The American population has started to change dramatically. When you consider what that means for senior care facilities from an insurance standpoint, it's even more dramatic.
First, some data:
- Over the next 15 years, 8,000 baby boomers a day will turn 65, according to AARP.
- By the time that spike ends, more than 20 percent of U.S. residents will be 65 or older, compared with 13 percent in 2010 and less than 10 percent in 1970, according to U.S. News & World Report.
- The number of seniors in 2012 (43.1 million) will nearly double to 83.7 million by 2050, according to U.S. News & World Report.
The decisions those aging baby boomers are making differ from their parents and grandparents, and that has ramifications. Today's assisted living facilities often treat residents who are 10 or 15 years older than previous generations of residents. And skilled nursing facilities frequently work with people who tend to be sicker and older than residents from years past. These facilities may not be properly staffed and equipped for the rising level of risk.
Consider this data from a recently published report1 that shows what's happened to the cost of professional liability claims from 2008 to 2014:
- Loss rates per occupied bed have jumped from $1,210 to $1,940.
- Claim frequency per 100 occupied beds has risen from 0.70 to 0.91.
- Claim severity has climbed from $172,000 to $214,000.
The report predicts these trends will continue, with loss rates climbing another 5 percent in 2015, claim frequency rising by 3 percent and claim severity increasing by 2 percent.
Here's what's happening and how agents can work with underwriters to lower their clients' risks.
Facilities must do more with less
For the past decade, more insurance capacity has become available for senior care facilities. They have improved their risk management programs to help reduce litigation, and tort reform in several states has also led to a drop in the number of lawsuits and claims.
At the same time, however, retiring baby boomers began making different decisions than previous generations.
They've been healthier longer, so they've been living at home longer. When they do move to assisted living, however, their average age is likely to be older and they're likely to need more care that's also riskier. Assisted living facilities may not be properly staffed or equipped for these higher acuity residents.
Skilled nursing facilities, meanwhile, also face increased risks. Residents' arrival at these facilities often stems from shorter stays at hospitals that have become routine. Many boomers in these nursing facilities may still need rehabilitation and other services that often were not part of the plan when the facilities opened.
As these senior care facilities must do more than ever, cuts to Medicare and Medicaid have left them with fewer resources.
The changing landscape has begun to change the insurance market.
Needing more coverage and broader protection
The business model for senior care facilities won't change and care for residents will only get riskier as they serve a population that has both increased levels of acuity and service expectations. Knowing this, agents need to provide more coverage and broader protection to ensure their senior care facilities have the insurance and risk management solution that's most appropriate.
Three tips to consider:
- Does your underwriter offer an effective risk management program to reduce the occurrence and cost of claims over time?
At some facilities, for instance, patients may fall more frequently. See if you can establish a loss control service that offers the latest tools and resources that can help address a facility's needs. Some insurers offer online tools and best practice documents that a facility can access. Consider insurers that offer this at no additional charge.
- Does your underwriter focus solely on this space so they can effectively advise against quality of care and litigation risks?
Make sure your underwriter utilizes an encompassing, analytical approach that considers all aspects of a senior care risk. While some benchmarks may consider the number of hours each day that a registered nurse works with a resident, for instance, a better analysis may also include factors such as the type of residents and their needs. Regardless of the number of hours some benchmarks require, taking into account the residents' acuity levels will determine if those staffing benchmarks are either too strict or too lenient. Without this, your insured may be penalized unfairly.
- How does your underwriter determine rates?
Using a combination of analysis and risk management that is uniquely structured for each risk can help create the best pool of insureds. In turn, that enables the broadest coverage at the most competitive rates.
1 Source: "2014 Long Term Care General Liability and Professional Liability Actuarial Analysis." American Health Care Association and Aon Global Risk Consulting, Nov. 2014.
Learn more?
Join National Underwriter Property & Casualty and PropertyCasualty360.com for a live, interactive webcast, sponsored by AmWINS, and hear from industry experts regarding how to address the growing risks associated with the changing dynamic of senior centers. Attend this online-only event and learn to offer an effective risk management program to reduce the occurrence and cost of claims over time. Please visit www.propertycasualty360.com/webcasts/lowering-risk-for-senior-care-facilities?pc=AmWINS
Matthew Wasta is Vice President of APU Senior Care, a division of AmWINS Program Underwriters, Inc. For the past decade, Wasta has been managing underwriting groups writing professional liability coverage for senior care facilities.
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