A health care entity with a retrospectively rated insurance policy whose ultimate premium is based primarily on the health care entity's loss experience shall account for the minimum premium as an expense over the period of coverage under the policy. Insurance recoveries from a retrospectively rated insurance policy whose ultimate premium is based primarily on the health care entity's loss experience shall not be recognized until the estimated losses exceed the stipulated maximum premium.
A health care entity insured under a retrospectively rated policy whose ultimate premium is based primarily on the experience of a group of health care entities shall accrue additional premiums or refunds on the basis of the group's experience to date, which includes a provision for the ultimate cost of asserted and unasserted claims before the financial statement date, whether reported or unreported.
An accrual for malpractice losses shall be based on estimated ultimate losses and costs associated with settling claims. See paragraphs
954-450-25-2 through 2A for factors to consider when determining the amount of the accrual.
The Claims Made Contract Subsections of Subtopic
720-20 apply if a health care entity purchases a claims-made insurance policy.
As discussed in paragraph 720-20-25-14, insured entities (except as discussed in Section 944-20-15), including those that use a claims-made approach for insuring certain risks, recognize a liability for the probable losses from incurred but not reported claims and incidents if the loss is both probable and reasonably estimable. Consequently, a health care entity that is insured under a claims-made insurance policy recognizes the estimated cost of claims and incidents not reported to the insurance carrier, in accordance with Subtopic 954-450. An entity that participates in a common trust fund and forfeits its rights to any excess funding shall expense its contributions and account for its participation in the trust fund based on the type of coverage obtained (for example, occurrence basis, claims-made, or retrospectively rated).