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Hannover Re US provides aggregate excess of loss cover for Next Generation ACO

3rd October 2017 - Author: Steve Evans

Global reinsurance player Hannover Re said today that its U.S. arm Hannover Life Reassurance Company of America (Hannover Re US) has closed on an aggregate excess of loss protection for UT Southwestern, a Texas-based Accountable Care Organization (ACO).

Hannover Re logoUT Southwestern participates in the so-called Next Generation ACO Model, a healthcare system that aims to shift from one that compensates providers for the quantity of services they deliver, to one that compensates them for the quality of health outcomes.

As a result, provider groups under the Next Generation ACO Model take on financial risks related to patient health results and so protection is required.

“Hannover Re is one of the nation’s largest professional reinsurers of Medicare business, operating in this market segment for more than a decade,” commented Steve Najjar, Executive Vice President and General Counsel, Health and Special Risk, Hannover Re US. “As the healthcare paradigm shift risks to providers, we are proud to provide such innovative solutions so that health care providers can focus on what they do best – delivering quality patient care.”

Hannover Re explained that in order to measure how successful they are ACOs are assigned a benchmark, reflecting the historical claims utilisation of their member population.

If claims fall below the benchmark an ACO can recognise shared savings, along with bonus incentives. But, if claims exceed the benchmark, they take on the downside risk and must cover the excess costs.

As a result, aggregate excess of loss reinsurance protection for ACOs can limit their exposure to financial loss related to this downside risk.

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