LEADING THE WAY by Charles Crispin, President & CEO, Evergreen RE

More often than ever before I hear health care leaders talk about the escalation in risk. It is not a feeling, obviously, but a fact that risk is changing quickly and dramatically. Trend continues to advance virtually across the medical and pharmaceutical expense spectrum. And it is challenging all stakeholders in the financing of care. Reinsurers are pushing much higher limits and retentions, and with certain reinsurers, increases in the number of exclusions. On the managed care E&O side of the risk, a near monopoly situation has developed resulting in very unfavorable terms to plan sponsors.

These are difficult times for executives who are trying to minimize unpredictable risk and obtain reliable and predictable financial results. Not understanding the impact of coverage limits in a rapidly changing environment – particularly on the reinsurance side – can often render coverage useless in certain cases.

Exclusions for specific incidents or situations commonly appear benign, but are typically associated with catastrophic cases. These could include advanced medical devices, high cost injectables and other pharmaceuticals, and certain transplant-related expenses – all of which are becoming more and more sophisticated and costly.

Despite these trying times plan sponsors can still achieve predictability and efficient surplus protection. Advanced modeling is required however. Given advancements in these medical and biotechnologies, analysis of historical claims alone is woefully ineffective. More advanced techniques are required to intelligently predict and manage risk in this environment.

We hope to explore these topics with you in our newsletter, The Advocate. In this issue we discuss “carve-outs” and the role they can play in the mix. We also are honored to feature Brent Greenwood, of Reden & Anders, whom is one of the country’s leading health care actuarial experts. Brent will share his views on consumer driven initiatives of health plans and other plan sponsors.

We welcome your comments about these and future topics.