The vast majority of people who own, operate and staff America’s senior living and long-term care facilities have one thing in common: They truly do care about their fellow human beings, particularly the aging and the elderly.
Yet after most senior living facilities responded with overwhelmingly admirable and effective action to a once-in-a-century global health crisis that hit their residents and employees especially hard, the industry finds itself facing a very different crisis – one of financial viability.
Property and Casualty Insurance availability and costs pose existential threats to many senior facilities, with the proliferation of liability lawsuits and the social inflation of verdicts among the factors most responsible for the severely hardened market. Typically operating with narrow margins in an environment characterized by human frailty, many facilities find themselves facing an insurance catch-22: They can afford neither to pay for it nor be without it.
Combine this with a growing senior population and a shortage of elder-care staffing – along with commensurate rising wages – and you have a senior living marketplace that is unsustainable.
What is the solution? There isn’t one. Instead, there are many.
Different Facilities, Different Needs
The National Institute on Aging (NIA), which operates within the Department of Health & Human Services (DHS), classifies long-term care facilities in four categories:
- Board and care homes – Also called residential care facilities or group homes, these typically house 20 or fewer residents in private or shared rooms and do not provide medical care onsite.
- Nursing homes – Also known as skilled nursing facilities, these have a heavy focus on medical care.
- Assisted living – This is for people who require help with daily care but not to the extent that a nursing home provides. Residents typically have their own apartments or rooms and have access to various levels of care, with rates varying according to level.
- Continuing care retirement communities (CCRCs) – Also known as life care communities, these offer different levels of service within one location, typically ranging from independent housing to assisted living to skilled nursing.
In addition, American home and community-based services (HCBS) provide care to more than 4.2 million older adults and the disabled in their homes or communities, rather than institutionalized settings. The Biden administration proposes $400 billion in new funding to support such services as part of its American Jobs Plan, but the proposal faces stiff opposition, and the bill’s passage is far from certain.
Given such a variety of services, facilities and needs, it’s easy to see why there’s no one-size-fits-all insurance solution for senior living facilities and organizations.
How We Got Here
In January 2020, before most of the public had heard of COVID-19, Senior Housing News reported, “Senior Living Faces Aggressive Litigation, Rising Insurance Costs in 2020.” The report noted that one insurer, CNA Healthcare, was seeing “significant impact in claims payouts between $250,000 and $1 million,” and had “received liability claims of $3 million and $4 million from independent living communities” in 2019 alone. Another insurer, Sapphire Blue, told Senior Living News that it had recent claims of $3.5 million and $6 million.
Those practically amounted to pocket change compared to the 2019 verdict that awarded $42.4 million in punitive and compensatory damages to the family of a 77-year-old woman who died in the care of a facility in Orangevale, CA. The jury in that case found that Eskaton FountainWood Lodge had administered the woman the prescription anti-anxiety medication Ativan without her consent and thus caused her to choke to death on a chicken nugget.
This all occurred after one major brokerage and advising company to predict rate increases of 5% to 30% in 2019 — and that, of course, was before COVID-19 even existed.
Developments such as these are why more than 10 carriers have left the industry in recent years, resulting not only in higher rates but also in diminished availability of insurance coverage and heightened scrutiny and selectivity by insurance underwriters. And with the ramifications of COVID-19 still in their early stages, the situation isn’t about to improve anytime soon.
What Organizations Can Do
Writing for the online publication McKnight’s Senior Living, the chief clinical officer for the national management company Eclipse Senior Living recently highlighted five areas in which the senior care industry made advances during the pandemic that should improve risk management going forward:
- Communication — between the facility team and families, and between families and residents;
- Socialization and engagement — including one-on-one and small-group programming that recognizes the mind-body connection;
- Infection prevention and control — involving subject matter experts, equipment and supplies;
- Health surveillance and technology — continuation of solutions put in place to test and track visitors and associates, as well as residents;
- Teamwork — primarily in the areas of training, recruiting and retaining qualified members of the care team.
Teamwork also is essential in designing an insurance program that is both affordable and effective.
For senior living facilities and organizations, this means working with a knowledgeable and experienced agent or broker who is motivated by your best interests rather than the promise of a big commission. It means communicating with full transparency to ensure risk managers have a full understanding of your exposures, claim history and safety protocols. And it means cooperation with an underwriter who has an established relationship with your agent or broker and appreciates a fully documented application presented in timely fashion.
Depending on the size of your organization, claim history and other factors, the solution you and your agent or broker determine is best for you might be found solely with a standard carrier, but is likely to involve one or more of the following:
- Excess insurance, to provide coverage beyond the limits of those in a standard, underlying policy;
- Self-insured retention — a dollar amount, specified in a liability policy, that must be paid by the insured before the policy will respond to a claim;
- A risk retention group, formed as a state-chartered company to insure the business or group of businesses against liability risks;
- A captive program, which may cover property in addition to liability, and which may be domiciled anywhere in the world, rather than a single state;
- Some form of hybrid program.
In addition to working with you on your Property & Casualty Insurance program, Alera Group has expertise in the area of Employee Benefits. We invite you to join us on Thursday, May 20, for a webinar designed to have a significant impact on your operations and improve your bottom line: Strengthen Your Benefits with Employee Benefits Technology. To register, click on the link below:
About the Author
Shomer Insurance Services, an Alera Group Company
Ari Baer started his career as a commercial lines producer for the Shomer Insurance Agency in 2004. After learning the ins and outs of insurance, he undertook the task of developing the Shomer Healthcare Division, which specializes in the insuring of skilled nursing, assisted living and residential care facilities in addition to home health agencies and hospitals. Ari’s motivation has always been the client’s success. With this in mind, he has assembled a singularly dedicated team of experts and acquired multiple data analytics platforms to create the uniquely effective client experience for which Shomer Insurance and Alera Group are known.