Rising Reinsurance Costs May Reportedly Put Medical Groups at Risk

August 21, 2003

Rising costs for reinsurance and medical stop-loss coverage may reportedly put medical groups at financial risk, as the organizations trim coverage to reduce policy costs.

Last year, reinsurance premiums rose 15 – 25 percent and they are expected to increase by another 10-15 percent in 2004, according to Charles Crispin, president, Evergreen Re, a managed care consulting firm and reinsurance brokerage.

“The higher premiums have caused some risk managers to purchase policies with additional carve-outs, more exclusions and higher deductibles. The reduced coverage may be placing their organizations at risk for huge costs, should a plan member experience a catastrophic claim,” Crispin said.

He said medical groups should pay particular attention to exclusions for synthetic blood factor, high-cost injectables and durable medical equipment (DME).

“The proliferation of high tech medical devices has made reinsurance coverage more complicated. When you say DME, many people think of wheelchairs, but it also includes heart pumps and other implants costing $100,000 or more,” Crispin added.

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