Skip to main content
Article

Insurance Marketplace Realities 2022 Spring Update – Managed care D&O and E&O

N/A
N/A

April 7, 2022

E&O, D&O and cyber market conditions for managed care organizations (MCOs) remain hard, especially the cyber market, but E&O and D&O are beginning to stabilize.
Rate predictions: Managed care D&O and E&O
Trend Range
Overall: Hard market conditions but stabilizing
Public MCOs and Blue plans Increase (Purple triangle pointing up) +15% or more for E&O, +20% or more for D&O
All other MCOs Increase (Purple triangle pointing up) +10% or more for E&O, +20% or more for D&O
Hybrid entities (accountable care organizations, third-party administrators, revenue cycle management, etc.) Increase (Purple triangle pointing up) +10% or more for E&O, +20% or more for D&O

Key takeaway

E&O, D&O and cyber market conditions for managed care organizations (MCOs) remain hard, especially the cyber market, but E&O and D&O are beginning to stabilize.

Rate increases are coming down, but significant coverage restrictions are still being applied, as are sublimits and retention increases. Coverage restrictions and limitations are significant for risks related to antitrust, fiduciary, cyber and systemic or group/association risks.

  • Rate increases are decelerating with an exception — one market continues to apply significant increases.
  • Retention increases have leveled off, but coinsurance and sublimits continue, especially related to antitrust, association and regulatory claims. Political and regulatory uncertainty at the federal and state level is adding further complexity to the marketplace.
  • Cyber exclusions are becoming more common due to the turbulent cyber market.
  • Systemic risk plagues MCOs, and managed care E&O and D&O carriers continue to assess their entire portfolios as they consider their exposure to aggregated risk.
  • Many carriers require managed care E&O participation to write a D&O/management liability package, which creates anti-stacking coverage concerns, as well as issues related to rate and capacity in larger towers.
  • Risk transfer programs must be managed and strategically planned across all lines of coverage in order to avoid gaps in coverage and limit restrictions.
  • Reinsurance carriers have increasingly serious issues with antitrust exposures, concerns that are no longer limited to Blue plans. Reinsurance rate increases and capacity in this space are also impacting rate, coverage and capacity.
  • The use of captives and other alternative risk financing solutions are on the rise. Fronted programs can be negotiated as an alternative to captive programs.

Is an end to the hard market in sight? Marketplace activity says possibly.

  • Two domestic carriers entered the excess managed care E&O and D&O market over the past year, fueling competition in the excess layers and allowing carriers to be moved around in towers to produce premium savings.
  • These markets also entered the managed care primary E&O space late in 2021, with one carrier writing primary D&O as well.
  • Carriers are hesitant to write hybrid accounts that provide non-managed care services to third parties.
  • No new offshore capacity has entered the market. Bermuda and London are high excess markets only.
  • Domestic carriers and their offshore counterparts closely coordinate capacity.

How can buyers most effectively continue to weather the storm?

  • Communicate early and often as the market changes.
  • Consider the broader picture. In addition to rate — growth, M&A, new business activities and adverse loss activity may affect pricing.
  • Host carrier renewal meetings and provide submission materials well in advance of renewal dates. These materials should include complete claim information, membership breakdown by type of member, and a complete list of managed care core and non-core services. Individualized underwriting is key.
  • Run analytic models. Broad and reliable analytics can support optimal selection of retentions, limits, captive use and alternative risk transfer options across the entire entity. While product line analytics can help an MCO employ the best program for a specific risk, entity-wide risk analytics can help build the most efficient program for the entity as a whole.
  • Negotiate terms early.
  • Explore alternatives to simply buying blocks of cover in the commercial market.

Buyers should be aware of claim scenarios that can create coverage problems.

  • Antitrust: Over the last 25+ years, the managed care industry has been involved in many antitrust claims. The ongoing In Re: BCBS Antitrust Litigation; (MDL 2406); 2:13-cv-20000-RDP (USDC N.D. AL) is but one example. Antitrust claims can take many forms and follow various legal theories and may be prosecuted in state, federal and foreign jurisdictions. They can be filed by members, providers, competitors and governments. They can be class actions, but many are not. They require specialized legal representation and are expensive to defend. The resulting losses are not always 100% covered. Coverage for these claims is tightening significantly. The recent passage of the federal CHIRA legislation, the Biden administration’s focus on antitrust in healthcare, state laws and regulatory pressures may continue to create disruption.
  • Network security and privacy: Cyber risk is a top risk for every MCO. MCOs maintain large amounts of protected data on millions of members, send and receive billions of dollars monthly and collect biometric data. Efforts to obtain this information by foreign governments, criminal enterprises and other hackers are an everyday occurrence. Claims related to lost business income, ransomware payments, breach response expenses and first- and third-party losses are all on the rise. While there is capacity in the marketplace, buyers must take note of coverage restrictions, the need to dovetail coverage terms with other lines and the difficulty of determining proper limits. Social engineering, ransomware and technology E&O coverage restrictions are growing. Changing state, federal and foreign exposure based on legislative and regulatory action are also adding to the pressure.
  • Government fines and penalties: Because MCOs are so tied to government reimbursement, plans are likely targets of government False Claims Act investigations, whistleblower lawsuits or administrative fines/penalties. Beyond restitution, damage awards, fines and penalties, defense costs alone can exhaust a risk transfer program. International regulatory compliance is another risk in countries (e.g., the UK, EU, India) where many MCOs now have business operations.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for losses relating to the Ukraine conflict. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include coverage relating to the Ukraine conflict. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third-party sources we consider reliable; however, we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. -The Ukraine conflict is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

Contacts

Kenneth White, J.D.
National Managed Care Practice Leader

Kathy Kunigiel
ARM, RPLU
Senior Managed Care E&O Placement Specialist

Related content tags, list of links Survey Report Healthcare Insurance United States
Contact Us