Florida's 85-and-over population is forecast to grow by 126percent in the next 22 years, a reflection of the state's continuedlure as a retirement haven and the good health enjoyed by seniorsoverall. In addition to this unprecedented population growth in theelder segment, a complex mix of sometimes conflicting forces isdramatically altering the long-term care facilities market and theinsurers that cover them.

Operators of nursing homes and other long-term care facilitieswill have to change with the new demographics and demands orthey'll be left behind as new approaches seize market share.

As the long-term care industry adapts to the changes inherent inan escalating senior population, liability insurance products alsomust change.

Stakeholders Provide Insights

A new study of Florida's aging service needs from 2008 to 2030revealed the looming crisis for providers of long-term care andsounded a wakeup call to facility owners and operators. Thedemographic and workforce study, “Mapping the Future – EstimatingFlorida Aging Services Needs 2008 to 2030,” analyzes aging caredemand, caregiver availability, and senior living environments. Itwas conducted by the research, consulting, and accounting firmLarsonAllen for Ponce de Leon LTC RRG, Inc., a provider of Generaland Professional Liability insurance to long-term care facilitiesin Florida.

The project team researched and analyzed state and federalpolicies, demographics, customer preference, and their impact onFlorida's aging services demands. A group of stakeholders reviewedthe research and provided insights on the key assumptions used todrive the calculations of estimated future demand for agingservices.

Considering that Florida today has the highest percentage ofsenior citizens in the United States, the impact of a 126 percentincrease in those over 85, plus the service needs of those between65 and 85, is staggering. Service providers and government agenciesare challenged to plan for this expected population growth, thecurrent decline in the housing market, public policy changes, theshortage of health care workers, and the changing incomes of elders– especially those without a defined pension.

As seniors live longer, healthier lives, hospital use rates aredeclining, with a resulting drop in demand for services todischarged patients. However, this is expected to be more thanoffset in the coming years by the rapidly growing elderlypopulation. In fact, it's estimated that 15,000 more nursing homebeds will be needed by 2030. But while those stays are predicted tobe brief, as seniors increasingly opt for home care or end-of-lifehospice services, staffing will be impacted by an expected shortageof healthcare workers, including nurses and home-care givers.

Nursing home operators accustomed to relatively stablepopulations will have to adjust. The average stay will be muchshorter, and a greater proportion of residents will require moreskilled nursing. This means greater risk, potentially more claims,and the need for professional risk management as a component ofliability insurance protection.

Baby Boomers Want Independent Living

Baby Boomers whose parents may have been satisfied with nursinghome care will opt for independent or assisted living until theycan no longer care for themselves. The study projects a need fornearly 160,000 new assisted living units. Demand for independentliving facilities also is expected to increase sharply, creating aneed for an additional 260,000 units. Skilled home care servicesfunded by Medicare, Medicaid, and other governmental sources areexpected to more than double by 2030. The wide range of healthcareoptions surely will increase professional and general liabilityrisks and create a need for increased liability insurance in anuncertain market.

Perhaps the most daunting challenge facing the industry over thenext couple of decades is the expected shortage of professionalhealthcare workers. This threatens to reduce the quality of careavailable to meet demand from the rapidly mounting population ofsenior citizens. Demand for Registered Nurses (RNs) and LicensedPractical Nurses (LPNs) is expected to grow by 30,000 Full TimeEquivalents (FTEs) over the next 22 years. Demand for nursingassistants, home-health aides, and personal-care attendants isexpected to grow by 122,000 FTEs.

However, the study predicts a severe shortage of RNs by 2030. Asof June 2007, 43 percent of licensed RNs were over 50 years old,and 15 percent were over 60. Academic programs are not producingenough nurses to replace those retiring. The salary differential isgrowing between nurses employed by hospitals and those serving inlong-term care. Long-term care RN salaries in some Florida marketsare not considered as generous as hospitals or other settings,which will result in even greater shortages for skilled care, homecare, and assisted living.

The shortage of nurses may mean that more care, especially forthose with low or no incomes, will have to be provided in settingswhere the limited number of trained staff can be deployed moreefficiently. This would limit customer choice, reduce timely accessto professional services, and go against the increasing preferencefor non-institutional living environments.

Informal caregivers will be the key to managing the explosion indemand for aging services. Approximately 40 percent of women and 19percent of men over 65 in 2005 lived alone. As the population ages,the numbers living alone are expected to increase. Without informalfamily help, it's more likely they will require support to meettheir daily needs.

The problem is that availability of home-care givers, includingfamily and other informal providers, is expected to decline 41percent by 2030. This means that 420,000 more seniors 85 years andolder may be without help at home or will be moved into alreadyburdened nursing homes and assisted living facilities.

Increased Potential for Adverse Events

Insurance implications of this complex and challenging outlookare significant. The study raises the specter of an insurancecrisis along with the long-term care crisis. Dramatic growth inhome care and assisted living as a substitute for care in skillednursing facilities surely will increase professional and generalliability risks. If staff is not available to meet the demand, thepotential for adverse events to occur will increase. In the nursinghome arena, shorter stays with most residents requiring more thancustodial care will expose operators to more risks and greaterclaims frequency.

Agents will be expected to increase liability protection to homehealthcare workers and hospice facilities impacted by the expandingpopulation, as well as to the full range of long-term careenvironments, including nursing homes, assisted and independentliving, and continuing care retirement communities.

This could well revive the litigation crisis of a few years ago,when professional liability insurance for nursing homes becameprohibitively expensive or unavailable. Experience shows thattraditional insurance companies often withdraw from troubled linesof insurance such as healthcare facility coverage when the goinggets tough.

A bright spot in the outlook for meeting liability insuranceneeds and providing professional risk management to improve careand cut losses is the emergence in recent years of alternativeinsurance mechanisms to compete with the traditional insurancemarket.

In Florida and other states, owners of nursing homes, assistedliving and other long-term care facilities have banded together toform risk retention groups and related mechanisms to control theirown destinies. These specialized insurance companies providestable, competitively priced liability insurance year in and yearout. As the elderly population continues to grow, agents can lookto these facility-owned companies to provide their clients withessential liability coverage when the cycle turns and thetraditional market begins to dry up.