INSURING FLORIDA ASSISTED LIVING FACILITIES
Rise in claims frequency and severity helps keep insurance market under pressure
By Linda Wright, CIC
Over the next decade or two, the United States will see unprecedented growth in its senior population as the Baby Boomer generation—individuals born between 1946 and 1964—ages. Over 10,000 Baby Boomers turn 65 every day. With this aging of Boomers, the healthcare industry will see increased demand, with the greatest impacts anticipated in skilled nursing, assisted living, and residential care facilities.
Florida is no exception to this increased demand, given the influx of retirees moving to our state each year.
The Florida senior living and long-term care market is already under pressure. Pricing for this industry continues to harden, with projections of premium increases ranging from 5% to 30% in 2019, resulting in part from rising frequency and severity of claims. This is particularly the case with assisted living facilities (ALFs). The premium charge per bed has been suppressed for years, and carriers need additional rate to become profitable.
Historically, assisted living facilities were intended for an ambulatory resident population with the cognitive abilities and skills to live independently with some assistance. The latest trends reflect ALF claims that are more in line with those from skilled nursing facilities.
In addition to the price hardening, the sector has undergone significant pressure from claim development over the past 18 to 24months, which has led to a number of carriers exiting Florida and other high-risk venues. Capacity is stretched, and carriers are taking a harder line in underwriting this sector. Coverage limits for key exposures such as elopement, bedsores, and sexual misconduct are being restricted.
Historically, assisted living facilities were intended for an ambulatory resident population with the cognitive abilities and skills to live independently with some assistance (e.g., help with daily living activities). The latest trends reflect ALF claims that are more in line with those from skilled nursing facilities. The line between skilled and assisted living exposures has become blurred as Boomers age in these facilities and health issues of the population require more care. This is an alarming trend because ALFs in many states are far less strictly regulated than skilled facilities, yet the required resident care is almost the same. Also, the ALF per-bed premium rate is not in line with the exposure.
Assisted living facilities in Florida, particularly smaller ones, may lack robust compliance programs to prevent accidents and other problems. As the population in the ALF community ages in place, families may struggle with finding alternatives for their family member or even resist trying to move the resident to a better-equipped facility. Failure to identify these residents and take appropriate action can lead to a variety of claims scenarios.
What is driving the claims?
Fall risks. As the resident population increases and their health becomes more fragile, falls are an ongoing problem. ALFs should implement risk management for fall risks and regularly evaluate the physical health of residents to determine whether a resident should be moved to a more skilled facility.
Cognitive degeneration as a result of dementia and/or Alzheimer’s. Residents dealing with memory loss or the effects of Alzheimer’s or other forms of dementia should be assessed prior to being accepted to the ALF. Regular assessments of all residents should be made to look for signs of cognitive deterioration. A resident should be moved to the memory care area of the residence or transferred to a facility with memory care services when it is determined that the resident is a risk to others or him- or herself. Dementia-induced changes in mood and personality may cause residents to become combative and physically harm themselves, other residents or staff members. Failure to appropriately assess and move residents also could lead to claims arising from resident “elopement” (wandering outside of the facility), which could result in serious injuries or even death.
Labor pool. Although not as frequent, inadequate vetting and screening of aides and other healthcare providers have resulted in increased claims activity alleging resident abuse.
The insurance market for ALFs is narrowing. Fewer insurers are offering coverage in the space. Increased premiums, higher deductibles, decreased limit offerings in high-risk venues such as Florida, and lower sublimited coverages for elopement, bedsores, and sexual abuse are becoming the norm and will continue to tighten the market.
In the past, Southeast Florida was the target of ALF claims. Today the trend can be seen statewide.
Now is the time to perform full due diligence on the general and professional liability coverages and options for all of your current and prospective ALF clients.
Linda Wright, CIC, is the healthcare professional practice leader for national wholesale brokerage Founders Professional. Linda helps long-term care facilities, medical professionals, and life science and social service entities secure professional liability and management liability coverages in conjunction with Founders’ retail agency. Linda can be reached at Linda.Wright@founderspro.com.