By Samantha Wright
Since the Affordable Care Act was enacted in 2010, the healthcare industry has been moving forward toward a new healthcare delivery paradigm. Liability insurers are racing to tailor their products to the new risks and exposures that continue to emerge in the landmark legislation’s wake.
It’s a bit of a moving target; healthcare exposures are rapidly evolving, just as the business models being insured are evolving, to adapt to the requirements of the ACA, as millions of newly insured Americans flood the marketplace. But one thing’s for sure – while the marketplace hasn’t really matured yet, clearly the Affordable Care Act is changing the liability insurance industry across the board.
“It’s the most dynamic period that I’ve ever seen in the healthcare industry,” said Joshua Stein, President of U.S. Healthcare for IronHealth, Ironshore's healthcare liability underwriting division. “And I think it’s one of the more dynamic areas of liability insurance out there.”
Thanks to the ACA, consolidation is the dominant trend in the healthcare sector today.
“The main story is that healthcare organizations are doing everything they can to figure out and implement how best to make a margin in this new world,” said Stein. “Business models are changing – and consolidation is the name of the game across the sector.”
This consolidation is happening both horizontally through mergers and vertically through acquisitions of practices. As a result, among the nation's biggest for-profit and not-for-profit healthcare systems, dealmaking over the past two years has created giants with multi-billion dollar annual revenues that rival some Fortune 500 companies.
While business models vary, nearly all systems are adding more physicians to their payrolls. A recent survey of hospital systems conducted by Modern Healthcare found that doctors employed by systems increased 39 percent last year to roughly 67,600 physicians.
One likely outcome of this phenomenon is that the family doctor (and the insurance products that have traditionally served him or her) will become an increasingly endangered species, as small, private practices increasingly merge with larger healthcare organizations.
The rash of consolidation within the healthcare industry has definitely had an impact on the exposure profile of insureds.
“Spread – geographically, and of the kinds of business you deliver – is really important in order to succeed and prosper under the Affordable Care Act,” explained Stein.
As healthcare organizations create that spread through acquisition, their exposure expands dramatically as they suddenly get a lot bigger, and start doing things they weren’t doing before.
“Understanding the various drivers of a client’s exposure is certainly something we need to make certain we are on top of,” Stein said.