Capitation products are essentially insurance contracts which shift risk to the provider accepting the capitation premium. This paper draws parallels between relatively new healthcare products and services designed to respond to risks brought on by capitation and well-established products and services in the property and casualty industry These parallels include specific excess insurance, aggregate excess insurance, the alternative market and third party administrators. This paper also outlines a procedure which is currently used in the healthcare industry to develop provider excess rates.
Issues covered in this paper will be of particular interest to casualty actuaries for many reasons including the following:
-The distinction between health and casualty insurance is blurring (e.g. 24 hour coverage)
-Managed care affects exposure to loss in casualty coverages such as hospital and physician professional liability.
-The use of managed care in workers compensation is increasing
-The healthcare industry values casualty actuaries’ expertise in evaluating specific excess of loss coverages, aggregate excess of loss contracts and alternative risk programs.
-Some states classify healthcare provider excess insurance as a casualty insurance products.
