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Survey Report

Insurance Marketplace Realities 2021 – Managed care E&O and D&O

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November 18, 2020

The market is hard: Significant rate increases, insistence on increased retentions, capacity problems and coverage restrictions.

Rate predictions

Rate predictions: Managed care E&O and D&O
  Trend Range
Overall: Hard and changing rapidly
Blue plans: Increase (Purple triangle pointing up) +30% to +50% or more
Public managed care organizations: Increase (Purple triangle pointing up) +25% or more
All other managed care organizations: Increase (Purple triangle pointing up) +10% or more

Key takeaway

The market is hard: Significate rate increases, insistence on increased retentions, capacity problems and coverage restrictions are the norm, and while the impact is being felt more by for-profit entities than non-profits, non-profit managed care entities of significant size face similar challenges.

Insurers continue to push rate and restrict coverage.

  • Carriers continue to segment their business between Blue plans, non-Blue plans and public companies, creating a potential capacity issue for buyers. Some carriers will not offer coverage for Blue plans or publicly traded companies, limiting market options. This can lead to significant problems building out larger towers.
  • Rates are increasing while coverage restrictions are being applied.
  • Prominent markets for Blue plans and non-Blue managed care organizations are continuing to reduce capacity/limits while managing their books. These markets are also seeking increased retentions.
  • The overall market continues to shrink, with another managed care carrier’s recent exit.
  • The shrinking market is leading to less favorable terms and conditions.
  • No new domestic or offshore capacity has entered the market. Bermuda and London are high excess markets only. Domestic carriers and their offshore counterparts closely coordinate capacity.
  • Buyers can help themselves obtain the best possible terms by hosting carrier renewal meetings and providing 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.
  • Analytics are another key in responding to the hard market. 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 a managed care organization employ the best program for that specific risk, entity-wide risk analytics can help build the most efficient program for the entity as a whole.

With Blue plans, the D&O market has been even more challenging than the E&O market because of the concern over systemic risk.

  • Systemic risk plagues managed care organizations, and managed care E&O and D&O carriers continue to assess their entire portfolios as they manage their capacity and exposure to aggregation risk.
  • Although markets have shown inconsistent responses to the Blue system Multi District Litigation (MDL), which was filed in 2012 and is still pending, several markets have taken hard lines in response to what they refer to as “systemic Blue plan” risk — that risk which impacts all Blue plans because of the way the Blue Cross Blue Shield Association (BCBSA) does business.
  • Some markets are still taking a wait-and-see approach while others have drafted exclusionary language to try to prevent coverage from attaching to this exposure.
  • Markets that have drafted endorsements to date are also inconsistent with each other — one has limited its exclusion to claims related to the existing lawsuit and matters related to the BCBSA license agreement, and another has a much broader exclusion, which significantly impacts coverage.

The market impact of COVID-19 is still unclear.

  • The impact of the pandemic and the ensuing economic downturn on this segment is still unclear after many months of health care management during the crisis.
  • However, the pandemic itself is unlikely in the near future to have a significant impact on rates or coverage terms. The pandemic-related risks associated with managed care entities of all sizes and types are financial/first-party loss related. Such risks are not generally covered under managed care E&O policies.

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 subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

Contacts

Kenneth White
J.D.
Willis Towers Watson

NA Managed Care practice and COE Leader
National Health Care practice


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

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