| Provider Stop Loss Reinsurance or PSL came into | | | | premiums from your provider policy that added |
| being in the 1980's when HMO's began capitating | | | | reimbursement may make the difference in you |
| Medical Groups and Independent Physician | | | | being profitable.o Your managed care E and O and |
| Associations (IPA's) as well as facilities. The | | | | D and O insurance coverage requires you to have |
| coverage at the time had limited options and was | | | | Provider Reinsurance coverage. Reason being is if |
| overpriced and was provided only through the | | | | you are sued for denying services, or giving a |
| HMO's. We offer the coverage at a cheaper price | | | | referral to a specialist, the plaintiffs attorney will |
| and with better terms. This allowed the capitated | | | | look to your financial motivations for denying care. |
| provider or facility to buy Provider Reinsurance | | | | If you have reinsurance, which shows you have |
| directly from an insurer versus buying from the | | | | coverage to protect your entity from a high dollar |
| HMO. | | | | patient, you have plausible defense. Without |
| This new area of insurance blossomed. At one | | | | Provider Stop Loss Reinsurance you do not have |
| point we insured 1 out 5 capitated patients in the | | | | this defense.o If you have stockholders and you |
| United States. Many insurers jumped into the | | | | do not meet your numbers for their distribution |
| provider stop loss market and thus too many | | | | due to having several catastrophic patients, they |
| insurers were chasing too few prospects. | | | | can sue you under for D and O type claims if you |
| Consequently, the pricing of the coverage | | | | do not have PSL. They can sue you for not |
| became insanely cheap, and the capitated | | | | properly insuring the business.o In California, the |
| providers made a profit off their PSL year after | | | | Department of Managed Care audits groups more |
| year, at the expense of the insurers who | | | | frequently than other states. Having PSL does |
| concentrated on volume rather than underwriting | | | | make a group look more financially stable.o The |
| discipline. | | | | HMO's, though they seem to be lacking in policing |
| By the early 2000's many capitated IPA's, and | | | | this coverage, require in your MCO agreements to |
| Medical Groups and facilities went out of business, | | | | maintain stop loss. If you do not have this you |
| since they had no clue as to how to manage the | | | | may be in breach of contract. |
| risk they had. Also many merged into large | | | | The purpose of provider stop loss is the same as |
| groups. The pricing of provider stop loss began to | | | | all insurance, to finance a risk that you cannot |
| harden, or increase in price, as insurers who lost | | | | readily absorb from your operational cash flow. If |
| money left the market. Why does a capitated | | | | you pay your premiums, then in most years you |
| IPA, Medical Group or Facility need provider stop | | | | should get back about half in claims. In the years |
| loss today?o If you have a particularly bad year | | | | you need it, it can pay off big if catastrophic |
| and you receive more in claims than you do in | | | | claims erode your profit margin. |