New York, December 11, 2013
Health care organizations paid significantly more for their directors and officers (D&O) liability insurance in the third quarter of 2013, amid growing concerns over antitrust issues arising from implementation of the Affordable Care Act (ACA), Marsh said in a new report. Average primary D&O rates for midsize and large health systems increased 9.6% in the quarter, while total program D&O rates renewed with 7.9% increases on average.
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 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 also are pulling back on offering full policy limit defense coverage, Marsh said.
“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,” said Mark Karlson, Marsh’s FINPRO Health Care Practice Leader. “This has resulted in a much more challenging D&O market for health care companies. 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.”
Among other findings from the report:
- 73% of Marsh’s midsize and large health care clients renewed their primary D&O coverage with a rate increase in the third quarter; while 91% of those renewing their total D&O program received an increase.
- 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% on average in the third quarter. Nearly all -- 96% -- of them renewed with rate increases.