Definition extracted with permission from American Academy of Family Physicians: Family Physicians and Managed Care
A type of protection purchased by some managed care companies from insurance companies specializing in underwriting specific tasks for a stipulated premium. this becomes a cost of doing business for managed care companies. Typical reinsurance risk coverage are: (1) individual stop-loss, (2) aggregate stop-loss, (3) out-of-area, and (4) insolvency protection. As managed care companies grow in membership, they usually reduce their reinsurance coverage (and related direct costs), being in a financial position to assume such risks themselves.