Health care organizations paid significantly more for their directors and officers liability insurance in the third quarter of 2013 amid growing concerns over antitrust issues arising from implementation of the Affordable Care Act (ACA), Marsh says in a new report released last Wednesday.
Average primary D&O rates for midsize and large health systems increased 9.6 percent in the quarter, while total program D&O rates renewed with 7.9 percent increases on average. The majority of Marsh’s midsize and large health care clients—73 percent—renewed their primary D&O coverage with a rate increase in the third quarter.
Primary D&O rates for smaller health care organizations (those with $150 million or less in assets or annual revenues and fewer than 1,000 employees) increased 12.7 percent on average in the quarter. Nearly all—96 percent—renewed with rate increases.
Since the passage of the ACA in 2010, the health care industry has undergone rapid consolidation resulting in organizations working more closely together and sharing information, according to the latest Marsh Risk Management Research briefing, “As Reform Takes Effect, Health Care D&O Rates Increase.”
This consolidation has resulted in increased antitrust concerns among insurers, which in some cases have lowered their antitrust sublimits and increased antitrust-related coinsurance requirements and retentions. In addition to raising rates, some D&O insurers are also pulling back on offering full policy limit defense coverage, Marsh says.
“Ongoing merger and acquisition activity and the transition to accountable care organizations and similar networks are creating new exposures for many health care organizations, including antitrust risks,” says Mark Karlson, Marsh’s FINPRO health care practice leader.
“Risk managers should expect to face additional rate increases in 2014 and be prepared to provide underwriters with detailed answers about their response to health care reform,” Karlson adds.