Trends in Medical Risk Transfer Risks that are uninsurable or prohibitively expensive to insure might call for alternative risk transfer BY BENJAMIN S. TERNER

In an ever-changing world, it

is no secret that risks

associated with ASCs also are evolving. Trends in medical risk transfer, how-

ever, are generally not related to ordi- nary risks but rather nontraditional— low frequency/high severity—risks. If these risks occur, they have the ability to bring a practice to a screeching halt. Examples of such risks include: loss or suspension of professional license, legislative and regulatory changes, cyber risk (breach of customer data and detrimental code) and related Health Insurance Portability and Accountability Act of 1996 (HIPAA) violations. To add perspective to such damaging

events, since the implementation of the Privacy Rule in April 2003, the Office of Civil Rights (OCR) has received more than 127,184 HIPAA complaints. OCR has investigated and resolved more than 24,080 cases by requiring changes in privacy practices and corrective actions by, or providing technical assistance to, HIPAA-covered entities and their business associates. OCR has successfully enforced the HIPAA rules by applying corrective measures resulting in a total dollar amount of $27,974,400, according to the US Department of Health & Human Services (HHS) web site.

What is Alternative Risk Transfer? Coverage for these non-traditional risks is typically unavailable or too costly to insure in the traditional insurance marketplace. According to a blog post on citing Deepak Godbole of GeneraI Insur- ance Corporation of India, distin-

Coverage for non-traditional risks is typically unavailable or too costly to insure in the traditional insurance marketplace.”

—Benjamin S. Terner, Texas A&M University School of Law

guishing characteristics of alterna- tive risk transfer (ART), as compared to

traditional insurance

non-traditional risk insured risks);


may include but are not limited to: ■

■ transfer (self-

underwriting income retention (pres- ervation of underwriting profit with a good claims experience);

varying coverage depending on types of risk to which a practice might be exposed; and

access to coverage for risks the con- ventional insurance market might consider uninsurable.

Why would You Consider ART? If you have uninsurable risks or risks that are prohibitively expensive to insure through the traditional insur-

ance market, you could face various threats to the operation of your busi- ness. And just as traditional risks, such as fire, are covered though risk diversification, you might consider the possibility of other detrimental events that could significantly affect your ASC and take action to protect your center from such an event. The ART market can be divided

into two general categories: (1) alternative carriers and (2) alternative products, according to the same blog on An example of the former is captive insurance companies. Examples of the latter include multiline and specialty products such as excess and surplus lines written through an insurer such as Lloyds of London. In both

The advice and opinions expressed in this column are those of the author’s and do not represent official Ambulatory Surgery Center Association policy or opinion. ASC FOCUS SEPTEMBER 2016 15

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