Insurance Solutions for Assisted Living and Skilled Nursing Facilities

May 12, 2022

Let’s be clear on a couple of points about the assisted living/skilled nursing industry.

  1. Those who work in long-term care are predominantly empathetic, dedicated, hard-working people — most of whom chose a career in serving a vulnerable population over less demanding, more lucrative occupations. Yes, there is the occasional bad actor, but for every horror story, there are hundreds of thousands of people in assisted living and skilled nursing facilities who receive quality care in a low-cost setting.

  2. As bad as market conditions are for Property and Casualty Insurance covering assisted living and skilled nursing facilities, those conditions do not inherently pose an existential threat. There are solutions. The key is knowing where to find and how to implement them.

But make no mistake: Solutions are necessary.

The assisted living and skilled nursing industry’s challenges start with an acute workforce shortage, which was greatly exacerbated – though not caused solely – by COVID-19. NPR detailed the crisis in its February 2022 report “The pandemic pummeled long-term care – it may not recover quickly, experts warn.” COVID, as NPR explained, has taken a severe toll on staff, mentally as well as physically:

“Frontline workers in long-term care are feeling they are letting their patients down, says Susan Reinhard, executive director of AARP’s Public Policy Institute.

“’If you have too many people to care for, you’re going to feel moral distress, like, “I’m not doing my best. I can’t do the best job I’ve been trained to do,”’ says Reinhard. ‘That is really devastating personally, just day after day.’”

Staff shortages, improving but still lagging occupancy rates and other factors — such as structural decay in older facilities — continue to make assisted living and skilled nursing organizations less marketable to insurance carriers and drive up costs for coverages that are available.

Yet all hope is not lost. If you understand the market conditions and what drives them, if you work with an insurance specialist who knows the industry and understands your business, and if you’re open to various means of risk control, you’ll find that there are strategies and tactics for managing the cost of risk.

P&C Market Outlook Entering 2022

In December 2021, Alera Group published the Property and Casualty 2022 Market Outlook, a comprehensive examination of the factors behind market conditions and forecast of the P&C landscape going forward, with recommendations on securing coverage and managing costs.

The Market Outlook includes analysis of individual industries and lines of coverage. Our outlook on insurance for assisted living and skilled nursing facilities was, to put it mildly, not good: “Industry veterans on both the healthcare facility side and insurance side say the industry is in a crisis like they’ve never seen before.”

We saw these as the most significant factors influencing the market for coverage:

  • Assisted living and skilled nursing facilities are facing enormous financial pressures. A 2021 study conducted by American Health Care Association (AHCA) found that 65% of providers are operating at a loss or negative margin, while 34% believe they can sustain operations for more than a year. The industry’s fragility combined with significant insurance losses is leading many insurers to pull back from writing this business.

  • Options are limited. Fewer insurers are willing to write assisted living and skilled nursing facilities. Those companies that remain active in the industry are raising rates and restricting the coverage they offer. For example, class action exclusions, punitive damage exclusions and sub-limits for abuse (and other sublimits) are increasingly being introduced by insurers. Increasingly, facilities are receiving non-renewal notices from their insurers.

  • Labor shortages continue. Eighteen months after the COVID-19 crisis began, skilled nursing facilities’ staffs are still shrinking. According to the AHCA study, 86% of nursing homes and 77% of assisted living providers say the problem is getting worse. Staff shortages are forcing facilities to limit admissions, which further hurts the bottom line and adds to the growing demand for beds. More important, low staffing levels lead to neglect, worse outcomes for residents and increased claims for insurers.

The Market Outlook does point out some sources of optimism, specifically:

  • The possibility of some immunity against liability under the federal Public Readiness and Emergency Preparedness (PREP) Act;

  • Leveling-off of Property Insurance rate increases, especially for best-in class clients;

  • The likelihood of an increase in insurance carriers serving the senior living market;

  • Stability in the marketplace for Workers’ Compensation Insurance, with availability of coverage actually favoring buyers.

But aside from Workers’ Comp, market conditions did appear unfavorable — and still do — for every line of coverage, especially Cyber Liability, Directors and Officers (D&O), Professional Liability and Umbrella/Excess Liability Insurance.

Strategies and Tactics

With the effects of the pandemic — particularly illness and death of staff as well as patients, and the resulting employment and occupancy shortages — threatening to put many facilities out of business, government assistance provided lifelines in the form of relief money and emergency declarations. The former provided much-needed infusions of cash, while the latter loosened restrictions medical providers crossing state lines to assist with care and protected healthcare workers from liability for administering certain COVID tests and treatments.

As of late April 2022, most states had let their emergency declarations expire, however, heightening the important of cost-saving measures on insurance coverage. Such measures for reducing General Liability and Professional Liability Insurance premiums may include:

  • Lower limits or sublimits. If your organization has an excellent loss control program, strong claim history, and/or operates in certain venues, accepting lower limits on coverage could be a viable strategy. Rather than paying for a liability policy with limits of $1 million per claim and $3 million aggregate, for example, you might consider reduced limits of $250,000 per claim and $750,000 aggregate to save on premium.

  • Bigger deductibles/self-insured retentions. Taking on more risk through a higher retention shifts the first or “burning” layer of risk from insurer to insured and provides a corresponding premium savings for placing the insurer at a higher position on any losses. This is sometimes referred to as the insured having “more skin in the game.”

  • Excess Insurance and/or Umbrella coverage. Given the rise in frequency and severity of liability claims associated with assisted living and skilled nursing facilities, protection beyond the limits of General Liability and Professional Liability policies is essential. Strategically selecting the limits for the respective policies may enable you to save on your net premium.

Alternative Risk Solutions

Increasingly, long-term care organizations are opting for alternative risk solutions such as captive insurance programs and risk-purchasing groups. As Senior Housing News noted in a 2021 report:

“To mitigate the total cost of risk, providers are assuming larger deductibles or self-insured retentions, and there is an increase in providers turning to captive programs — insurance companies that are wholly owned and controlled by its clients — for primary layers on these risks.”

Captives and other alternative risk solutions aren’t for everyone. For starters, forming a captive requires the upfront capital to self-insure and to transfer risk through reinsurance. But given the P&C market conditions for assisted living and skilled nursing facilities, moving to a captive is an option you should at least discuss with your agent or broker.

A specialist in captive programs can conduct a feasibility study to determine whether such a program or other alternative risk solution is a good option for your business, providing you with an actuarial funding analysis and projection of future performance.

Cyber Insurance

In response to elevated concerns about malicious cyber activity related to Russia’s invasion of Ukraine, the U.S. Cybersecurity & Infrastructure Security Agency earlier this year issued a “Shields Up” alert. Given the amount of personal data healthcare organizations process and store, they can be especially appealing targets for cybercriminals, and as the Ponemon Institute stated last year in its Cost of a Data Breach Report, “Healthcare breach costs surged” amid the COVID-19 pandemic.

“Industries that faced huge operational changes during the pandemic (healthcare, retail, hospitality, and consumer manufacturing/distribution) also experienced a substantial increase in data breach costs year over year,” the report reads. “Healthcare breaches cost the most by far, at $9.23 million per incident — a $2 million increase over the previous year.”  

And, given the amount of personal data healthcare organizations process and store, long-term care facilities can be especially appealing targets for cybercriminals.

In its May 2022 article “Exploring Challenges, Benefits of Cyber Insurance in Healthcare,” the online publication Health IT Security addresses the soaring costs of coverage and the evolving approach to ransomware attacks before concluding, “But even as costs go up, having some level of cyber coverage is likely to be financially beneficial. A data breach and its associated fees are likely to be significantly more costly than an insurance policy.”

Next Steps

Protecting your business requires the same level of caring and expertise that assisted living and skilled nursing facilities provide their residents. Alera Group includes specialists in long-term care facilities, offering expertise on healthcare professional liability, Cyber Liability Insurance, alternative risk solutions such as captives, and more. With more than 130 offices around the country, we’re able to combine local service with national reach that enables our brokers to collaborate with other specialists on innovative coverage programs customized to individual facilities’ location, size and population.

To contact an Alera Group agent or broker about insurance for your assisted living or skilled nursing facility, click on the link below.


About the Author

Rob Schumann

Sales Director — Senior Care East

Propel Insurance, An Alera Group Company

With 20 years of experience and a focus on senior care, Rob Schumann always finds new ways to help his clients. In high school, Rob worked in a senior care facility and developed a passion for the residents as well as the industry. He enjoys working closely with his clients, building relationships, and maintaining long-term trust and reliability. Rob’s goal is to solve problems and accelerate his clients’ success.

Contact information:


The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such. Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice. This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.