Professional Caregiver Insurance Risk (PCIR) - Update Oct 2009

Many health care finance mechanisms transfer insurance risks (intra-
and inter-patient cost variability) to health care providers. Global
capitation, in which health care providers assume all variability in health care costs for a defined population is the PCIR gold standard. Insurance risk transfers
also occur in Medicare/Medicaid managed care and the Prospective Payment (PPSs) systems for hospitals, doctors, nursing homes, and home health agencies.

Insurance risk transfers entail inadequately analyzed risks for health care providers. We perform risk theoretic and financial analyses, detailing the impact of risk disaggregation on key insurer operating characteristics: Portfolio size, Actual loss ratios, Profitability, Risk premiums, and Maximum sustainable benefits (MSBs).

Small insurers manage insurance risks less efficiently, are less profitable, have higher operating losses, and more insolvencies than large insurers. Risk assuming health care providers (RAHCPs) must reduce patient services to compensate for their inefficiencies as insurers.
Professional Caregiver Insurance Risk (PCIR)