The healthcare insurance market is going through a period of intense regulatory change, and RPS Healthcare Broker Kyle Pass says this change is adding further fuel to the social inflation that's driving up claims costs across the market.

"We are seeing significant new regulation that's changing the caps that some states have on damages," he says. "For some, this means that the amount that can be paid out on claims is going to increase every year, and that's making it harder to write certain types of business in some areas of the country."

Indeed, this change has already led to an increase in the frequency of nuclear verdicts, with RPS Area Senior Vice President Karen Bennett describing such verdicts as a "serious issue" for carriers.

This issue is particularly true in areas with fragile patient populations such as hospitals, senior living facilities and behavioral health facilities.

"Insurers are extremely nervous when it comes to handling these claims, as they are wary of the increased costs they face if a claim goes to trial," Bennett says. "Insurers are avoiding going to trial altogether in some venues, so they now having to settle and fund claims that otherwise may have been disputed, simply because they're afraid of what the trial outcome may be."

While a multitude of pressures are making the healthcare insurance market a challenging space in which to operate, not all areas of the market are equally affected. Allied healthcare is a bright spot: With a more benign claims environment compared to sectors with a fragile patient population, allied healthcare continues to operate largely free from the threat of widespread nuclear verdicts.

The allied healthcare arena is also full of exciting new startups that typically experience lower visit counts and lower revenues.

As a result, both the frequency and opportunity to make a claim are much lower, and those lower claims, combined with the propensity for many elective or cosmetic procedures in this sector, the overall risk exposure to an insurer is much lower.

This lower risk results in less pressure on underwriting profitability, so capacity continues to be easier to come by, and premiums are not rising as fast as in other areas of the market.

Learn more about what's next for the Healthcare industry in the RPS 2023 US Healthcare Market Outlook.


Contributor Information