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Bill Kenealy

ACA altering directors and officers liability coverage pricing: Marsh

December 11, 2013 - 1:36pm

Affordable Care Act D&O Rates

Graphic from the Marsh report, "As Reform Takes Effect, Healthcare D&O Rates Increase."

The Affordable Care Act is altering the price for directors and officers liability coverage for health care companies, a report issued Tuesday by Marsh Inc. finds.

The report, “As Reform Takes Effect, Healthcare D&O Rates Increase,” cites Marsh internal data for the third quarter to illustrate that insurers are seeking price increases for D&O liability insurance for health care companies. According to Marsh, average primary D&O rates for midsize and large health systems increased 9.6% in the third quarter of 2013. Moreover, the report found that 73% midsize and large health companies renewed with rate increases, while 13% saw decreases and 13% remained the same.

The report contends that the rising rates are a reflection of health care organizations' changing business models and risk profiles as result of the Affordable Care Act. For example, the ongoing consolidation of the health care industry and the growth of accountable care organizations since passage of the ACA in 2010 raises new antitrust concerns, the report states.

“Ongoing merger and acquisition activity and the transition to accountable care organizations and similar networks are creating new exposures for many health care organizations, including antitrust risks,” Mark Karlson, Marsh's FINPRO health care practice leader said in a statement. “This has resulted in a much more challenging D&O market for health care 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 health care reform.”