Property and Casualty
Assisted Living and Skilled Nursing Sector Vulnerable to Cyber Threats and Staffing Mandates
July 23, 2024
One month into the third quarter of 2024, assisted living and skilled nursing facilities face a good-news/bad-news scenario in the market for property and casualty insurance.
After a challenging 2023, Property Insurance rates are more stable. However, environmental exposures, new staffing mandates and cyber threats persist. And with over 16,900 skilled nursing facilities and 30,600 assisted living communities in the U.S. accommodating millions of residents, the sector faces unique challenges.
Easing rate increases for Property Insurance
One month into the second half of 2024, Property Insurance offers more stability and competition with moderate rate increases and better terms and conditions compared to last year. However, coastal areas remain problematic, and potential hurricane losses could alter these trends.
Alera Group’s 2024 Property and Casualty Market Outlook notes that underwriters view senior-care buildings as high-risk, especially those constructed with wood frames, which are prone to fire and catastrophic damage.
Hidden environmental hazards in older buildings
Wood-frame and A-frame constructions, prevalent in assisted living and skilled nursing homes, often conceal environmental hazards. During repairs after a storm or pipe rupture, previously undetected hazards such as mold or asbestos can surface, which are not covered by Property Insurance.
Environmental Liability Insurance typically covers these damages, and a comprehensive insurance program includes remediation support and risk management services. Environmental Liability Insurance is essential — especially for older facilities — to minimize long-term liability and ensure patient safety.
Staffing mandates and labor shortages
Staffing shortages and turnover concern both healthcare providers and insurers. Alera Group’s Market Outlook highlights this issue, citing a 2023 poll by the nonprofit aging-services advocacy group Leading Age. The poll indicated that “70% of assisted living facilities are experiencing significant or severe worker shortages. The pressure comes at a time when there is a growing demand for nursing home care and the government is requiring facilities to increase staffing levels.”
“Be prepared for underwriters to take a hard look at staffing levels,” the Market Outlook advises. “Experience shows that high staff turnover, shortages and reliance on temporary agencies hamper a facility’s ability to deliver services and often lead to increased losses.”
Recent federal mandates further complicate the staffing crisis. In April 2024, [SG1] [VS2] the Centers for Medicare & Medicaid Services (CMS) finalized minimum staffing requirements for nursing homes receiving federal funding. This mandate aims to “improve safety, provide support for care workers and family caregivers, and to expand access to affordable, high-quality care.”
However, the American Health Care Association reports that the American Hospital Association (AHA) raised concerns that the mandate exacerbates the labor shortage issue and adversely affects care delivery.
The “process of safely staffing any health care facility is about much more than achieving an arbitrary number set by regulation,” AHA states in letters to Congress. “It requires clinical judgment and flexibility to account for patient needs, facility characteristics and the expertise and experience of the care team.”
Furthermore, the AHA argues that the mandate is not a one-size-fits-all solution and “could jeopardize access to all types of care across the continuum, especially in rural and underserved communities that may not have the workforce levels to support these requirements." This may lead to reduced capacity and potential facility closures.
Facilities prime targets for cyber threats
Treasure troves of medical and financial records, assisted living and skilled nursing facilities face significant cyber liability exposure. Despite security protocols such as multi-factor authentication, facilities remain vulnerable to hacker ingenuity, posing economic risks and jeopardizing patient safety.
Escalating cyber threats prompted Sen. Mark Warner (D-VA), cofounder of the Senate Cybersecurity Caucus, to call for mandatory minimum cybersecurity standards in the healthcare sector.
The impact of cyberattacks is severe. The February 2024 Change Healthcare cyberattack disrupted nursing homes and skilled nursing facilities, causing payment delays and suspensions. Peterson Health Care, one of the largest nursing home facilities in the U.S., filed for bankruptcy, citing the February attack and an October 2023 cyberattack as significant contributing factors.
The constant evolution of cyber threats underscores the need for comprehensive Cyber Liability Insurance with support services such as interventionists and negotiators to manage attacks and ransom demands. Additionally, risk management services such as employee education and training programs focused on recognizing potential phishing attacks are crucial to managing cyber risks.
Preparing for underwriters and finding the right broker
Thoroughness and timeliness are crucial when preparing for underwriters. Connect with underwriters in person or online to highlight your risk management tools, system investments and infrastructure improvements to enhance your chances of securing the most favorable insurance program.
For facilities with challenging loss histories or location in coastal areas, work closely with your broker to develop creative plan designs and explore new markets.
Facilities in hurricane-prone Florida are closing due to Property Insurance rates, underscoring the importance of partnering with a savvy broker. A knowledgeable broker can leverage market intelligence to set realistic expectations and craft innovative solutions for challenged accounts.
When searching for an insurance broker, prioritize specialization in assisted living and skilled nursing facilities. Evaluate the broker’s volume with leading healthcare insurers and their capabilities in market analytics, risk management tools and claims advocacy. Inquire about the broker’s retention rate of healthcare clients and request client references.
An experienced broker will guide you through the underwriting process, leveraging buying power and relationships with primary healthcare insurers to secure the most favorable insurance program for assisted living and skilled nursing facilities.
CONTACT AN ASSISTED LIVING AND SKILLED NURSING SPECIALIST
About the author
Rob Schumann, ASLI
Sales Director, Senior Care East
Alera Group
With more than 20 years of experience in senior care, Rob Schumann excels at identifying innovative solutions for his clients. His passion for the industry began in high school, when he worked at a senior care facility. Rob thrives on building trust-based relationships with clients, aiming to solve problems and accelerate their success. Specializing in Property, Liability and Workers’ Compensation Insurance solutions for senior living and healthcare facilities, Rob is dedicated to delivering comprehensive coverage at competitive rates.
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