Five things you need to know before entering into capitation risk

Mar 30, 2016

A little history…

McPhee & Associates has been insuring managed care groups for over 33 years.  We wrote the original language for reinsurance and stop-loss in the early 80s.  Below are some great questions to answer if you’re considering entering into capitation risk contracts.

5 Important Questions

  1. Will this be a start-up or will you be assigned a certain number of members?  If a start-up, will the number of members have to reach a specific number before you are capitated?  If not, you may have risk that would not be covered by the capitation fees.  If you are being assigned a specific number of members – how many members will it be?  Are there enough members to make it profitable?
  2. What type of membership is being capitated? Is it Exchange, Point of Service, Special Needs Plan?  Each membership may have different charges.
  3. What is included in the risk (blood products, transplants etc.)? With this, you can determine if your capitated amount is enough to cover the risk.
  4. Will historical claims data be provided?  Without claims data, you can’t predict if the capitation fee is sufficient.
  5. Who will pay the claims?  If you pay the claims, you can manage your members and oversee correct payments.  If the Health plan pays the claims, ensure that you receive monthly detailed reports that can be audited.

Is it viable?

After you answer the questions above you can determine if capitation is the right next move.  If it is, the next thing to do is get a stop-loss policy to protect you from catastrophic claims.

Provider Stop-Loss Questionnaire

If there are other questions you have about capitation or stop-loss/provider excess loss insurance, we can help.  Feel free to email me at or call the office at (818) 541-7900.