In today’s world of climbing insurance liability rates in the long-term care market, underwriters specializing in medical organizations are taking a “back-to-basics” approach. As claims frequency and severity continues to increase, underwriters focus on operational excellence. Some of the account characteristics insurers seek are the organization’s strong risk management programs, claims management approach and the clinical practices and protocols of the facility. Equally important is a good loss history and the facility’s locations.

Rates Climb, Market Share Diminishes in General and Professional Liability

Skilled nursing facilities, long-term care facilities and other medical providers who assist the elderly are experiencing stiff rate increases. The only exception to these rate and deductible increases appear to be long-term care providers with stellar experience and a positive loss history. When USI Insurance Services published its 2019 mid-year rate update, liability rates for general liability have risen up to 15% and professional liability have seen increases up to 10%. Most insurance experts expect these rate hikes to continue into 2020.

In the past few years, commercial insurers that previously held substantial healthcare market share exited the marketplace, largely due to poor underwriting profits. The carriers still writing have increased their underwriting discipline. This includes raising rates, imposing higher deductibles and insisting on higher retentions. These policies will improve insurers underwriting profitability and further scrutinize new and renewal business for profitability.

In an actuarial analysis completed last year by Aon, losses rose 6% annually by occupied bed, and overall claim frequency rose 3% annually. The forecast for 2019 is not much brighter, with Aon predicting a claim frequency of 1.11 per 100 beds occupied. Claim severity is inching up, as well, with severity increasing 3% annually.

Location, Location, Location in Long-Term Care

According to the Aon report, claim costs varied widely by state. Of the 13 states studied, West Virginia ranked highest in loss rates (limited to $1 million) with Kentucky and Florida not far behind. Aon defined loss rates as “the annual amount per occupied bed required to defend, settle, or litigate claims in any given year.”

Other areas where underwriters may be skittish when insuring facilities include those near Chicago, Illinois, California and Kentucky. If you own or invest in a facility in these locales, it is imperative that your insurance broker presents your facility to underwriters in its best light with a thorough underwriting submission. This can include explaining your risk management protocols, providing photographs of the facility and including the bios of your senior leadership team.

What Can Long-Term Care Providers Do to Improve Operations?

How can providers improve their operations to reduce claims severity and frequency? The following tips can help assisted-living and long-term care facility managers better manage their risk.

  • The majority of long-term care claim activity occurs during the loading and unloading of residents. While losses arising from vehicle use generally hit your own auto policy, they may also affect the professional or general liability policy. Improving the movement of residents as they enter and exit vans and other vehicles can help improve losses.
  • Arbitration agreements are essential to your success. Work with your legal counsel to develop these agreements if you do not already include them in your resident contracts. The Centers for Medicare & Medicaid Services (CMS) recently relaxed rules by revising the requirements for arbitration agreements in long-term care facilities. While the CMS rule allows patients to refuse to sign the agreement, many residents will sign if they understand the protections available under CMS. Of the claims studied by Aon, 63% of claims that closed between 2015 and 2017 had arbitration agreements in place versus 51 percent from 2008 to 2014. The use of arbitration agreements can help keep claims away from juries and in front of arbitrators, experienced in settling these sensitive matters.
  • Cyber risk is on the rise, with ransomware attacks in 2017 placing increasing pressure on care facilities. Today’s medical organizations are increasingly scrutinizing the insuring agreements of their cyber policies to ensure they have the coverage needed for the various cyber intrusions that plague the medical industry today.
  • Falls account for many serious injuries each year in assisted-living facilities. Falls cause disability, functional decline, a poorer quality of life and even death. According to BMC Family Practice in its 2018 peer-reviewed article on falls in long-term care, over half of their sample of 395 long-term care residents fell at least once. Caregiver training on existing fall-prevention protocols and ensuring all staff members appreciate the heightened risks in their residents can help prevent falls. A one-size-fits all protocol will not stand up in the claims process because the facility administration must tailor each fall-prevention plan to the resident.
  • Pressure ulcers account for 20% of claims in long-term and assisted-living facilities, according to some experts. Training caregivers to recognize early signs of pressure sores and instituting turning protocols can help reduce risks that can result from these painful wounds. Ensuring nurses assess and thoroughly document the patient’s risk at admission can help develop the best protocol for each patient.

What Does the Future Hold for Long-Term Care Providers?

2020 will see a bump in US citizens aged 65 and older, with about 17% of the population in this age bracket. According to the US census bureau, one in every five Americans will be of retirement age. With American families spread out across the nation and many Americans childless, the burden of care will increasingly rest on long-term care facilities.

Because Americans rely on these facilities to protect them and their loved ones, almost any claim arising from long-term care is emotional and difficult to defend. Due to the increasing number of claims and their growing payouts, today’s professional and general liability underwriters in the long-term care space increasingly cherry-pick the facilities they insure.

If you have questions about insurance for your long-term care or skilled nursing facility, reach out to us here. We would be happy to answer any questions and provide you with a comprehensive insurance solution.