It is that time of year again! The majority of reinsurance treaties and/or provider excess policies renew on January 1st each year. Summit Re works collaboratively with our clients to ensure a comprehensive review process while minimizing disruption to your organization. One of the crucial steps in finalizing reinsurance coverage is disclosure. Disclosure is defined as the process of revealing information. To bind reinsurance coverage, you are required to reveal claimant data that may not have been available at the time of underwriting due to the inherent delay between underwriting the risks and binding the coverage. Disclosure is intended to be a quick review of the latest claim and utilization management activity at the time that a binder for coverage is signed.
Why is disclosure important?
When preparing a quote, the reinsurer performs a careful analysis of reinsurance claim costs and trends, including an analysis of the current year's activity. A critical assumption is the degree to which this data can be considered complete. Disclosure helps the reinsurer solidify the accuracy of this assumption.
The disclosure also identifies potential reinsurance claimants that may be categorized as high cost and/or chronic and, therefore, highly predictable in both the usage and the cost of services. If possible, the reinsurer may recommend a cost reduction strategy to assist you in the management of these new claimants. This would potentially benefit both you and the reinsurer. In some cases, this strategy may include the increasingly common practice of “lasering” some members by placing higher deductibles on these individuals or excluding them from coverage if a reinsurance claim is already anticipated.
An accurate disclosure is important to you to protect against possible denial of a reinsurance claim. The disclosure statement is part of the signed binder and ultimately a part of the policy/agreement. Therefore, if a potentially serious loss was not included in the disclosure review, the reinsurer has the right to exclude the serious loss that was known or should have been known by the client, but not disclosed at the time the binder is signed.
What to disclose?
The disclosure statement provides a detailed outline of the information that needs to be disclosed. Limiting the information provided to Summit Re only to those representing a potential serious loss will expedite the process; however, you need to be careful to include all individuals that are known to you. We highly recommend that you confer with your utilization, case management, and pharmacy departments. They may have received a recent request for potentially high cost care that may not yet be known to the finance and claims departments.
What are the possible outcomes?
The majority of the time the disclosure will reveal a normal level of catastrophic claim activity of an acute nature, which allows the reinsurer to confirm the terms as originally priced.
Another scenario is that a significant claim is identified to have a high probability of continuing into the coverage period in question, and a separate deductible may be assigned to that claim if it is likely to exceed the retention. This has now become a known claim to both you and the reinsurer and, therefore, uninsurable. A basic premise of reinsurance is that known events with predictable costs are not insurable.
A third scenario is that the disclosed claim information is dramatically different from the claim information presented during the quotation process, and the reinsurer is forced either to materially modify its quoted rates or terms or to completely withdraw their quote. Summit Re makes every attempt to make this a rare occurrence.
We look forward to working with you as we enter into the renewal season.
Disclosure Statement by Applicant
This Applicant Disclosure Statement (“Disclosure”) must be completed by the Applicant and returned to Summit Re. Completion and execution of this Disclosure by an authorized officer of the Applicant, is a warranty that a diligent review for potential Serious Losses was completed by consulting with your administrator, utilization review, case management, and claims unit(s), either internally or from any delegated authority, to review claim information including, but not limited to pre-certification information, disability and/or utilization review data, case management records, hospital inpatient logs and transplant waiting list(s). Further, as part of any Disclosure it is the Applicant’s duty to provide current information for Members who may have been included in the information exchange during the underwriting process and who meet the definition of Serious Losses at the time of signing the Offer.
Serious Losses mean any potential Member expected to incur claims that may reasonably be assumed will reach seventy-five percent (75%) of the Specific Retention in the current or the upcoming Agreement Period based on their:
primary diagnosis or diagnoses, if significant co-morbidities;
current physical condition, treatment plan, prognosis, and facility confinement status (e.g. acute hospital, long term acute care, skilled nursing facility, etc.);
referral for or undergoing a transplant evaluation;
potential for receiving specialty drugs (oral, injectable, or infusion), gene and cell therapies (including but not limited to Zolgensma), blood factor products or blood derivatives, including those that are covered under the medical benefit; or
Chronic high cost treatment, planned surgeries, and prolonged facility admissions. “Chronic” shall mean the illness, condition or disease is continuing or occurring again and again for more than three (3) months.
Serious Losses known by the Applicant, either internally or from any delegated authority such as an administrator, utilization review or case management company, as of the date the Offer is executed, will be excluded from coverage unless fully disclosed to and accepted by Summit Re.
Disclose or Disclosed means the following information has been provided to Summit Re:
A paid claim detail report of all Members who have exceeded fifty percent (50%) of the Specific Retention for the current Agreement Period;
A report for all Members considered Serious Losses, which contains the following:
a. Member ID/Name (or other unique identifier) and date of birth;
b. Admission date and estimated discharge date, if applicable;
c. Diagnosis, current status, and treatment plan;
d. Expenses incurred to date & estimated expenses to be incurred/paid within the Agreement Period;
e. Anticipated hospital admissions or planned surgeries that have potential to exceed the Specific Retention; and
f. For each Member identified as receiving, or having the potential to receive, specialty drugs (oral, injectable, or infusion), blood factor products or blood derivatives including those covered under the medical benefit:
i. Whether the Member is receiving the drug or product prophylactically or on an as needed basis;
ii. Drug or product name, dosage, frequency and cost per treatment;
iii. Expected duration of treatment; and
iv. Site of administration (i.e. inpatient, outpatient, physician office, home, self-administered).