Insurance Marketplace Realities 2023 - Managed care D&O and E&O

Rate predictions: Managed care D&O and E&O

	Trend	Range
Public MCOs and Blue plans		E&O, +10% or more; D&O, +15% or more
Other management liability lines (employment practices liability, crime)		+10% to +12%
Fiduciary		+50% or more
Hybrid entities (accountable care organizations, third-party administrators, revenue cycle management, etc.)		E&O, +10% or more; D&O, +10% or more
All other MCOs		E&O, +5% or more; D&O, +10% or more

E&O and D&O rate increases are coming down, but coverage restrictions on significant risks continue.

• Rate increases are leveling off, except for one market. Increases are becoming less generalized and increasingly applied on an account-by-account basis.
• Forced retention increases based solely on market conditions have slowed down. But we are keeping an eye on regulatory retentions based on political and regulatory uncertainty at the federal and state level, which is adding further complexity to the marketplace.
• Coinsurance and sub-limits related to antitrust and regulatory risk continue to be applied by some markets.
• Related claim language is narrowing significantly, as is manuscripted exclusionary language related to prior industry claims.
• Association, cyber and opioid exclusions remain common.
• Rebate exclusions are being added to PBM policies.
• 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.
• Carriers are hesitant to write hybrid accounts that provide non-managed care services to third parties.
• Risk transfer programs must be managed and strategically planned across all lines of coverage 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 is on the rise. Fronted programs can be negotiated as an alternative to captive programs.
• Coverage for pharmacy benefit managers, those engaged in value-based contracting from the provider side, revenue cycle management and medical services management, remains difficult to find due to limited capacity and restrictive terms and conditions.
• New London and Bermuda markets have shown some interest in managed care E&O. However, capacity is limited, and Bermuda’s minimum attachment is $75 million.

Merger and acquisition activity continues to rise.

• One industry trend that supports upward pressure on rates is ongoing mergers and acquisitions. Consolidation, vertical and horizontal integration, acquisition of delivery platforms by payors, the significant involvement of private equity and venture capital, etc., constitute a major force in driving industry risk.
• Due diligence related to exposure and solutions — and innovation related to risk transfer — is required because combinations create risks that are not typically seen or evaluated in the marketplace.
• The markets are slow to adapt terms and conditions because traditional healthcare underwriting does not take this market dynamic into account. Markets will have to be pushed into offering appropriate terms, conditions, products and rates to cover this evolving segment of the industry.

The Dobbs Decision — a controversial subject is creating a lot of debate.

• In June the U.S. Supreme Court reversed the legal precedent (Roe v. Wade) that protected access to abortion at the federal level. This ruling pushed laws about abortion to the state level, which has created complex legal issues due to widely different state legislative and regulatory approaches to reproductive healthcare benefits.
• This is significant for MCOs as benefit payors and plan creators, but also as providers and managers.
• Payors and hybrids, including administrators and employers, as well as the managed care insurance market, are keeping a close eye on developments since managed care E&O, D&O, employment practices and fiduciary liability coverages may be affected.
• Self-insured plans may need to make changes to plan benefits based on their employee base. These self-insured plans could consider purchasing a plan purchaser policy that extends coverage like that of health plans and provides some protection for regulatory actions and defense for criminal actions.

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. 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.
• 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. 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.
• Government fines and penalties: Because MCOs are so tied to government reimbursement, plans are likely targets of government investigations, False Claims Act actions, whistleblower lawsuits or administrative fines/penalties.
• Behavioral health claims: Behavioral health claims are on the rise. Mental health parity claims, at both the federal and state levels, can be costly to defend, especially the class actions. Demands for benefit payments, penalties and restitution are not covered by managed care E&O policies, but there is usually defense coverage. 

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).

Contacts

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Kenneth White, J.D.

NA Managed Care Practice and COE Leader
National Healthcare Practice

email Email phone +1 954 615 1887

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Kathy Kunigiel

ARM, RPLU
Senior Managed Care E&O Placement Specialist

email Email phone +1 860 874 4012

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