In a recent NGHP Section 111 User Guide publication, the Centers for Medicare and Medicaid Services (CMS) added a new section (Chapter III, Section 6.1.13) to directly reference Subscription Insurance Policies. In short, CMS will now allow the “lead insurer” to be the sole Responsible Reporting Entity (RRE), responsible for all Section 111 and recovery activities.
Historically, CMS did not recognize the lead insurer model, and instead required each insurer to report independently via Section 111. The entire version 7.1 of the NGHP Section 111 User Guide is available here.
Subscription Insurance Model Primer
Affectionately coined the “London Insurance Market,” subscription insurance involves two or more entities sharing a portion of the risk on a policy. Consider it the precursor to today’s crowd-funding models like Kickstarter and GoFundMe. This practice originated in the late 1600’s at Edward Lloyd’s coffee house (yes, that “Lloyd”), whereby multiple entities acquired distinct portions of the risk as English merchants travelled around the globe. One entity always held a majority of the risk, and was named the “lead.” For example, the lead may have held 40% of the risk, while two additional entities each held 30%, resulting in the full 100% of coverage for the merchant and his valuable cargo. Should there be a payout, those entities then paid their percentages accordingly.
Subscription Insurance still continues today, where the risks are either unusual or have high severity with low frequency, such as the Marine, Aviation and Trucking industries, global property insurance, and more recently, cyber insurance. Also, a significant portion of the US excess and surplus lines runs through the Subscription Insurance model.
ECS applauds CMS for accepting the Subscription Insurance model as it results in a cleaner, more streamlined Section 111 process. For any questions about this update, please contact Scott Huber at scott.huber@examworkscompliance.com or 678-256-5135.