Episode 11: Insurance for Digital Health Innovators: A Surprising Conversation with Beracah Stortvedt of Marsh & McClennan Agency
If your company deals in healthcare data, mobile apps, digital therapeutics, multi-jurisdictional telemedicine, or any other interesting digital health angle, you’re about to find out why insurance is an essential (and even interesting!) conversation for innovators.
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In this episode you’ll discover:
What the unique risks for digital health companies are
Why your tech company might need medical practice insurance, or your practice’s telemedicine services might require errors and omissions coverage—and other surprising areas of risk in the digital health space
Why your coverage should overlap and “talk to each other” in these complex scenarios so you don’t have gaps
How multi-state telemedicine companies should evaluate insurance based on their complex needs
How much you should expect to pay for this
Keep scrolling for a transcript of this episode.
Read the transcript:
Rebecca Gwilt (00:00):
So this has been super interesting. The most exciting conversation about insurance I think our listeners will ever have, in my opinion.
Beracah Stortvedt (00:09):
I know they're probably all on the edge of their seats right now thinking, wow, I never knew insurance could be so exciting.
Speaker 3 (00:15):
I know you're listening to Decoding Healthcare Innovation with Carrie Nixon and Rebecca Gwilt, A podcast for novel and destructive business leaders seeking to transform how we receive and experience healthcare.
Rebecca Gwilt (00:28):
Welcome back everyone to this episode of Decoding Healthcare Innovation. I'm so excited to have you all with us. I am also excited to have my colleague Beracah Stortvedt with me. Beracah is the co-founder of Marsh McLennan Digital Health and Healthcare Practice Advisory, and he is our go-to at Nixon Gwilt Law for our clients who are doing super fun things with healthcare data companies like mobile app developers and multi-jurisdictional telemedicine companies and digital therapeutics companies. If there is some interesting digital health angle, we always send them to Beracah. They're always happy because he knows more about this than any other broker that I've talked to. So I will stop singing his praises and welcome him to the podcast. Hey Beracah.
Beracah Stortvedt (01:22):
Hey, thanks for having me.
Rebecca Gwilt (01:24):
You are welcome, my man. So you may be asking yourself, Rebecca, what are we doing talking about insurance? This is supposed to be a podcast about super fun, innovative things, exciting developments in the world of healthcare innovation. And you know, are probably assuming that insurance is quite mundane. People have said it about legal services as well. I think Beracah would disagree with you. Like Beracah, the work that I do can be sort of tedious often less than exciting in terms of conversations for entrepreneurs, but I have found that this is a conversation, the insurance conversation this is a conversation I have with every single one of my clients, and frankly, I think there's nothing more exciting than having an insurance agent to call when things go wrong. What do you think, Beracah?
Beracah Stortvedt (02:22):
Oh yeah that is when it gets exciting. I will acknowledge that talking to an insurance broker can put a CEO to sleep faster than almost anything including melatonin. But we can, I think it's really important and it can be fun when we talk about it for the right lens.
Rebecca Gwilt (02:40):
Yeah, and I would say, I'm going to ask you a little bit more about this later in the conversation, but I would say what the CEOs are most interested in is sort of why do I need it? What do I need and how much it's going to cost. And what I have learned from my work with you is that those answers are different depending on who you talk to. And what is most helpful is someone who really understands your business and your industry, who can say, I've looked across the market, I work with a lot of people like you. Here's what I could recommend from that place of understanding. And anyway, so we will get to those key questions during this podcast. The first thing I'm going to ask you about today is when you're looking at digital health clients and I'm talking about the when I say digital health I am also including healthcare providers, but not sort of traditional brick and mortar healthcare providers. This is sort of the tech enabled world. When you were looking at companies like this, what kinds of risks are you talking to them about? And does that vary based on the specific kind of company?
Beracah Stortvedt (03:56):
Oh, absolutely. And it's funny, companies in the digital health world will come at it from one of a few lenses. They'll come at it from, we're a tech company who's doing some things in healthcare lens, or we're a healthcare provider that is focused on medical malpractice, or we're a life science company that's focused on product liability. And so my job is to broaden whatever lens they come in with. How do I help them broaden that to be able to see at the intersection of all three? And that creates some unique things. And we have to talk about some things that you don't typically talk about. So if you're a tech company, you're not used to having malpractice exposure and now you're like, oh, we have these nurses and you're doing remote patient monitoring, well, you probably better start thinking about medical malpractice. Or if you're a provider and you have your own tech platform, well you better start thinking about technology areas and omissions and the bodily injury exposure that comes there. And everyone in healthcare these days is probably already thinking and talking about cyber. So that's the other topic that gets a lot of people going, especially with the things that have been going on in the world over the past 18 months that that's key. And we think about other things that are less exciting, like property coverage, general liability and auto and umbrella and worker's comp. But really it's like the cyber, the ENO, the malpractice and product liability and the intersection of those is what really leads the conversation in digital health.
Rebecca Gwilt (05:32):
Tell me. So I think people, at least if they're coming to the conversation with a healthcare lens at all, I think in some cases we have to remind them, but most people are familiar with what medical malpractice is. I'm really interested in, maybe you can say a couple of words about the tech ENO and the product liability side and maybe give some examples of companies where that becomes part of the conversation when they maybe didn't assume it would.
Beracah Stortvedt (06:00):
Yep, yep. So I'll use the classic telehealth platform as an example. A company that they provide virtual care services, but they also have their own tech backbone that's enabling those services. So they have their own platform, maybe their own e r integration that goes with it. And so essentially part of what they're doing is providing that technology to their customers, not just the healthcare services. And so if that tech fails provider can not do anything wrong, the provider just never even got the patient right because something happened or whatever they heard from the patient they responded to and dealt with appropriately, but the tech just failed. And so you have a situation where bodily injury can happen to a patient based on a tech failure that wouldn't trigger a traditional malpractice policy. And so that tech happens. The other is like let's say you're a platform provider that's a B2B company.
(06:58):
You have what we call financial injury exposure, meaning that if you, let's say the platform's down, people can't use it. There become claims cost to a self-insured employer as a result of that, they're not suing you for bodily injury, the employer's going to sue you because they lost had some financial loss or cost that happened as a result of that. And that's what a tech, the tech ENO coverage is going to cover too, or general ENO for the professional services other than medical services that company is providing. So that's kind of the interesting thing. And then products like RPM is a great example of remote patient monitoring where companies have all three exposures, often of products, tech and professional services. So they have an actual physical device that could hurt someone that's a product liability claim. If that product, the hardware fails and it hurts someone, the software component is the tech, right? So if the tech fails or the data doesn't flow correctly, that could cause a tech related claim. And if the nurse on the other end who's doing the triage, which a lot of these companies do fails to catch something or doesn't respond or doesn't give appropriate treatment, then it's a malpractice claim. And so it's really important that those coverages are all there and that they overlap in terms of with the same carrier and talk to each other so that claims are covered.
Rebecca Gwilt (08:29):
Yeah, it sounds like a deep understanding of not only the business itself, but who its customers becomes really part of the insurance planning.
Beracah Stortvedt (08:37):
Absolutely. Absolutely. And that's why it's like, it's almost like you need someone who's going to be integrated with what the business is and what it does and really take the time because you can't put, protect yourself from a risk perspective appropriately without having someone who can advise you based on what you're actually doing as a company,
Rebecca Gwilt (08:57):
Right? I think that's very similar. We have very similar philosophy about that, the way to provide the most values to make sure you really understand the nature of the business, its goals, where they're going, how it's growing, et cetera. And we've talked about that before. You said a little bit about telemedicine and the unique risks of telemedicine companies. I wanted to dive a little, not too deep, cause we don't have all day, but I wanted to <laugh> like a midway deep into what I get a ton of questions about all the time, which is structuring insurance for multi-jurisdictional telemedicine companies. So these are companies that have complex corporate structures that are professional entities and non-professional entities and physicians who may be employed or contracted and then leased out between the professional entities. We will do a podcast at some point about that particular structure. But suffice it to say it is separate legal entities that all work together in a concerted way. But usually there is one group that is in charge of managing the entire enterprise. That one group isn't really a healthcare provider. Only the professional entities, entities are healthcare providers. And so we get the questions about who gets the insurance, what kind of insurance, how do we make sure that everybody is covered. So like I said, not all the way down, but mid dive into the cave of ensuring multi-jurisdictional telemedicine companies.
Beracah Stortvedt (10:40):
All right, I'm going to try and make this,
(10:44):
as understandable as possible and at mid-level and exciting at the same time. So basically what we call the MSOPC structure, which we get really excited about and gets me up every morning certainly is corporate structures of professional corporations. Same. But the important thing to look at from an insurance perspective is when there's management control, which usually happens via what we call a master services agreement between the corporate entity and the professional entities for regulatory reasons, we will not dive into at this point, the important thing is how do we consolidate it? And we talked about RPM companies being an example of you could have a malpractice claim that's related to a tech claim that's related to a product claim. And so you do not, some brokers and some companies think we need completely separate insurance programs for these professional entities compared to the corporate entities.
(11:45):
And I say generally absolutely not because what can happen is there's interrelation and you can end up with gaps in coverage if things are not coordinated. And so what we do is we name as named insureds, which is gives the full rights of a policy holder basically to all of the professional entities. And we put the policies in the name of the corporate entity because that corporate entity controls via management control all the non-healthcare specific related services that go on within that ecosystem that's working together. And so that's the important thing is saying get all the coverage together wherever possible and make sure that every entity is actually physically named on a policy because the automatic coverage for subsidiaries is not going to work.
Rebecca Gwilt (12:42):
So that was a perfect mid-level dive into this. The big picture takeaway is you can get one policy to cover the entire enterprise but your broker needs to understand the business. So how many professional entities, what's the patient volume? Which states are you in? I learned more than I ever want to know about how Kansas is a pain in the butt
Beracah Stortvedt (13:08):
That is <laugh>. Yeah,
Rebecca Gwilt (13:09):
It's insurance. So anyway, another reason why having somebody who really knows this business is super important. Okay, so the last thing I want to touch on which is usually the only thing that my clients <laugh> really come to me caring about is how much is going to, this is going to cost me and how does all of that work? Is Marsh & McClennan going to look at the exact same things? Does it matter where I go? How do I make sure the cost isn't overwhelming and at the same time, how do I make sure I have enough because I'm scaling very quickly I want to make sure that my insurance matches my risk. So talk to me a little bit, how about how you counsel both on that?
Beracah Stortvedt (13:53):
Yeah, and I think it really depends on stage and that's where understanding the business and the stage of the company is really important because I have strategic conversations with my clients all the time of like, Hey listen, if you are risk averse and you want to cover everything from day one and pay a little bit more money to do it, let's do the full structure from day one. If you're willing to take on some risk and do it intelligently and have a bare bones kind of program that's going to cover the major risk. Maybe you're only worried about malpractice and cyber, but you do have the tech component, but it's just minimal and you don't have enough dollars in it yet that it makes sense. So I work with them and say, what do we got for budget? What are you willing to take on?
(14:35):
How risk averse are you? Here are the risks and let's build something that makes sense. And so I would say typically for a telehealth multi-jurisdictional startup, if you're doing the coordinated coverage, it's probably 10 to $15,000 for the first year if you're going to do coordinated coverage. But you can find stuff as little as $5,000 if you want to kind of have a more bare bones program that's not going to take care of everything necessarily. But you're bootstrapping. And so you've got a lot of restrictions on what you can do. So that's kind of where I just try and help people make those decisions for themselves instead of trying to, I think some brokers would just say, here take this and a one size fits all approach that I don't think is necessarily helpful.
Rebecca Gwilt (15:26):
I, I'm really interested in how the underwriters are even approaching these new technologies. I mean guessing they understand the risks related to companies that look like Teladoc, but we've got all of these innovations coming into the market, digital therapeutics and direct to consumer diagnostic tools and software as a medical device. How is that even being handled right now?
Beracah Stortvedt (15:55):
They just basically throw a dart up against the wall and come back with the price. No, I think that's where education, and you talked about what makes working with Marsh & McClennan or someone who does this on a daily basis different, and I think it is telling the story and helping the underwriters even understand the risk. I feel like half of my job is talking with the underwriters about what people are and are not doing and what the implications of that are or aren't, right? From a risk perspective to help them size the premium based on the actual risk. And I'm a former underwriter myself, so I geek out on that.
Rebecca Gwilt (16:33):
I knew you were going to drop that in. I knew.
Beracah Stortvedt (16:34):
I know. So that's why I love that part of it. I love that part of it. So it's fun and I get to be able to have those conversations with the underwriters to help them understand and then try and find the right price for the right exposures.
Rebecca Gwilt (16:51):
So are you then privy to litigation and settlements information about litigations and settle litigation and settlements across the country on this? Because frankly there's not a ton out there for the general public to understand. You want to drop a little bit of knowledge about, I'm assuming it's mostly settlements cause it's not seeing a lot of big judgment. Yeah. Judgment. But tell me a little bit about are you seeing it increase? What kinds of unique things are you seeing? Yeah, go ahead.
Beracah Stortvedt (17:30):
Yeah, so one of our carrier partners throws through down an interesting fact, like 60% of the claims that they've gotten since they started the product four years ago have not been traditional malpractice related claims where the tech or the product or some this a cyber related event came into play with it. There's actually been more claims activity in terms of intellectual property issues around trademark infringement particularly. So just be careful out there. Make sure you talk to a good lawyer before you pick a trademark. And cyber, honestly, that's where most of the claims activity is happening. There have been some malpractice suits and then a number of medical board related actions against providers in multiple states based on patient complaints or on not following the appropriate requirements for initiating a telehealth relationship with a patient. Yeah, that's where all the action is. And those are not hide, those claims are not hide dollar claims, but they're just a pain to deal with and they're, you're getting letter that the physicians are getting uptight because they're getting letters from five different states medical boards.
Rebecca Gwilt (18:49):
Yeah. I, especially with these telemedicine companies I talk to when, where non-physician founders are involved and they're asking me about risk. I often say, well, some of this risk is malpractice and licensure risk that it's going to be born by your physicians. And there's tremendous competition for providers who understand or are good at providing care in the virtual space and companies that are taking good care of their physicians and making sure that they've got what they need to avoid those claims certainly, but the ability to protect them when those claims come about that's, that's at least going to be a differentiator. Okay. So this has been super interesting. The most exciting conversation about insurance I think our listeners will ever have in my opinion.
Beracah Stortvedt (19:42):
I know they're probably all on the edge of their seats right now thinking, wow, I never knew insurance could be so exciting as well.
Rebecca Gwilt (19:48):
I'm also realizing that I have a hole in my ceiling and I really missed an opportunity to make a gaps in coverage kind of reference here. Really, I'm mourning it. All right. Thank you everyone for joining us. Beracah, thank you so much for being here. I will make sure that your contact information is in the show notes. Make sure that you follow us on wherever you're listening to us streaming and that you check in with us on social and we look forward to talking to you soon. Take care.
Beracah Stortvedt (20:24):
Thanks everyone.
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“There’s tremendous competition for virtual care providers and it’s a differentiator for companies adequately protecting those physicians”