Report Cites Liability Rates for Long Term Care Rising for Three Consecutive Years
The American Health Care Association (AHCA) and Aon Global Risk Consulting released findings from their analysis showing that the cost of liability continues to increase for the long-term care profession. The overall national long-term care loss rate is expected to grow by 5% annually, with claim frequency driving the increase at an expected 3% growth rate, according to the 13th published edition of the Aon/AHCA 2015 Long Term Care General Liability and Professional Liability Actuarial Analysis.
The analysis provides estimates of loss rates, or the cost of liability to skilled nursing care centers on a per-bed basis. The projected national 2016 loss rate, which is a combination of claim severity and frequency, is expected to increase from $2,030 to $2,150 per occupied bed. A nursing care center, for example, with 100 occupied beds can expect approximately $215,000 in liability expenses in 2016.
Eighteen states were profiled individually in this annual report in addition to the national projections. This year’s data show that Kentucky is expected to remain the highest-cost state with a projected loss rate of $9,820 per occupied bed, while Texas, which has enacted substantive tort reforms, contrasts sharply with an anticipated $410 loss rate per occupied bed. This is consistent with the report’s 2014 findings.
Consolidation in the healthcare industry, uncertainty surrounding healthcare reform and solicitation campaigns from plaintiff’s attorneys all factor into the increase, cites the authors of the report.
The Role of Arbitration
New findings from the analysis also looked at the use of arbitration as an alternative to litigation, a practice that continues to pose challenges for the long-term care profession. Data specifically shows that claims resolved under arbitration agreements have a 7% lower cost and are finalized three months earlier than claims resolved without arbitration.
“The report validates what we have been saying about arbitration,” said Mark Parkinson, president and CEO of AHCA. “Arbitration is an important way to help protect the legal rights of patients and their families while providing a faster resolution of disputes. It also reduces costs for patients and their families, the nursing center, and the health care system.”
There are opponents, however, within the industry to arbitration according to the report. Opponents feel that these agreements restrict access to courts, give providers unfair leverage and are not clearly presented or properly executed when residents are accepted. In fact, the report cites that members of Congress and a number of states’ attorneys general have recently asked the Centers for Medicare & Medicaid Services (CMS) to ban mandatory pre-dispute arbitration agreements from nursing home admission contracts.
Rising litigation costs continue to pose a challenge for long-term care providers. The key is for providers to understand and leverage the findings from reports like this so that they are better able to navigate this complex landscape and properly fund for liability expenses.
At Caitlin Morgan, we specialize in providing long-term care facilities, including nursing homes, with liability insurance solutions. We manage a member-owned risk retention group, Midwest Insurance Group, Inc., to provide the healthcare industry in Indiana with an alternative to rising liability costs. Both General Liability and Professional Liability insurance are available for nursing homes in Indiana through Midwest Insurance Group. Primary coverage is available with $1 million and 3 million limits. Excess limits are available up to $10 million.
We also offer specialized programs that include a broad spectrum of coverages to nursing homes, and assisted living facilities throughout the country, including General Liability, Professional Liability, D&O, EPLI, Cyber, Automobile, Property, and other key products. We can help you navigate the liability costs this industry is facing with both sound insurance programs and risk management strategies. Give us a call at 877.226.1027.