Integro News

Integro Re Survey Detect Softening Provider Excess Insurance Market - Forecasts Strong Rebound in 2016

New York, NY (November 16, 2015) – The growth in the Provider Excess insurance market has stalled in 2015, according to Integro Re’s annual survey released today. Total premium in 2015 is expected to be $167M, which would represent a 3% drop from a total of $172M in 2014.

Provider Excess is an insurance product for health care providers who take on risk via capitation, shared savings plans or a bundled/episodic payment plan. Although payers typically offer protection from large claims in their risk contracts with providers, the provider excess market typically provides claims mitigation services and competitive pricing.

The survey included the participation of 15 of the top insurance and reinsurance companies in the provider excess space. The companies were asked for their premium volumes in 2014 and projections for 2015 and 2016, as well as their current and anticipated level of participation in emerging population health coverages. The survey was conducted by the Integro Re analytics team.

Ironically, premium volume is dropping as population health risk is growing rapidly. Why? Integro Re identified several underlying reasons total premium may be stagnating:

  • Rate adequacy is a key driver: Integro Re’s analysis indicates that rate levels have dropped 5% since 2013;
  • Many buyers are accepting the large claim protection offered by payers in their provider risk contracts, effectively closing out the provider excess market from their services;
  • Higher retentions and the use of captives has also led to more risk being retained by providers rather than being ceded to the insurance market.

“Risk takers need to be educated on the stop-loss coverage embedded in their provider risk contracts,” says Peter Robinson, Accident & Health practice leader of Integro Re, a division of Integro USA Inc. “The provider excess market will beat the payers on price and service nine times out of ten.”

Survey participants were decidedly optimistic about next year, anticipating strong growth. Their premium projections for 2016 are $190M, which would represent a 14% increase over the estimated 2015 total.

Much of the growth in 2016 is expected to come from new sources of risk in the provider market. For instance, many Medicare ACOs will take on significant risk in 2016, whether through Track 3 of the Medicare Shared Savings Plan or as a Next Generation ACO. Although CMS includes truncation clauses in those contracts that limit large per-claim risk, there is a need for aggregate protection against an extremely costly outcome. On the commercial side, rising pharmaceutical costs has fueled demand for protection against a huge hit to a risk taker’s bottom line.

“Provider excess isn’t just a per-claim excess-of-loss coverage anymore,” notes Patrick Gallagher, chief actuary at Integro Re. “Whether it be specialty drug costs, pandemics or surge risk, there is a growing need for aggregate protection for risk takers across the health care spectrum.”

Other survey findings include:

  • While a number of underwriters indicated a willingness to write aggregate provider excess coverage, fewer than 25% of the respondents currently have aggregate coverage on their books.
  • There is growing comfort with the use of captives; approximately half of the respondents are currently participating in conjunction with a provider owned captive.
  • Provider Excess for bundled or episodic payment risk has not taken off; fewer than 10% of respondents reported having policies in force for bundled payments.
  • There have not been many “mega claims” in the provider excess space to date. While there have been a number of paid claims in excess of $5M in the HMO Re space, there has not yet been a $5M paid provider excess claim.

About Integro Re 

Integro Re, a division of Integro USA Inc., is a full service reinsurance broker with particular expertise in healthcare, developing and implementing reinsurance strategies for a client base that includes insurance companies; alternative risk entities such as captives and risk retention groups; managing general agencies and third party administrators. Integro Re has locations in New York, San Francisco, Chicago, Denver, Boston and London.

About Integro

Integro is an insurance brokerage and risk management firm. Clients credit Integro’s superior technical abilities and creative, collaborative work style for securing superior program results and pricing. The firm's acknowledged capabilities in brokerage, risk analytics and claims are rewriting industry standards for service and quality. Launched in 2005, Integro and its family of specialty insurance and reinsurance companies, some having served clients for more than 150 years, operate from offices in the United States, Canada, Bermuda and the United Kingdom. Its U.S. headquarter office is located at 1 State Street Plaza, 9th Floor, New York, NY 10004. 1-877-688-8701. 

Editorial Contact: 
Betsy Van Alstyne 
Tel: 212-295-5445