The medical community’s recognition of addiction as a disease has changed the way providers diagnose and treat the condition. As a result, facilities like alcohol and drug rehabilitation centers have had to expand the services they provide, which has lead to new exposures and increased insurance needs, the experts say.
Healthcare reform will bring more changes to this segment as well.
According to those who specialize in this class, there are new opportunities for agents looking for a lucrative niche to focus on, but it’s not without its risks.
Richard Willetts, program director for NSM Insurance Group, says addiction treatment facilities started being considered part of the behavioral healthcare industry during the past couple of decades after the medical community began viewing addiction as a disease. Many addiction facilities now incorporate medical professionals into rehabilitation treatment, which requires additional layers of insurance and more coverage.
“What we are learning is that this niche is evolving,” says Willets. “I’ve seen dramatic changes and we are finding new sub-niches developing within this niche.”
With this evolution comes many more factors for facilities to consider, especially in light of the Affordable Care Act (ACA), which “includes substance use disorders as one of the 10 elements of essential health benefits” (whitehouse.gov). As of 2014, all insurance sold through health benefit exchanges or provided through Medicaid must include substance abuse services.
Willets says only about three million people in the U.S. currently receive treatment for substance abuse, and he expects with the new Medicaid requirements that number could double. More centers will have to open and facilities that currently accept Medicaid will have to start providing addiction services.
Insurance agents who can act as advisors and help these facilities navigate the changes are in a very good position.
“This is a $200 million industry,” he says. “It is a small piece of the overall healthcare market, but it is a growing piece.”
Willetts says a lot of venture capital money has already started to pour into this segment to capture some of the market. Merger and acquisition activity for health clinics that focus on behavioral health is picking up everywhere because of the potential increase in business.
All of these new entrants to the field, however, create plenty of opportunities for errors or negligence –which can mean very big claims.
“The major difference [with this segment] is that human lives are involved and when you make a mistake the consequences are dire and the claims can be large,” says Nicholas L. Bozzo, managing director for Negley Associates.“This segment has always had severity exposure but the concern is avoiding frequency of severity.”
Bozzo says healthcare reform impacts this segment ranging from financial to personnel and all the way through to treatment alternatives. That’s why, he says, it is important for agents to work with a carrier who has a long-term understanding and expertise in covering and defending this industry segment.
“The real issue is what impact [healthcare reform] has on insurance claims, costs and coverage and how that all evolves as a result. We don’t see any significant reduction in liability exposures, or meaningful changes to the legal system as a result of any of the proposed healthcare reforms,” says Bozzo. “We believe the liability exposures will only get more difficult as we move forward in healthcare reform.”
A particularly important aspect of these facilities that could become even more significant as the ACA takes effect is when a facility contracts physicians. Facilities often use an outside behavioral health specialist to treat the medical aspects of this risk. Healthcare reform will increase that occurrence because it can be a way for the facility to receive Medicaid reimbursement money, says Willetts.
A common mistake facilities make is assuming the physician’s insurance extends to their facility, which it likely does not, according to Nancy Williams, vice president of marketing and sales for NIF Group in Manhasset, N.Y.
“Anytime you have contracted professionals you need to make sure there is coverage in place for them and that the entity itself is protected,” says Williams. “People don’t think about the exposures the facility faces if the insurance is elsewhere.”
Williams says agents need to make sure they know exactly what kind of medical services these contracted professionals are providing, such as psychological, detox or methadone maintenance, because these are carrier considerations.
NIF Group focuses mainly on non-profit rehabilitation facilities and does write some intake and detox, but does not target those in the hospital setting. NIF does cover transitional housing, sober living and any kind of work-training or job placement services. It partners with Liberty Mutual and more recently with Everest National. The program manager is looking for agents with association affiliations to partner with.
NSM has been exploring the new sub-niches like sober living houses and recovery communities that have sprung out of this growing industry. Willetts says he is also working with agents on how to sell cyber coverage to these facilities because electronic medical records are another requirement of healthcare reform that will affect this industry.
Willetts says the upcoming challenges and obstacles facing this class will make insurance agents more relevant, unlike other lines of business that are being lost to the internet. Factor in the average premium – around $40,000 with NSM’s program – and agents who know what they are doing are in the right place at the right time.
“This is the perfect business for the trusted advisor to say, ‘OK, these are all your exposures’,” says Willetts. “It’s not for every agent, but if you like a challenge, it’s a growth industry, its complex, and can be very rewarding.”