Perfect Storm Brings Opportunities in Covering Health Care Providers

Those in the business of providing liability coverage to doctors, nurses and other health care professionals, may have just found themselves in a perfect storm of opportunity.

Health care reform in the United States is a done deal. It brings with it a flood of roughly 30 million Americans, soon to be covered, who will become new patients in health care-related businesses and organizations around the country — just as aging baby boomers begin their inevitably increasing trips to the doctors.

Political rhetoric aside, it seems clear an opportunity is brewing. More patients mean more businesses, and more businesses mean more potential clients for property/casualty insurers. That’s not the only storm in this interesting collision.

The other is a soft market that for the last several years has seen an extended run of weak or near-zero growth in many coverage lines — a market that has blurred the lines between traditional and E&S markets as carriers ramp up competition for what was, in more profitable days, typically an E&S coverage.

It’s against this backdrop that, over the last year, a number of carriers have amped-up, and doubled-down on their range of coverages or footprint in the medical field, and it’s created a range of new products, carriers and to some degree a new landscape in the world of professional liability and P/C coverage available to agents and their customers.

Medical M&As

Mergers and acquisitions have brought a shifting footprint for many medical liability insurers over the last year or so. One of the biggest came in June, when Boston-based medical liability insurer ProMutual Group paid $164 million to acquire Michigan-based medical liability insurer and risk management company FinCor and its five subsidiaries: MHA Insurance Co., Washington Casualty Co., FinCor Solutions Inc., Risk Management and Patient Safety Institute Inc. and Capital Risk Solutions.

ProMutual, an independent agency-distributed company which was concentrated primarily on states along the Eastern seaboard, was already one of the 10 largest medical liability insurers in the country. The deal created an organization with a major footprint in the Midwest and Pacific Northwest, creating a sizable, super-regional carrier and adding more than 250 hospitals and health care facilities and 5,000 physicians, and 11 states to ProMutual’s book of business. In 2008, FinCor reported annual revenues of $97.2 million, and $17 million in net income.

Discussing the deal and its reasoning with Insurance Journal, ProMutual President and CEO Richard Brewer said that the deal was especially attractive because FinCor is known largely as a hospital company, whereas ProMutual is largely known for writing physicians. The carriers were also complementary in terms of their geography: The two write in entirely different states.

“The market for malpractice is mature: The number of physicians is fairly stable,” Brewer said. “When you have a mature market, you see consolidation taking place. That’s one reason we were interested in the deal. We see opportunity. The medical malpractice business is always going to be around. There’s not enough in tort reform that will change it. And our being more of a national company, rather than a larger regional one, will help weather the volatility of the market.”

In all ProMutual will now write in 20 states, and holds licenses to write in an additional 20 states.

New Opportunities, New Exposures

But while traditional medical liability insurers see a relatively stable market, changes to the way health care is delivered in the United States is opening up new exposures for health care careers — and opening up new opportunities for agents and brokers.

Carla Santa Maria, CEO of Santa Maria & Co., a risk management and insurance services firm in San Francisco, said she has seen a number of market and regulatory changes over the last year that have lead to an expansion of her firm’s services to health care providers. These include elimination of caps on liability for physicians in some jurisdictions, and increased responsibility on health care providers to secure personal information of their clients.

The computer and data-related issues are becoming more and more of a concern, she said, and this has also opened up the need for managing cyber liability associated with the processing of data as an issue, she said.

There are also new risks emerging for health care professionals who previously did not require the same level of liability as a doctor. Nurse practitioners in particular are a prime example.

According to a study released last month by insurer CNA HealthPro, average indemnity and expense payments in nurse practitioner liability claims have increased 2.3 percent annually over the past 10 years, according to an insurer’s review of claims. CNA says that nurse practitioners, as a field, are approaching a “paradigm shift” in the health care system as physician groups, hospitals, aging services and other health care organizations increasingly depend upon nurse practitioners.

The barrage of new risks is one reason that companies are increasingly looking to health care as a source of new opportunity. Over the last year, a number of high profile and lesser known insurers have introduced new products targeting health care providers.

In November, for instance, Travelers introduced a new commercial lines product for health care providers designed to meet needs other than medical malpractice. “We think it’s a strong market for us right now with this coverage,” said Matt Hudnall, health care industry director for Travelers Commercial Accounts.

Travelers is not the only one. Other carriers, too, are looking to get into the health care market with new products and offerings for providers. In September, for instance, Ironshore Inc. and CRC Insurance Services partnered to launch a miscellaneous health care facility professional liability coverage, which is aimed at organizations such as medical clinics, surgery centers, dialysis and imaging centers. It’s a category where providers are “finding themselves in need of innovative professional liability solutions” said Matthew Dolan, president of IronHealth.

Another case in point: Massachusetts-based insurer The Hanover, which last month completed its acquisition of The Campania Group, a specialty carrier that caters to the needs of the health care industry.

In some cases, program managers and wholesalers have even found themselves with products for which the need seems imminent, but the market for coverage has yet to develop.

Philip Duncan, chief operating officer and head broker of San Diego-based Pipeline Wholesale Insurance, has begun marketing one of those products for agents to sell. It’s a product called Medefense, underwritten by Lloyd’s of London, which covers health care offices in the event that an audit reveals improper billing.

Duncan said that, as federal regulators increasingly target those who bill to Medicaid and Medicare — and providers amass huge fines — the need for the coverage is clear, although it hasn’t started selling. It’s the type of risk and coverage that independent agents could easily add into their repertoire of coverages for clients.

The newness of the exposure means there is “not a sales force yet that understands that type of exposure and that’s why nobody is really selling it yet.” It’s a dilemma that insurance agents, as well as wholesalers and carriers face in terms of bringing awareness of potential exposures to light, he said.

“We need to be educating a large group of people on future exposures in a changing environment for the whole health care arena,” Duncan said. “These risks are going to happen and the P/C world needs to be prepared for it.”