What steps should you and your MCO take?

• Start placement efforts early. Go to the market and actively shop your insurance programs in order to maximize interested carriers and coverage options. Push carriers on proposed pricing and language before “picking a horse.”
• Assess options. Carriers may no longer unilaterally impose reductions in limits and increases in retentions for MCOs in 2023 as was the case in recent years, but MCOs should still assess retention levels, co-insurance and sub-limits, as well as seek pricing on various options. Some carriers are requiring both E&O and D&O placement in their quotes. Be aware those carriers’ policies will likely include “tie in of limits” provisions, such that the limit of only one coverage line applies to a “Claim” implicating E&O and D&O coverage (even though premiums were paid for both).
• Scrutinize proposed policy language and exclusions. Seek preferred language and enhancements. In recent years, “Association”/“Enterprise Liability” exclusions for Blue Plans have become commonplace as a result of BCBS MDL. Likewise, carriers have imposed “Opioid” exclusions. MCOs may be unable to avoid these exclusions, but should still push for preferred policy language to “pressure test” the carriers’ flexibility on policy language.
• Enhance risk mitigation efforts, such as increased focus on and investment in network security and information privacy protection systems. As carriers require more robust cyber applications and underwriting processes, including expanded use of underwriting calls with information security professionals, MCOs may reduce their exposure to risk and loss, but also assist their cyber placements through such information and network security efforts.
• Explore alternatives, such as use of a “captive insurer” – an insurance company set up and owned by the MCO itself – for issuance of excess or other coverage to your MCO. In light of high premium pricing and narrowing of coverage, some MCOs are expanding use of captive insurers in their insurance programs, while other MCOs are looking to set up captive insurers for the first time.
• Be proactive in claims handling matters to maximize insurance recovery. Carriers often assert hourly rate caps and litigation guidelines, not found in the policy language. Carriers also unilaterally impose improper reductions in defense fee payments through granular audits of defense invoices. In addition, carriers are becoming more aggressive in asserting “cooperation” obligations and consent to settle defenses to avoid coverage. Insurance recovery expertise must be brought to bear in order to properly manage carriers on these issues. There is ample support in the insurance case law and policyholder’s playbook for MCOs to combat these tactics.