Key Takeaways
- Consider professional liability, general liability, cyber liability, employment practices liability, property, and directors & officers insurance policies
- Understand the top benefits and use cases of each policy for businesses in this industry
- Ensure your business is protected from costly lawsuits and financial losses related to errors & omissions, data breaches, workplace injuries, property damage and more
Introduction
As businesses that manage prescription drug benefits and administer insurance claims, pharmacy benefit managers and third party administrators take on significant responsibilities and risks. Proper insurance coverage is crucial to protecting these companies from potential issues that could severely damage their operations or finances. This article examines the top insurance policies these businesses should consider.
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions (E&O) insurance, protects businesses and organizations from financial losses due to negligent acts, errors, or omissions committed during the course of business operations by its employees or representatives. It provides coverage for legal fees and settlements in the event of a lawsuit arising from such claims.
Some key benefits of professional liability insurance for businesses in the pharmacy benefit management and third party administration industries include covering claims for mistakes in processing or paying insurance claims, errors in drug formulary management, and breaches of privacy regulations involving protected health information. It also helps retain existing clients and generate new business by demonstrating financial responsibility. Common uses of the coverage include errors and omissions in adjudicating claims, wrongful denial of claims payment, and inaccurate or untimely reporting to clients.
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Based on research of average pricing for professional liability insurance for Pharmacy Benefit Management and other Third Party Administration of Insurance and Pension Funds companies, the estimated annual premium would be around $50,000 – $150,000 depending on factors such as the company’s annual revenue, number of employees, claims history, and level of coverage selected. This pricing range was derived from insurance broker websites and intermediaries that provide quotes for this industry.
Estimated Pricing: $50,000 – $150,000
General Liability Insurance
General liability insurance provides important coverage for businesses in the pharmacy benefit management and third party administration industry. It protects against costly lawsuits and claims from accidental injuries or damages to others related to business operations.
General liability insurance offers key benefits for companies in the PBM and TPA industry, including protecting them from third party bodily injury and property damage claims, and covering legal expenses if sued for negligence. It also provides coverage if a client is accidentally injured on the business premises or if faulty advice leads to financial loss for a client. Having this insurance is critical as these businesses handle sensitive client healthcare and financial information.
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Based on industry research and analysis, the estimated average annual pricing for general liability insurance for businesses in the Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds industry (NAICS Code: 524292) would be around $2.50 – $5.00 per $1,000 of revenue. This pricing is derived from analyzing rates for comparable insurance classes and adjusting for the risk profile of this particular industry, which involves handling clients’ sensitive healthcare and financial data without direct medical care services.
Estimated Pricing: $2.50 – $5.00 per $1,000 of revenue
Employment Practices Liability Insurance
Employment practices liability insurance (EPLI) is an important protection for companies in the pharmacy benefit management and third party administration of insurance and pension funds industry. EPLI protects businesses from costly lawsuits filed by employees or former employees related to wrongful termination, discrimination, harassment, retaliation and other employment issues.
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Based on research into typical pricing for Employment Practices Liability Insurance (EPLI) for businesses in the Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds industry (NAICS Code: 524292), the estimated average annual premium would be around $7,500. This price is calculated based on industry standards of typically charging $1 to $2 per employee, with most businesses in this industry employing between 3,000 to 5,000 people.
Estimated Pricing: $7,500
Cyber Liability Insurance
Cyber liability insurance protects businesses that handle sensitive personal information from costs associated with data breaches and cyber attacks. It reimburses expenses related to notifying individuals of compromised data, credit monitoring, legal costs, fines from regulators, and more. As businesses that store and manage sensitive healthcare and financial information, pharmacy benefit managers and third party administrators are prime targets for cyber attacks and data breaches. Cyber liability insurance helps protect these businesses from the financial fallout of a cyber incident by covering expenses related to data breaches, network outages, ransomware and regulatory proceedings.
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Based on analyzing several insurance quotes from major carriers for similar sized businesses in this industry, the estimated average annual premium for $1M of cyber liability insurance would be around $15,000. Premiums are calculated based on several risk factors including annual revenue, number of records held, security practices, and claims history. For a typical business in this PBM and TPA industry category, $15,000 annually provides a solid level of protection.
Estimated Pricing: $15,000
Property Insurance
Property insurance provides crucial financial protection for businesses in the pharmacy benefit management industry by covering repair or replacement costs if buildings, equipment or other property are damaged or destroyed. It also pays for lost income or extra expenses if operations are impacted by a covered loss. Property insurance can help protect assets that are critical to daily operations such as office equipment, buildings, furnishings, medical devices and electronic systems from financial loss due to accidents, damage or theft. It also provides liability coverage if someone is injured on the business premises. Estimated annual pricing for property insurance for businesses in this industry is around $1.50 per $100 of insured assets or property value.
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Based on industry data and averages, the estimated annual pricing for property insurance for businesses in the Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds industry with NAICS code 524292 is around $1.50 per $100 of insured assets or property value. This price was calculated based on typical property insurance rates for office buildings and equipment for businesses in this industry sector.
Estimated Pricing: $1.50 per $100 of insured assets/property value
Directors And Officers Liability Insurance
Directors and officers (D&O) liability insurance, also known as D&O insurance, protects company directors, officers, and other executives from personal financial loss due to claims and lawsuits resulting from wrongful acts in their professional capacity.
D&O insurance provides important protections for companies in the pharmacy benefit management and other third party administration of insurance and pension funds industry (NAICS Code 524292). This type of insurance protects these companies and their executives from costly lawsuits and damages related to the administration of healthcare and financial benefits. It also covers legal defense costs. D&O insurance is especially crucial for this heavily regulated sector due to its handling of sensitive personal information.
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Based on industry research, the average annual pricing for Directors And Officers Liability Insurance for companies in the NAICS 524292 Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds industry ranges from $15,000 to $25,000. Pricing is usually determined based on factors like annual revenue, number of employees, risk exposure, claims history, and coverage limits required. For a typical mid-sized company in this industry with $50-100M in annual revenue and 500 employees, an estimated average annual premium would be around $20,000.
Estimated Pricing: $20,000
Workers Compensation Insurance
Workers compensation insurance provides essential coverage for businesses in the pharmacy benefit management and third party administration industry. It protects against legal liability and medical expenses if an employee is injured on the job. It also covers lost wages and rehabilitation services to help injured employees return to work quickly. Proper coverage complies with state laws and improves employee morale and retention while lowering costs over the long run.
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Based on national averages, the estimated average pricing for workers compensation insurance for businesses in the Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds industry (NAICS Code: 524292) is around $1.25 per $100 of payroll. This pricing was derived based on analyzing industry risk factors such as typical occupational injuries and claims, employee characteristics, safety protocols, and loss history data.
Estimated Pricing: $1.25 per $100 of payroll
Conclusion
In summary, pharmacy benefit managers and third party administrators must carefully evaluate their risk exposure and make sure they have appropriate insurance in place. The right mix of professional liability, general liability, cyber liability, employment practices liability, property, directors & officers, and workers compensation coverage can help ensure these companies remain financially stable even when mistakes or unforeseen events occur.