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3 New Unintended Consequences of Health Care Reform

Adapting to the ACA is creating unintended consequences.
By: | January 9, 2014 • 4 min read

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As the Affordable Care Act (ACA) continues its gradual and bumpy rollout, health care providers are utilizing various strategies to comply and adapt. Many of these approaches, some of which include M&A activity, IT upgrades and shared service agreements are now creating new risks of their own.

1. Continuity of Care

Many aspects of the ACA and other healthcare trends are driving M&A or shared service agreements among hospitals, physicians and other providers. These new relationships can present serious challenges for managing a patient’s treatment across different organizations.

“There’s a risk that one organization might not provide care consistent with the other,” said Dan Nash, national healthcare practice leader, Zurich in North America. “Oftentimes, it’s not contractually required for them to do so.”

Patients being transferred from system to system might be exposed to different approaches to care and different levels of treatment.

Care managers can do a lot to help alleviate risks associated with continuity of care. Having a “concierge” that knows how each system operates can make transitions much easier for patients and explain why treatments differ from system to system.

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“There’s a risk that one organization will not provide care consistent with the standards of the other. Oftentimes, it’s not contractually required for them to do so.”
— Dan Nash, National Healthcare Practice Leader, Zurich North America

“It creates a feeling that they’re working together,” said Dan Nash, national healthcare practice leader, Zurich in North America. “If you have a care manager through the process, it can give the patient a level of comfort that takes away anxiousness,” said Nash. “Then they feel like they’re being taken care of.”

2. Compliance

Between the Health Insurance Portability and Accountability Act, the U.S. Department of Health and Human Services and a long list of other government organizations and mandates, there are serious demands on health systems.

“Real estate may be all about location, location, location but healthcare is all about compliance, compliance, compliance,” said Nash.

A lot of risk managers are focused on digital-related exposures, but a significant amount of serious data breaches are still the result of “paper losses.”

“One example happened on a subway in 2009 when a hospital worker left records for 192 patients on a train,” said Nash about an incident involving a mid-Atlantic hospital “It led to the hospital paying $1 million to the government in 2011 to settle the potential HIPAA violations.”

Despite the risks, health care providers are still reluctant to buy coverage around it.

“People used to look at banks with an eye toward their brick-and-mortar locations. ‘My money is safe because it’s housed within those walls,’ they’d think. While that thinking is antiquated when dealing with finances, it still rings true in the health care world,” said Nash.

“Often customers we talk to say it’s important, but not in budget this year,” said Nash. Furthermore, their IT departments seem to think they’ve got the problem figured out on the digital side and companies generally don’t pay enough attention to the possibility of paper losses.

To help combat the risk, Zurich offers to qualified customers a Breach Coach consulting service, during which an experienced cyber breach risk engineering consultant can assess where businesses are most vulnerable to a data loss.

3. Outpatient Treatment

Currently, 60% of hospital services are delivered inpatient with 40% of care delivered through outpatient facilities. Under the Affordable Care Act, the proportion will likely be reversed, so that 60% of care is delivered through outpatient facilities.

“It’s risky because patients generally see hospitals as places where they are safer in the event of an adverse reaction,” said Nash. “They might not have that same sense of security with an outpatient facility.

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Nash compared that notion to the way many Americans thought about banks 20 or 30 years ago.

“People used to look at banks with an eye toward their brick-and-mortar locations. ‘My money is safe because it’s housed within those walls,’ they’d think. While that thinking is antiquated when dealing with finances, it still rings true in the health care world,” said Nash. “People feel safer and think they’re getting better care if they’re in a large hospital. At an outpatient facility, that comfort level isn’t the same.”

Another risk of having more outpatient procedures is that the health care provider has less time for observing patients. With patients going home after their procedure, it becomes even more important for the patient to carefully follow instructions: like taking medicine at scheduled times and doing proper rehab. Any health care provider can tell you that’s never guaranteed. But even if they don’t follow the care instructions, the hospital is still responsible.

This article was produced by Zurich and not the Risk & Insurance® editorial team.
Note: This content is provided for informational purposes only. Please consult with qualified legal counsel to address your particular circumstances and needs. Neither Risk & Insurance® nor Zurich are providing legal advice and assume no liability concerning the information set forth above.


Zurich Insurance Group, Ltd is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.
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Aviation Woes

Coping with Cancellations

Could a weather-related insurance solution be designed to help airlines cope with cancellation losses?
By: | April 23, 2014 • 4 min read
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Airlines typically can offset revenue losses for cancellations due to bad weather either by saving on fuel and salary costs or rerouting passengers on other flights, but this year’s revenue losses from the worst winter storm season in years might be too much for traditional measures.

At least one broker said the time may be right for airlines to consider crafting custom insurance programs to account for such devastating seasons.

For a good part of the country, including many parts of the Southeast, snow and ice storms have wreaked havoc on flight cancellations, with a mid-February storm being the worst of all. On Feb. 13, a snowstorm from Virginia to Maine caused airlines to scrub 7,561 U.S. flights, more than the 7,400 cancelled flights due to Hurricane Sandy, according to MasFlight, industry data tracker based in Bethesda, Md.

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Roughly 100,000 flights have been canceled since Dec. 1, MasFlight said.

Just United, alone, the world’s second-largest airline, reported that it had cancelled 22,500 flights in January and February, 2014, according to Bloomberg. The airline’s completed regional flights was 87.1 percent, which was “an extraordinarily low level,” and almost 9 percentage points below its mainline operations, it reported.

And another potentially heavy snowfall was forecast for last weekend, from California to New England.

The sheer amount of cancellations this winter are likely straining airlines’ bottom lines, said Katie Connell, a spokeswoman for Airlines for America, a trade group for major U.S. airline companies.

“The airline industry’s fixed costs are high, therefore the majority of operating costs will still be incurred by airlines, even for canceled flights,” Connell wrote in an email. “If a flight is canceled due to weather, the only significant cost that the airline avoids is fuel; otherwise, it must still pay ownership costs for aircraft and ground equipment, maintenance costs and overhead and most crew costs. Extended storms and other sources of irregular operations are clear reminders of the industry’s operational and financial vulnerability to factors outside its control.”

Bob Mann, an independent airline analyst and consultant who is principal of R.W. Mann & Co. Inc. in Port Washington, N.Y., said that two-thirds of costs — fuel and labor — are short-term variable costs, but that fixed charges are “unfortunately incurred.” Airlines just typically absorb those costs.

“I am not aware of any airline that has considered taking out business interruption insurance for weather-related disruptions; it is simply a part of the business,” Mann said.

Chuck Cederroth, managing director at Aon Risk Solutions’ aviation practice, said carriers would probably not want to insure airlines against cancellations because airlines have control over whether a flight will be canceled, particularly if they don’t want to risk being fined up to $27,500 for each passenger by the Federal Aviation Administration when passengers are stuck on a tarmac for hours.

“How could an insurance product work when the insured is the one who controls the trigger?” Cederroth asked. “I think it would be a product that insurance companies would probably have a hard time providing.”

But Brad Meinhardt, U.S. aviation practice leader, for Arthur J. Gallagher & Co., said now may be the best time for airlines — and insurance carriers — to think about crafting a specialized insurance program to cover fluke years like this one.

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“I would be stunned if this subject hasn’t made its way up into the C-suites of major and mid-sized airlines,” Meinhardt said. “When these events happen, people tend to look over their shoulder and ask if there is a solution for such events.”

Airlines often hedge losses from unknown variables such as varying fuel costs or interest rate fluctuations using derivatives, but those tools may not be enough for severe winters such as this year’s, he said. While products like business interruption insurance may not be used for airlines, they could look at weather-related insurance products that have very specific triggers.

For example, airlines could designate a period of time for such a “tough winter policy,” say from the period of November to March, in which they can manage cancellations due to 10 days of heavy snowfall, Meinhardt said. That amount could be designated their retention in such a policy, and anything in excess of the designated snowfall days could be a defined benefit that a carrier could pay if the policy is triggered. Possibly, the trigger would be inches of snowfall. “Custom solutions are the idea,” he said.

“Airlines are not likely buying any of these types of products now, but I think there’s probably some thinking along those lines right now as many might have to take losses as write-downs on their quarterly earnings and hope this doesn’t happen again,” he said. “There probably needs to be one airline making a trailblazing action on an insurance or derivative product — something that gets people talking about how to hedge against those losses in the future.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at riskletters@lrp.com.
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Diversifying Top Management in Workers’ Comp

Inaugural Women in Workers’ Compensation (WiWC) Forum focuses on advancing more women into top leadership roles.
By: | January 7, 2015 • 5 min read

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The panel at the inaugural Women in Workers’ Compensation (WiWC) Forum. From left to right: Eileen Ramallo, Elaine Vega, Nina Smith-Garmon, Nancy Hamlet, Michelle Weatherson, Nanette de la Torre, Danielle Lisenbey.

Across the country, the business community is engaged in a robust conversation about women being under-represented among c-level positions.

Why aren’t more women breaking into upper management roles? Does gender bias still exist? And, perhaps more importantly, what can women and men do to add more diversity to top leadership ranks?

Elaine Vega and Nancy Hamlet, of Healthcare Solutions, the Duluth, Ga.-based health services provider to the workers’ compensation and auto liability/PIP markets, have discussed the issue between themselves many times over the years.

The duo agreed that starting an industry-wide conversation would be an effective start to addressing the challenge. After three years of internal discussions, the inaugural Women in Workers’ Compensation (WiWC) Forum became reality. Judging by the attendance, content and feedback, it was an auspicious, very successful, debut.

Nancy Hamlet, Senior Vice President of Marketing, Healthcare Solutions

Nancy Hamlet, Senior Vice President of Marketing, Healthcare Solutions

Specifically, Healthcare Solutions and LRP Publications teamed up at the National Workers’ compensation and Disability Conference (NWCDC), held Nov. 18-21, 2014 in Las Vegas, to present the first WiWC event focused on the development of women as leaders within the industry. The WiWC debut featured a keynote speaker, a panel discussion and a networking cocktail hour.

“We believe this is just the beginning for the WiWC organization,” said Hamlet, senior vice president of marketing, adding that the event’s main theme was the conversation regarding challenges that still exist for women in the workplace is “current, real … and relevant.”

Originally the forum was allocated a room to hold 150 people. Vega and Hamlet worried about the room being too large, so they asked LRP what the contingency would be to make the room smaller if they couldn’t fill it. They needn’t have worried, as more than 400 women, and some men as well, registered and attended, requiring an even larger room.

“Clearly, the topic is relevant and there was plenty to discuss,” said Vega, senior vice president of account management.

Hamlet explained that WiWC was formed to create an open forum to promote a strong sense of community and support for current and future female leaders in the workers’ compensation industry. Going forward, the WiWC forum will provide insight and ideas with opportunities for members to:

  • Engage … with accomplished industry professionals and build lasting relationships.
  • Enrich … their knowledge base with tactical insights from speakers and panelists.
  • Explore … opportunities and challenges facing women leaders today.
  • Encounter … senior executives’ perspectives on leadership.
  • Examine … leadership strategies and how to effectively apply the strategies.
  • Empower … themselves and others to achieve success and groundbreaking results.

At the inaugural event, keynote speaker Peggy Holtman, co-author of “Leading at the Edge: Leadership Lessons from the Extraordinary Saga of Shackleton’s Antarctic Expedition,” discussed how a seemingly unconnected historical event can offer critical lessons on leadership in the workplace, especially for women looking to move into top executive spots.

Elaine Vega, Senior Vice President of Account Management, Healthcare Solutions

Elaine Vega, Senior Vice President of Account Management, Healthcare Solutions

After Holtman’s talk, a panel discussion, moderated by Vega, offered the perspectives of five workers’ compensation industry executives on ways in which women can navigate past the glass ceiling. Panelists included Eileen Ramallo , EVP Healthcare Solutions; Danielle Lisenbey, CEO Broadspire; Nanette de la Torre, VP Zenith; Nina Smith-Garmon, EVP Mitchell International; and Michelle Weatherson, Director, Claims Medical and Regulatory Division, State Fund of Calif.

The panelists discussed a wide range of topics related to women in workers’ compensation. For example, one topic focused on the need to take the big risks when it comes to moving past workplace barriers. Other topics included the importance of women in higher positions serving as sponsors and advocates for younger, less experienced women; and the impact of industry consolidation on women’s careers and how to best manage that change. Another topic was how women could best master conflict and emotions in the workplace.

“What’s clear is conflict has to be managed; it will not go away. It will only get worse,” said Healthcare Solutions’ Ramallo. “It then can create other rifts that won’t necessarily be visible immediately, but can have a very large impact. You have to be able to understand what it is early on from another’s perspective, why the situation exists, and then encourage and try to resolve a conflict situation, whatever may be driving it.”

In the wake of the first WiWC Forum, Hamlet noted that while there are countless general reports showing that women have not yet achieved equal representation in top leadership positions in the workplace, studies deal with averages rather than individual stories. And while women must continue to look at the data and work toward closing the gap, hearing from accomplished women in the workers’ compensation industry at NWCDC drove home critical messages on a person level.

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Today, Vega and Hamlet are looking to expand WiWC to make it “truly owned” by the industry. For example, they expect to recruit companies interested in becoming sponsors, forming an advisory council, creating a charter and discussing future possibilities for the organization on both the national and regional levels.

“Much remains to be done, but I have confidence that we will come together and make the organization stronger so that it prospers for years to come,” Hamlet said. “After all, it’s clear that our industry is filled with talented women who can make things happen!”

Vega added that WiWC has already received requests to live stream the event in the future, so it will examine the feasibility of that option in an effort to be even more inclusive.

“We have a shared vision for improving opportunities for current and future women leaders in workers’ compensation,” Vega said. “It doesn’t matter our gender or our title, it’s all about supporting the greater vision. As was said several times at the event, this is just the beginning. We hope more women and men will join us in this continued dialogue.”

For more information about the WiWC, send email to wiwcleadership@healthcaresolutions.com or join our WiWC group on LinkedIn.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.




Healthcare Solutions serves as a health services company delivering integrated solutions to the property and casualty markets, specializing in workers’ compensation and auto liability/PIP.
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