Executives are dealing with so many variables in today’s leadership landscape. Noise from bank failures and inflation make it easy to neglect certain risks in your organization. Situations needing immediate attention may result in executives delaying the process of proactively identifying and managing other risks, viewing them as only potential future problems. It’s easy for executives to kick the can down the road in order to focus on the problems that are here and now. While understandable, this can lead to significant losses in the near future that should be addressed today.
Even if things appear fine, it is critical to know where these landmines are buried. There are several risks embedded in every organization that if detonated, could result in substantial loss including financial loss, productivity losses and reputational damage. Here are 5 overlooked risks that executives need to address now in order to alleviate near certain future losses.
• The Internet of Things (IoT)
Advanced sensors, smart accessories or other connected devices commonly come to mind when the average person thinks about Internet of Things (IoT) devices. However, some IoT systems are often unknown to an executive.
For example, Target faced a cyber security breach through its HVAC system. Target said the breach exposed approximately 40 million debit and credit cards. Organizations must identify any system or network that can be hacked, even seemingly innocuous. (Source: Planet Compliance)
• Chronic Conditions
Diabetes, hypertension, hyperlipidemia and other chronic diseases are ticking time bombs embedded in your group health plan. Each chronic disease could lead to hundreds of thousands of dollars in claims expenses. It is critical, especially for large employers to not only have adequate reporting to understand the risk, but also use the data to implement targeted disease management programs that will reduce the amount spent on chronic disease and prevent the next one.
Also, many high-cost specialty drugs are used to treat the above chronic conditions. Specialty pharmacy is one of the primary reasons many employers have seen pharmacy cost increases outpacing medical spend.
• Chronic Condition Amplifiers
What’s worse than health plans being saddled with chronic diseases? Those with members that have secondary conditions that amplify the cost and the complication of treating the initial chronic disease. Depression (and other mental health issues), long-haul COVID, musculoskeletal and other conditions piggyback on a member’s chronic condition resulting in a 200%-500% increase in cost compared to the chronic condition alone.
• Aligning the Plan Document and Reinsurance Contract
For partially self-funded health plans, the reinsurance or stop-loss contract must be aligned with the plan document. For instance, After 12 weeks of leave through FMLA, coverage can be termed and COBRA offered, but the individual is still an employee. If the stop-loss contract language isn’t aligned there could be a gap in coverage during the leave period putting the employer on the hook for any and all claims incurred during the leave period.
Another area to review is how approved drugs are prescribed. When Cancer Drug X is being used to treat Cancer Type Y, the claims administer may approve the doctor recommended treatment only to have the reinsurer deny reimbursement because the FDA has approved the cancer drug to treat X and not Y. Having the reinsurance contract align with the plan document will alleviate land mines such as these.
• Drop the Hammer
Contained in many Directors & Officers (D&O) policies is what’s known as the Hammer Clause. This clause allows insurance companies to compel (REQUIRE) an insured to settle a claim or any matter outside of court, even if this is not in the best interest of the insured. The Hammer Clause is designed to cap the insurance company’s liability. Review your policy today and see if this clause has been inserted. It is designed to protect the insurer, and may be to the detriment of your organization.
These are just a few of the many risks that executives may overlook. The exposure to a business depends on size, industry and geographic scope. It is important to solve the immediate problems in your business. However, identifying these shadow risks will allow you to prevent the next problem which will surface months or years down the road. Working with knowledgeable advisors is the best way to learn about the risks you’re ignoring, and to understand the probability and magnitude these risks pose to your business. In time, addressing and resolving these risks today will result in a generous ROI in the near future.