Insurance premium increases have put a huge financial weight on skilled nursing operators looking to raise wages for its staff during a mass exodus from the industry, while trying to attract potential staff or pay for agency workers, Shomer Insurance Services President Ari Baer told Skilled Nursing News.
Professional liability insurance can be the second or third largest expense that an operator has, Baer continued, and reimbursement rates “do not even come close” to what the cost is today for coverage.
“It seems like these operators are working just to pay their insurance premiums, which is obviously what we don’t want them to do. We want them to do what they do best and that’s focusing on the care of the residents,” said Baer.
It’s always been a tight market for skilled nursing facilities to obtain insurance, Baer added, but it’s near impossible now that less carriers are writing for the industry.
An increase in claims is the general contributor to less readily available operator coverage, spurred by plaintiff’s attorneys, Baer said. Those that are left aren’t creating competitive prices, according to a report by Chicago-based risk management, insurance brokerage and advisory firm Willis Towers Watson in November.
Meanwhile, premiums are higher because claim activity is higher, Baer added, with plaintiff’s attorneys looking for the next large settlement; defense attorneys seek to settle fast, he added.
“If they have higher limits of liability, then they’re more of a target,” explained Baer. “There are certain states where you’re able to have a lower [liability] limit, and in those states the claims are better [for the operator].”
Kentucky, Illinois and California are notorious for higher professional liability rates, with the cost per claim being higher than other states, Baer said.
“We had an insured, two facilities out in New Mexico. Amazing operator, he had been in business for over 40 years and he took over these two facilities only to find out there’s no insurance carriers out there willing to write for his two facilities,” said Baer. “The operator can’t be put in a financial situation where now no insurance carrier wants to insure them and those that do, the premium is astronomical.”
Good news for operator clients is sometimes bringing a 40% increase down to 10%, Baer said.
Shomer puts sub-limits on certain coverages like falls or wounds in order to protect the operator from an influx of claims, with a disclaimer in the policy that reverts any attempted stacking of allegations to the original sub-limit allegation.
“A plaintiff attorney comes in and they sue for falls — there is a sub-limit of $100,000. What happens if they go ahead and they sue for falls and violation of patients’ rights, and this and that?” asked Baer. “Within the policy form it says, if you’re going to go ahead and start stacking all of these allegations, because that’s what attorneys do, everything drops down to the sub-limit.”
Surprisingly, the rise in claims doesn’t appear to be tied to COVID-19 cases, but rather falls, wounds, and violation of patients’ rights.
The reason? No “deep pockets,” as Baer puts it.
In other words, there are very few policies out there with communicable disease coverage, especially for policies written or renewed well into the pandemic; many carriers actually exclude this coverage in general liability policies, Baer said.
“You’re only as good as your insurance policy,” Baer said.
There’s also business liability protections and provisions in place depending on the state, to shield businesses from claims related to COVID-19 exposure. Protections are dependent on whether or not the business was in compliance with federal, state or local guidance at the time of an incident.
The Alabama legislature, for example, in February passed a Senate bill protecting health care providers from COVID-19 claims concerning exposure, vaccinations or providing personal protective equipment (PPE) if they followed retroactive guidelines.
The bill adds a statute of limitation for certain claims.
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