titled “Drug & Alcohol Rehabilitation Clinics in the U.S.: Market Research Report.” In addition to the improving economic environment, the ACA’s expansion of private and government coverage of drug and alcohol rehabilitation services would help bolster demand in this industry segment, which should boost revenues during the five years to 2019, the report predicts.
Employment of substance abuse and behavioral disorder counselors is also projected to grow by 31 percent from 2012 to 2022, much faster than the average for all occupations, according to the Bureau of Labor Statistics. The forecasted growth is good news for insurance experts specializing in this industry.
Program administrator Irwin Siegel Agency Inc., based in Rockhill, N.Y., has seen its specialty book of business for behavioral health and addiction treatment facilities grow.
“We are seeing the book for this segment grow very nicely,” says Tiffany VanEtten, behavioral health underwriting specialist for Irwin Siegel.
VanEtten says while some states have started to see more funding to support nonprofit addiction rehabilitation treatment facilities, overall the segment — both nonprofit and for-profit facilities — is experiencing growth nationwide.
In VanEtten’s view, while state and federal funding boosts are helping to grow this segment, there are other factors contributing to its growth as well. Everything from media coverage over the growing need of addiction treatment to school shootings to the expansion of healthcare from the ACA have contributed to the growth.
Irwin Siegel has been writing insurance for social service providers for more than 40 years.
“Our behavioral health and addiction treatment segment is currently written with ACE although we have been doing this segment in addition to our other segments for 40-plus years. Behavioral health and addiction treatment (BHAT) segment came a couple years after our developmental disabilities and social services,” she says.
ACE has served as the carrier on the program since 2008. The average premium size on an Irwin Siegel BHAT account ranges from $75,000 to $150,000 but VanEtten says they will write facilities as small as $10,000 in premium, or as large as upwards of $1 million in premium.
The program includes a package policy but offers ancillary products as well to fill in any gaps for property/casualty coverages. Those may include general liability, professional lines, crime coverage, sexual abuse coverage as well as auto coverage.
“We’ve had very good success overall (in losses),” she adds.
While many in the industry anticipate a surge in individuals seeking drug and alcohol rehabilitation treatment services thanks to newfound insurance coverage afforded by the ACA rules, others say it’s too early to tell.
“It’s a mixed bag depending on where you are in the country,” says Brad Storey, assistant vice president of risk management for Irwin Siegel. There’s a lot of politics involved as well, he says, especially in states like Louisiana which at this point has not agreed to Medicaid expansion.
“To be very honest, it’s way too early to tell what the true impact of the ACA will be on the market,” Storey says. In the next two to three years the picture will get far clearer as implementation benchmarks of the ACA begin to take shape, he says.
“Just because someone has insurance doesn’t mean they are insured for everything,” he says. While it may be better to have some coverage for addiction treatment services than nothing at all, it’s not yet clear how comprehensive the coverage will be for such services.
Even with a projected 31 percent employment growth rate for substance abuse and behavioral disorder counselors in the coming years, some question whether the industry will be ready to handle the forecasted surge in patient care for drug and alcohol treatment. According to the National Association of Alcoholism and Drug Abuse Counselors, between three million to five million people who have a diagnostic addiction disorder warranting treatment will gain coverage through healthcare reform.
“If all of the affected three million to five million people who are going to gain coverage through the ACA all go to seek treatment, yeah, we’ll have a little bit of a problem in the industry,” Storey says. “However, just because somebody now has insurance doesn’t mean that they are going to seek treatment. That’s where it starts to get muddy.”
Storey doesn’t see a “run on the bank” mentality where millions of people suddenly seek treatment, but he does expect to see continued growth as coverage becomes available and more mainstream.
One area where drug and alcohol rehab facilities will be increasingly at-risk under the ACA is cyber-related exposures.
“Now more than ever organizations have to be far more technical and that brings exposures that are not traditional to human sources,” Storey says.
Cyber liability is one coverage area that many organizations in this segment do not understand the need.
“We’ve seen a lot more cyber policies selling but not nearly enough to where it should be,” he says.
“One of the new requirements with the ACA was the introduction of electronic health records,” says Dawn Martin, assistant vice president of underwriting at Irwin Siegel. “With steady growth of more people coming into the marketplace under ACA there’s more and more personal health information held online where traditionally it was paperwork.”
All but four states (New Mexico, Alabama, Kentucky and South Dakota) have laws requiring agencies to notify in the event of a breach, Martin says.
“New Mexico has a bill in the house and will soon have laws for notification,” she says. Each state has its own data breach notification law, and the requirements vary significantly state by state.
“That means if you have a breach you could potentially be required to notify everyone that could be affected, which could be very costly.”
That’s why Irwin Siegel recommends that facilities purchase stand-alone cyber liability policies where much higher limits of coverage are offered. The purchase rate is still pretty low, but it is starting to catch on, Martin says.