HealthSure Headlines: Vol. 11



Survey indicates med-mal market “years from hardening”


eMCA program saves money and simplifies equipment maintenance and repair


Preparing for the inevitable data breach


Healthcare workers suffer higher on the job injuries than most other professions


Another reason to consider self-funding

Survey indicates med-mal market “years from hardening”
By Brant Couch, CIC, CPA

Revenue continues to outpace claim expenses
Source: Medical Liability Monitor New Release

According to data, from the 2013 Medical Liability Monitor Annual Rate Survey, the medical professional liability insurance industry has experienced yet another year where rates and written premium continue to trend downward, while insurers continue to achieve above-average financial results. This is a familiar scenario, as rates have been declining since 2006, but year after year the industry as a whole continues to post impressive financial performances.

“While it’s not surprising that this year’s Annual Rate Survey indicates the continuation of a multi-year downward trend in rates and written-premium, it’s still confounding,” said Michael Matray, editor of the Medical Liability Monitor. “The medical professional liability insurance industry has been slogging through the longest soft market in its history, and there’s no solid indication as to when that’s going to change.”

“Since 2006, the U.S. medical professional liability insurance sector has seen direct written premium fall by roughly 20 percent, suggesting a soft market,” said Chad Karls, author of the Executive Summary to this year’s Annual Rate Survey. “At the same time this traditional soft market indicator has been in free-fall, however, the industry’s premium revenue has continued to outpace its claims expenses, with annual combined ratios for the sector coming in at well below 100 percent every year since 2006. To put this record into historical perspective, consider that for the 28 years between 1978 and 2005, the sector enjoyed a combined ratio under 100 percent only twice, once in 1989 and once again in 1994. To put this sector’s recent financial results into a current perspective, all other property and casualty lines of insurance had combined ratios of 100 percent, or well above, in 2012. Only medical professional liability managed an underwriting profit last year.”

Similar to the last seven years, this year’s Annual Rate Survey finds the majority of rates remained flat (57.6 percent of all rates did not change). Rate declines significantly outnumbered, and were generally more severe, than rate increases this year-as 28.8 percent of all manual rates decreased in 2013, a 3.1 percent rise from last year, while 13.7 percent were increases, slightly lower than last year’s 15.1 percent.

On a regional basis, the Northeast was once again the only area of the U.S. to see an average increase in rates, but at 0.7 percent, it was lower than last year’s 1.19 percent. New York led the pack in the Northeast this year with a 4.8 percent rise in rates, followed by New Hampshire, which had shown the second highest increase in 2012, with a rise in rates of 4.2 percent.

At 3.6 percent, the Midwest once again experienced the largest average rate decrease (the region had an almost identical 3.5 percent drop last year) and was once again the most volatile region. Only three states (Iowa, Minnesota and Missouri) showed no average change up or down in rates. North Dakota and Nebraska, as noted above, had the steepest declines at 12.2 and 10 percent, respectively. Michigan took third place with a 5.1 percent drop, followed by Wisconsin and Indiana at 4.2 percent each. South Dakota’s rates fell 3.35 percent, with the remaining states all coming in with rate declines less than two percent: Illinois (1.6 percent), Kansas (1.2 percent) and Ohio (1.6 percent). No state in the Midwest region showed an average rate increase over 2012.

The medical professional liability insurance industry faces a number of issues that will continue to impact the market over the next several years. No one knows exactly how reforms in the Patient Protection & Affordable Care Act will affect the number of independent physicians as well as claims frequency, but for now, medical professional liability continues to be the most profitable segment of the property and casualty insurance segment despite a soft market with no definitive end in sight.





eMCA program saves money and simplifies equipment maintenance and repair

Healthcare organizations can now consolidate all their vendor maintenance agreements into one comprehensive program.

Available through HealthSure, the Equipment Maintenance Contract Alternatives (eMCA) eliminates the high costs and inefficiencies of multiple vendor service agreements while enabling hospital administrators to retain control over who services their equipment.

“Being able to choose who does your maintenance and when they do it is one of the most appealing features of the program,” says Brant Couch, president at HealthSure. “And, the average cost reduction has been proven to be 25% or more.”

Consolidating OEM service agreements into one comprehensive plan helps avoid unnecessary and expensive down time resulting from improperly scheduled maintenance. It also eliminates paying for services you do not need. By consolidating multiple service agreements into one eMCA agreement, you can schedule the preventive and corrective maintenance your equipment needs and also experience significant savings through lower monthly costs, improved cash flow and overall operational efficiencies.

eMCA is most effective for organizations with a significant number of OEM service contracts. “For example, we have found it to be a great fit for hospitals with $200,000 or more in service contracts,” says Couch.

The program works like an insurance contract; a retention amount and a service agreement cost are established based on the equipment to be covered. If the retention amount is exceeded, the hospital is reimbursed for the repairs and scheduled maintenance performed on covered equipment.

The program also provides coverage for emergency advice and assistance on service providers and parts suppliers.

Here is a simple example of potential savings based on a hospital with a total annual cost of all service agreements of $500,000:

  • eMCA Cost $ 125,000
  • Retention $ 300,000
  • Total Equipment Maintenance Program Cost $425,000
  • Total Annual Cost of all Service Agreements $500,000
  • Savings $75,000

In the event the entire retention amount is not required, there are potential additional savings as follows:

  • Retention $300,000
  • Actual Repair Costs – $250,000
  • Additional Savings $50,000

While actual savings will vary by organization and are not guaranteed, the combined potential savings in this example is $125,000.

“Finding out if eMCA is a good fit for your organization is simple,” Couch says. “We need two to three weeks to conduct a review of all your contracts. Once the review is completed, we provide an accurate estimate of the savings available to your hospital.”

For more information about eMCA, including endorsements from existing eMCA clients, contact HealthSure.




Preparing for the inevitable data breach

Incident response plan a cyber security necessity
Source: HealthSure team research

With cyber criminals successfully targeting organizations of all sizes across all industry sectors, and the extra-vigilant nature of healthcare privacy legislation, your organization needs to be prepared to respond to the inevitable data breach.

Developing, implementing and maintaining a practical cyber security Incident Response Plan (IRP) can help limit damage, increase the confidence of external stakeholders, and reduce recovery time and costs.

Developing a written plan is the first step, but unless it is kept up to date, made accessible to key decision makers, specific to your organization, and just plain helpful to anyone who will have to deal with an incident, it won’t be worth the paper it is printed on – er… the disc space it is saved on?

Think of it this way: While many organizations are highly conscientious about practicing fire drills, most fail to rehearse the steps they would take in the event of a data breach.

Here are 10 steps you can take to create and implement an IRP:

  1. Assign an executive to take on responsibility for the plan and for integrating incident-response efforts across all departments and locations.
  2. Identify and categorize all risks, threats, and potential failures. Review continually to address changes in the threat environment.
  3. Create and make accessible quick-response guides for the most likely scenarios.
  4. Develop processes for major decision-making, such as when to isolate areas your network that have been compromised, or when and how to inform officials and patients of a breach.
  5. Keep up your relationships with important external stakeholders like regulators and law enforcement.
  6. Learn about external breach-remediation providers and experts. Develop a relationship with one or more based on your sense of comfort and level of risk. If you feel extra vigilant or vulnerable, you may wish to contract with them in advance… but at least knowing who can help in the event of a breach will give you a place to go for help when needed.
  7. Make sure your response plan documents are available to the entire organization and keep them up to date.
  8. Make sure your staff understands their cyber incident roles and responsibilities.
  9. Make sure you identify people who are critical to incident response and use a buddy system for each one so that a back up person is on call should any of the primary responders be unavailable.
  10. Do cyber incident (breach) fire drills. By stress-testing your plans, you sharpen response capabilities and decrease the likelihood of a breach.

The bottom line we would have you think about here is that when a cyber security breach occurs – whether due to an attack, or a leak – one of the first questions asked by all outside stake holders, and the authorities will be, “What did this healthcare organization do to prepare for this?”

At HealthSure, we work with a number of providers who offer protection from the cost of cyber security breaches. Each of them believes prevention to be far better than any insurance cure. If you would like a copy of an incident response planning document*, click here. And, for our assistance in this area please contact your HealthSure account manager.

*Courtesy of the Chubb Group of Insurance Companies




Healthcare workers suffer higher on the job injuries than most other professions

2 million lost workdays reported in 2011.

Adapted from an American Society of Safety Engineers news release

“Pick any other industry, and the injury rate is less,” says Scott Harris, Ph.D., MSPH, author of Safety Culture in Healthcare, The $13 Billion Case, a peer-reviewed feature in the October issue of Professional Safety, the American Society of Safety Engineers’ (ASSE) journal.

Even though healthcare worker injury rates are only less than outdoor wilderness professions such as commercial loggers and fishermen, the focus of safety in healthcare facilities has been primarily on patient safety.

Since there is only one Occupational Safety and Health Administration (OSHA) inspector for every 59,000 covered employees across more than eight million worksites, few inspections have occurred in healthcare facilities. “The injury rates are sky high,” Harris says.

With nursing homes recording the highest injury rates among all healthcare facilities, the most frequent injuries are sprains, strains, and tears to the back, primarily due to overexertion from patient handling.

Slips, trips and falls, violence and chemical exposure cause other injuries, with nurses being the workers who experience the highest rate of injury.

The costs associated with healthcare worker safety, also eventually trickle down to patient medical bills. For example, the cost of injuries in hospitals in 2011 exceeded $6.1 million, which required additional patient billing to offset the expense. Similar scenarios are true in nursing and residential care facilities and ambulatory health.

“The injury side of health-care costs has to be in there somewhere,” said Harris.

However, the weak occupational safety culture in healthcare facilities has not been ignored by OSHA, which in 2012, began targeted inspections and regional and national emphasis programs, with additional inspections at nursing, residential and ambulatory care facilities scheduled in the near future.




Another reason to consider self-funding
Transitional Reinsurance Fee Changes In New Regulations
Source: Caprock HealthPlans web article, Oct. 2013

A massive 236-page regulation released by Health and Human Services (HHS) on Oct. 30, 2013 says HHS plans to alleviate the burden of the reinsurance contributions to self-funded plans.
The regulation contains a short paragraph that promises a change to how the regulation impacts self-funded entities. The regulation is entitled “Program Integrity; Exchange, Premium Stabilization Programs, and Market Standards; Amendments to the HHS Notice of Benefit and Payment Parameters for 2014”.

HHS says “we intend to propose in future rulemaking to collect reinsurance contributions in two installments-the reinsurance contributions for reinsurance payments and administrative expenses would be collected at the beginning of the calendar year following the applicable benefit year, and the contributions for payments to the U.S. Treasury would be collected at the end of the calendar year following the applicable benefit year. We also intend to propose in future rulemaking to exempt certain self-insured, self-administered plans from the requirement to make reinsurance contributions for the 2015 and 2016 years.”

What does this mean? Simply put, the regulation says employers that self-fund and self-administer health care plans would be partially exempted from the health care reform law “transitional reinsurance fee” under new HHS rules. Groups subject to the exemption would not have to make reinsurance fee contributions for 2015 and 2016. They would, however, still be required to pay the first-year fee payments for 2014 in two installments, at the beginning and end of the year.

The change in the regulation is in response to criticism by business groups and employers with self-funded plans who are required to pay the transitional reinsurance fee, but receive no direct benefit. The transitional reinsurance fee was discussed in the Senate during the deliberations on the Continuing Resolution to end the government shutdown. The legislative language was not included in the final debt bill.

The Transitional Reinsurance Fee is a $63 per head fee that would apply to all self-funded plans in 2014. The Transitional Reinsurance Fee is a three-year fee that begins in 2014, with different fee levels for 2015 and 2016. The fees are intended to generate $25 billion over the three-year program. Revenues generated by the fee are to be used to help offset costs incurred by insurers covering high-cost individuals purchasing coverage in the public exchange/marketplace.

At HealthSure, we know self-funding is not the right solution for every organization. But, we are also often surprised by some of the inaccurate assumptions about self-funding new and existing clients make. Our goal is to bring simplicity to this and the many other complicated risk and insurance opportunities and challenges you face. To find out if self-funding makes sense for any aspect of your risk and insurance program, please ask us for help.




Small but important print
This communication is designed to provide a summary of significant developments to our clients. Information presented is based on known provisions. Additional facts and information or future developments may affect the subjects addressed. It is intended to be informational and does not constitute legal advice regarding any specific situation. Plan sponsors should consult and rely on their attorneys for legal advice.
What Happens Next? This ACA Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.


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