Caring about care providers
Demographics point to growing opportunities in the senior care market
By Dave Willis
We're getting older. In fact, as Jeff Collins, vice president, commercial lines underwriting, at Philadelphia Insurance Companies, points out, "On average, 10,000 people a day will reach the age of 65 for the next 20 years." As we look to and past retirement, he adds, people will be looking for alternatives to traditional nursing homes.
"The first Baby Boomers turn 65 this year," notes Bill Yurek, RPS-AVRECO area president. "As they age, we'll see increased demand for added nursing home and assisted living facilities. At the same time, there's a move to keep seniors in their homes—or living with family—for a number of reasons, not the least of which are economic." This increases the demand for alternatives.
Among these are home care services—including the delivery of health care and adult day care. "It's great when we can help people stay in their home, rather than have to go to a facility," says Bryan Baird, president of K&B Underwriters, LLC. "I expect to see huge growth in some of these younger industries. Home health care, in my mind, is a great way to keep people dignified as they age."
Collins notes that home health care services offer a broader range of services than home care service providers do. "Home health agencies, along with hospitals and public health departments, are licensed by the state," he explains. "People providing home health care are often licensed practical nurses, therapists or home health aides." Services may include occupational and physical therapy, speech therapy and even skilled nursing.
They also may involve helping seniors with daily living tasks, such as bathing, dressing and eating. "Or they may include monitoring the individual's daily regimen of prescription and over-the-counter medications," he adds.
On the other hand, home care services are less medically oriented, helping seniors as they recover from an illness or injury, Collins explains. "Home care typically includes help with chores and housecleaning services."
Baird sums it up this way: "Anything in senior living and senior care represents a growth opportunity. People want options. Some will want to go into assisted living or nursing homes. Others will want in-home services and day care. From an insurance standpoint, day care is a fantastic option; it has much less exposure."
As demand grows and the care landscape evolves, legislative, regulatory and financial factors are in play. "Laws and regulations are continuously changing and evolving," explains Collins. "This creates uncertainty."
"While there is increased oversight by many state regulators," explains Yurek, "this oversight is inconsistent from state to state." Some consistency comes from Medicare, which imposes certain uniform requirements for agencies that receive its funding, Collins adds.
This funding, of course, will likely be reduced, along with Medicaid reimbursements, Yurek notes. "This will lead to inadequate revenue for nursing homes and other dependent providers," he explains. "Healthcare reform applies to nursing homes, and it is unclear what effect it will have on the industry."
Baird concurs. "Providers are going to have to figure out how to do more with less," he says. "The demographics are upside down." Fewer younger people are paying into a system that funds a growing number of seniors. These funding issues, along with regulatory and reporting requirements, training brought on by new rules and high turnover, and a range of other administrative issues are increasing stress on providers at all levels, he adds.
According to Baird, the insurance industry could play a role in transforming the world of senior care. "We can help facilitate their innovation to make changes that allow for reduced regulation," he explains. "There are so many creative solutions out there in terms of technology and preventative care—things that aren't funded by Medicare. If we help the industry through their insurance and risk management, looking at innovative solutions that can streamline processes and care delivery, our customers will be stronger."
Despite the changing marketplace and its challenges, the insurance industry continues to have a healthy appetite for healthcare-related risks. "There is still significant competition among markets for long-term care, forcing premiums to be stable or reduced on policy renewal," notes Yurek. Some carriers are trying to offer more coverage lines to facilities, such as separate policies for D&O/EPL, property, cyber liability/privacy coverages, he says.
"Markets continue to enter the allied healthcare business for risks such as home health care, and that has driven prices down over the last six years," he adds. In addition, terms often are more liberal, with broader coverages, such as sexual abuse, being readily available. Yurek also has observed an increase in requests for cyber liability/privacy insurance among care providers. "We have access to markets that have expanded coverage over the last 18 months, to make it more attractive to the buyer," he notes.
Collins has seen continued strong competition in the home health care insurance market, as well. "As competitive rates continue to push down premiums, we are seeing a continuous uptick in both the cost to handle and settle claims for accounts with these exposures," he explains, noting that the industry needs to proactively monitor experience in the class.
The industry needs to stay attuned to changes in the level of care for in-home patients, as well. For instance, he explains, 75% of patients need available skilled nursing services, 44% of patients utilize personal care providers and 37% of patients benefit from the use of therapeutic services.
Advances in medical technology will continue to improve survival rates of severely ill and injured patients, Collins adds, which will also affect the insurance community. "These individuals will need extensive therapy and care," he explains. "New technologies will enable earlier diagnoses of many diseases, which often increases the ability to treat conditions previously not treatable.
"As the population ages," he adds, "the need for durable and home medical equipment will increase." Collins believes hospices will continue to be the fastest growing segment of the home health care industry. "Medicare added a hospice benefit in 1982," he notes. "Seventy-five percent of hospice services are paid for by Medicare."
The insurance industry response, Baird believes, involves looking across the enterprise and understanding the dynamics that drive losses, litigation and costs. "It starts at the top with how care facilities treat employees," he explains. "Treat your employees right, and that has a positive effect on employee safety, wellness and health."
Beyond that, he adds, "If you have happy, healthy employees, turnover will be lower and employees will deliver better care to residents. They'll also interact better with residents' families, which can ultimately lessen the likelihood of litigation down the road.
"That's our real opportunity," Baird notes. "It's exciting to think about the role the insurance industry can play through effective risk management."
Getting on board
Changing demographics, healthcare reform and an expansion in the number of home health care providers, coupled with continued strong insurer appetite, spells opportunities for retail agents and brokers, Yurek says.
Agents not currently involved need to recognize the learning curve associated with serving the market, he adds. "Working with a wholesaler can help agents increase their knowledge base and provide access to strong markets," he says. There's no shortage of prospects. "For example, there are 17,000 nursing home operations with 75,000 locations throughout the United States. Many of these are local, stand-alone facilities where the retailer probably already knows the owner. The added benefit is nursing homes are like many other risks, but also have a professional liability component, which is yet another opportunity."
Baird also sees value in the nursing home marketplace. "I would point agents to skilled nursing and for-profit operations," he says. "First, the revenue is good. Second, there are more of them. If an agent is going to spend time getting educated and up to speed, I would focus on the for-profits."
Risk management assessment and counsel can help agents make inroads. "Properly evaluating a risk's exposures and controls are vital to identifying potential weaknesses in an account's services, training and employee screening practices," notes Collins. "Completing a thorough review of hiring practices, policies and procedures, formal training practices, turnover rate, and patient handling policies and procedures will help ensure that all the proper risk management controls are being adhered to.
"This proper upfront due diligence will help confirm that all clients are receiving the proper care, thus assisting in overall claims reduction," he adds. And it will strengthen the agent-insured bond.
Adds Baird, "There's a real opportunity to come in and learn. Learn the industry, understand the issues they are facing and struggling with, and be a solution provider. If you help them manage their risk, you'll impact their bottom line. You'll help them run a better operation, increase revenue and reduce liability."
"I would point agents to skilled nursing
and for-profit operations. First, the revenue is good. Second, there are more of them."
K&B Underwriters, LLC