• U.S. health care spending
exceeded $3 trillion in 2016 alone.
• Cyber threats and batch claims
have become key concerns.
• Captives are now being used
for high-severity, low-frequency
health care risks.
Given the range and complexity
of these new risks, captives can
be a viable solution, enabling
organizations to tailor their own
specific coverage. By pooling
together, health care providers
can also spread the risk between
themselves and leverage the data and
analytics available to them.
Leading the way on this front
is Vermont, with 100 health care
captives on its books, a testament
to its risk transfer expertise and
regulatory infrastructure and
reputation. That number is
only expected to grow given the
multitude of risks facing the health
BATCH CLAIM CONCERNS
While medical professional
liability, general liability and workers’
compensation remain the most
common lines written in a health
care captive, according to Aon’s latest
captive benchmarking report, a host
of new risks have emerged.
One of the biggest is batch claims,
where one incident or a group of
related incidents such as a rogue
nurse or an infected surgical tool can
result in multiple lawsuits.
The number of reported claims
is on the rise annually, according
to Aon/ASHRM’s 2017 Hospital
and Physician Professional Liability
Benchmark Analysis. Driven
by plaintiff counsels seeking to
maximize recovery, they are hard
to contain and can often result in
multimillion dollar claims.
“Batch claims are the equivalent
of class action lawsuits in medical
malpractice, representing an
opportunity for plaintiff firms to have
carte blanche,” said Jeremy Brigham,
director, Willis Towers Watson.
“If they can find a case and sign
up multiple claimants, they will
pursue it relentlessly.”
Kevin Gabhart, senior managing
director, Beecher Carlson, said
finding the appropriate coverage
for batch claims in the commercial
market can be difficult at the best of
times. That’s because of the almost
limitless outcomes possible, he said.
“Finding the right language
and wording for batch claims that’s
agreeable to both the insured and
the underwriter can be problematic,”
Gabhart said. “That’s because there’s
no silver bullet for every potential
In recent times, hospitals and
health care systems have also
become a prime target for hackers,
who are increasingly sophisticated in
their methods for gaining access to
electronic medical records, including
the use of ransomware.
Put in context, the average cost
of a health care data breach topped
$7.35 million in 2017, according to
a report by the Ponemon Institute,
sponsored by IBM Security.
The cyber threat has been
exacerbated by the use of third
parties, as well as handheld electronic
devices in hospitals and health care
systems, the large amount of patient
and employee data held on the
system, and multiple access points.
Then there is the crossover between
cyber and product liability in the
form of defective medical devices.
“We have had clients who were
hacked and their whole system was
in lockdown,” said Jason Flaxbeard,
“As a result, they lost access to
records and had to turn patients
away, and the hackers demanded a
ransom to release the files, which
although costly is not as burdensome
as losing all of your data.”
Another emerging risk is
telemedicine, with the use of video
consultations expected to increase
700 percent by 2020, according
to industry experts. Fueled by
advancements in technology, health
care providers are increasingly
turning to video conferencing,
digital photography and instant
messaging to reach patients in even
the remotest of places.
Its growth has been boosted by
regulations such as the Medicare
Telehealth Parity Act of 2015, which
expanded telehealth coverage to
Medicare beneficiaries and has
streamlined the payment system.
While it can save time and
money, as well as enable patients
to do simple tasks such as give
their heart rate and blood pressure
reading at the click of a button, it’s
not without risk.
The main liabilities include
standard of care and data breach
as well as incorrect diagnosis,
prescription or treatment. Fraud
and abuse are also concerns, not
to mention a host of legal and
regulatory issues including cross-
border licensure and credentialing.
“Billions are being invested in
new digital telehealth technology,
and health care executives are
Batch claims are the
equivalent of class action
lawsuits in medical
malpractice, representing an
opportunity for plaintiff firms
to have carte blanche.”
—Jeremy Brigham, director, Willis Towers Watson