1. The Story of Three Children‘s Hospitals in Various Stages of Captive Development

2. Alliant Insurance Services, Inc.
Moderated by:
Todd Hagemeier
Alliant Insurance Services, Inc.
Managing Director, Executive Vice President

3. Director Insurance Services
Keith Lindloff
Children‘s Health
Director Insurance Services

4. Our transition to a Risk Bearing Captive Story
Children‘s Health
Our transition to a Risk Bearing Captive Story

5. Children’s Insurance Company (CIC)
Parent Organization: Children’s Medical Center of Dallas
Independent pediatric hospital
Two full service hospitals, total of 442 beds in operation
3 subsidiary physician organizations employing appx 100 physicians
Level I Trauma Center; Level III NICU
Affiliated with UT Southwestern Medical School

6. Children’s Insurance Company (CIC)
Captive created in 1990 to provide access to reinsurance markets, esp. Employers’ Reinsurance
Domiciled in Vermont due to Board concerns about public perception
Issued policies for excess Professional & General Liability, 100% reinsured
Retained no risk for first 25 years

7. Children’s Insurance Company (CIC)
Children’s Medical Center has been a very conservative organization with regard to risk as well as finance
Children’s Medical Center has been a financially strong organization – well-supported by community; favorable reimbursement structure
Successful tort reform in Texas lowered the temperature regarding Professional Liability

8. Children’s Insurance Company (CIC)
Challenge: Developing the organizational will to assume more risk
Elements that came together:
New Strategies
Continued increase in primary HPL premium despite excellent loss history
New CFO
Desire to remove costs from Operations budget

9. Children’s Insurance Company (CIC)
Jan – Assumed primary Professional and General Liability in CIC
Near term plans:
Add employed physicians
Issue ‘deductibles’ policy to consolidate budgeting for all losses within deductibles
Review of all coverages with an eye to utilizing CIC

10. Cook Children‘s Health Care System
Karen A. Wardell
Cook Children‘s Health Care System
Associate General Counsel

11. Our Captive Success Story
Cook Children‘s
Our Captive Success Story

12. Cook Children‘s Health Care System
enter picture
Cook Children’s Health Care System is a not-for-profit, pediatric health care organization based in Fort Worth, Texas

13. Cook Children’s Health Care System
W.I. Cook
Foundation, Inc.
Cook Children’s Health Care System
Cook Children’s
Home Health
Physician Network
Medical Center
Cook Children’s NE Hospital, LLC
Cook Children’s Surgical Center, LLC [Plano]
Health Plan
Indemnity Company
Cook Children’s Health Services, Inc.
Rosedale Office Building, Inc. 501(c)(2)

16. Cook Children‘s Indemnity Company
CCIC was licensed & capitalized in 2002 in response to a hardening insurance market
CCMC historically maintained a self-insured trust for its HPL and purchased excess insurance
Its physician group purchased first dollar coverage
In the early 2000’s, we started seeing declining capacity for medical malpractice
Carriers abandoned the market and/or refused to insure certain medical specialties
In 2002, the cost of insuring our 200 employed physicians was over $5M
Primary purpose was to provide a vehicle to self-insure the medical malpractice exposure of Cook Children’s Health Care System & its employed physicians

17. Coverage and Limits Hospital Professional Liability
claims-made policy with pre-paid tail coverage
$5M per claim/$20M aggregate limits
excess reinsured up to $70M
funding is actuarially determined at expected level or greater plus budgeted administrative expenses
retrospectively rated premiums
Physician Professional Liability
$1M/$3M limits per physician/mid-level provider
funding is actuarially determined and funded at the expected level or greater plus budgeted administrative expenses
General Liability
occurrence policy
$1M per occurrence/$5M aggregate limits
Managed Care E&O
claims-made policy
no claims in the 5 years it was there
removed from the captive in 2010

18. Premium paid to CCIC since December 2002 - $92M
Premium net of reinsurance - $80M
(Amount actuaries say we should have paid)
Total paid losses to date - $6.8M
Dividend/retrospective premium returned to System - $68M

19. HOW?
Medical malpractice tort reform enacted in Texas in 2003 made it easier to accurately predict future costs
non-economic damages caps at $250,000 per occurrence for any and all non-institutional health care providers (most commonly, physicians) with a second $250,000 cap per occurrence for each health care institution with a limit of $500,000 total for all health care institutions
2 year statute of limitations
10 year statute of repose
all wrongful death damages remained capped at an indexed cap, which is about $1.8M and includes punitive damages
Apology & disclosure policy developed and implemented
See Lee Taft, Apology & Medical Mistake: Opportunity or Foil?, 14 Annals of Health Law 55 (2005).

21. Texas Children‘s Hospital
Melissa Murrah
Texas Children‘s Hospital
Director – Risk Management

22. Texas Children’s Our Super Captive Insurance Company Story

23. Overview of Texas Children‘s Hospital
Groundbreaking ceremonies were held on May 23, 1951 for a three story, 106 bed pediatric hospital
Teaching affiliation established at that time with Baylor College of Medicine that is still in place
Neurological Research Institute, the world’s first basic research institute dedicated to childhood neurological diseases, opened in 2010
The Pavilion for Women, providing women, mothers and babies with a full continuum of high quality healthcare, opened in 2011
EPIC installed system wide in 2012
In 2013, Texas Children’s had 3.2 million patient encounters and performed 26,000 surgeries
Today beds and 230 employed physicians

24. Overview of TCH Insurance Company, Ltd. (“TCHICO”)
Licensed in Cayman in March of 1995
Holds an Unrestricted Class B insurer’s license
Currently writes:
Professional / General Liability
Umbrella / Excess Liability – Integrated Form
Property and Business Interruption
Property coverage has been written on a quota share basis since 2012; no losses to date
Over $350,000 of patient safety grants have been awarded to date

25. Texas Children’s ERM Initiative
Texas Children’s has a very robust and interactive ERM initiative that started in 2012
Board oversight of our ERM initiative is provided by the Chairman of our Risk Management & Insurance Committee
Our ERM protocol involves the use of a Risk Register, a Heat Map and Aggregate Risk Scores that lead to a red, yellow or green ranking for each enterprise risk that is identified
We are tracking fifty-two enterprise risks, including a “Fine Fifteen”
TCHICO is an integral part of our Risk Mitigation Strategy and Action Plan and the possible utilization is always a part of our analysis

26. Sample ERM Risk Register
Heat Map

27. Other Possible Risk Areas for TCHICO Being Investigated
HMO Reinsurance
Medical Stop Loss
Biomedical Maintenance
Property and Casualty Deductibles
Regulatory (Billing E&O) Risk
Property (Higher Limits)
ROCIP Coverages
Builder’s Risk
Primary Casualty
Excess Liability

28. Questions