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The ACO: A reinsurance opportunity?

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Will the rise of the accountable care organization (ACO) create a significant new reinsurance market?


Peter Robinson, a longtime health plan reinsurance broker, talked about the young ACO reinsurance market in a recent e-mail interview with

The Patient Protection and Affordable Care Act of 2010 (PPACA) pushed the Centers for Medicare & Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services (HHS), to use ACOs to move the traditional Medicare program away from the fee-for-service approach to paying for care.

When group physician practices experimented with accepting flat, “capitated” payments for each patient served in the 1990s, they collapsed. CMS wants the providers that participate in its Pioneer ACO program and its Medicare Shared Savings Program (MSSP) Track 2 ACO program to earn extra cash in exchange for accepting risk, but without imploding.

To guard against one problem that cropped up in the 1990s — complaints that some capitated physicians were keeping patients from getting necessary care — the ACO programs are supposed to reward the ACOs for providing good care as well as for providing efficient care.

Robinson’s company, ReSource Intermediaries, a unit of Integro, can help ACO managers manage risk by lining up ACO surety bonds and ACO reinsurance arrangements.

Robinson took time to answer a few questions about the ACO risk management niche.

Q: How easy has it been to line up a supply of reinsurance for ACOs?

A. The reinsurance market’s response is emerging. Certain markets have identified teams working on ACOs with significant actuarial depth while others look at ACOs through existing underwriting teams.

Predictably, the firms with focused teams and strong analytics are setting the bar for the market.

Q: What kinds of entities are providing the surety bonds and reinsurance?

A. Very roughly, I would say that two-thirds or more of the existing ACOs are written by traditional health plan stop-loss writers who also have expertise in provider excess. [Stop-loss insurance that protects a provider, rather than an insurer or an employer.]

Most state insurance regulators look at the stop-loss for an ACO as an insurance transaction requiring a filed policy, i.e. provider excess.

We are seeing a rapid increase in the use of captives [or company-controlled insurers], which frequently hospitals can offer to the ACO. Or, the ACO can create a new captive.

Use of the captive can give the ACO access to a wider array of reinsurance markets than the traditional health plan writers.

The captive also focuses the ACO on enterprise risk for the organization, including cyber, professional, [directors & officers' liability], etc.

Q: Are the reinsurance suppliers already working with any ACOs, and, if so, do you they have any early observations about how well the ACOs are managing risk?

A. The leading markets have all written a handful of ACOs.

The metrics on the Pioneers and other early entrants have been positive from all accounts.

Most of the focus has been on ACOs for Medicare, as intended by HHS.

However, we are seeing significant expansion in the use of ACOs for commercial populations. We see this as a significant trend, and the self-funded employers are watching this keenly in the hopes that they can achieve improvements in medical trend … as a result.

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