Healthcare 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 the implementation of the Affordable Care Act (ACA).
Broker Marsh said in a new report that average primary D&O rates for midsize and large health systems increased 9.6 percent in the quarter, while total program D&O rates renewed with 7.9 percent increases on average.
Since the passage of the ACA in 2010, the healthcare industry has undergone rapid consolidation resulting in organizations working more closely together and sharing information, according to the report, titled Marsh Risk Management Research briefing: As Reform Takes Effect, Healthcare 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 healthcare organizations, including antitrust risks,” said Mark Karlson, Marsh’s FINPRO Healthcare Practice Leader.
“This has resulted in a much more challenging D&O market for healthcare 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 healthcare reform.”
The report also found that 73 percent of Marsh’s midsize and large healthcare clients renewed their primary D&O coverage with a rate increase in the third quarter; while 91 percent of those renewing their total D&O program received an increase.
Primary D&O rates for smaller healthcare organizations – those with $150 million or less in assets or annual revenues and fewer than 1,000 employees – increased 12.7 percent on average in the third quarter. Nearly all – 96 percent of them - renewed with rate increases.
Directors and officers liability, D&O, Affordable Care Act, ACA