Survey: Healthcare Reform Driving Demand for Provider Excess Insurance

July 30, 2013

Evolving reimbursement models for healthcare providers are fueling a surge in demand for provider excess insurance with industry experts forecasting a jump in premiums of 15-30 percent in 2013, according to a ReSource Intermediaries survey.

Traditional fee-for-service contracts that reward hospitals and physicians based on the amount of care provided are in decline as government and commercial health insurers seek to control cost. In their place, “value-based reimbursement contracts” allow providers who efficiently manage the amount and quality of care to share in the savings, or to share in the costs of over-utilization. Provider excess insurance protects hospitals and physicians against the impact of the costs of a single expensive patient and can also be used to manage providers’ budgets for value based reimbursement contracts.

“This changing paradigm is dramatic, essentially turning a hospital into a small health insurer, and as such a buyer of reinsurance,” said Peter Robinson, Health and Accident practice leader of San Francisco-based Resource Intermediaries. “The market for provider excess insurance is experiencing explosive growth as this type of contracting becomes more common.”

Based on the survey, which ReSource said included the participation of 13 of the top underwriters, ReSource expects the provider excess insurance market to total $180 million in 2013, representing a 24 percent increase from the estimated $145 million market in 2012.

Other survey findings include:

  • Respondents expect, on average, 16 percent growth in the overall provider excess market. When asked about the growth of the organization’s own portfolio, respondents said they expect a much higher 30 percent growth rate.
  • Reported HMO reinsurance premiums associated with provider-owned health plans is estimated at $213 million in 2012 and $230 million in 2013.
  • Respondents expect, on average, 6 percent growth in the overall HMO Re market for provider-owned plans. When asked about the growth of the organization’s own portfolio, survey respondents said they expect 8 percent growth.

“Underwriting provider excess insurance is a very technical and data-driven process. We see insurers investing in specialist underwriters, data, analytics, and claims resources to keep pace with this growing market,” said Patrick Gallagher, chief actuary of ReSource Intermediaries.

ReSource Intermediaries, an Integro company, is a reinsurance broker particularly focused on the healthcare segment. Integro is an insurance brokerage and risk management firm.

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