Nursing Home Professional Liability Insurance Crisis -

An Update

Ruth KilduffCAS Annual MeetingNovember 9, 2002

State of the Market

• 1 or 2 insurers willing to quote all 50 states

• Rigorous underwriting• Retentions 25K to 2MM no aggs• Rate increases 100 to 1000%• Claims Made• Exclusions punitive damages, physical

and sexual abuse• State and financial covenant

requirements for coverage

What Keeps Me Up at Night?

Many Drug Errors at Nursing HomesDosing mistakes are biggest concern, researchers say...

Reuters

BOSTON, Aug. 10 — An estimated 350,000 medication errors happen in U.S. nursing homes each year and more than half of them can be prevented, according to a study released on Thursday.

The Climate

• Graying of America• Value on elders• Fragmentation of families• Insurers missed the boat• Reimbursement ($4.25 hr)• Least costly site of service• Redefinition of the continuum

Independent Living

• Ranch style (single level) or condo style apartments

• Residents pay entrance fee• Residents pay monthly rent• Communal meals and activities• Medical outpatient “wellness” services on

premises• No clinical or regulatory oversight• No required or benchmark resident to

FTE ratio

Assisted Living

• Studio or 1 bedroom without cooking facilities

• Resident needs assistance with 1 or more ADL’s (bathing, dressing, etc.)

• Resident pays monthly rent ($2,000 to 4,500) plus additional for level of care

• 1 RN oversight non licensed 24 x 7• Little, if any, regulation• Generally 7 resident to 1 FTE ratio

Skilled Nursing Home

• 1, 2 or 3 beds per room• 24 x 7 RN supervision• Dependent on most ADL’s• Private pay $5,000 to 7,200 month• Medicaid rate $4.25/hr• Second in regulation only to nuclear

power.• Annual turnover rate of staff 102%• 1:1 resident to FTE ratio

Let’s compare our priorities

• Hyatt Wichita, KS - 303 rooms 300 employees

• Hyatt Coconut Point, FL - 456 rooms 600 employees

• Ritz, Boston - 193 rooms 300 employees

• How many ADL’s do you need help with?

Priorities

• Average Medicaid payment per hour for skilled nursing care - $4.25

• Average payment per hour for dog walker - $22.50 ($7.50 per dog per 20 minute walk)

Very Large ALF Fla and Tx

• Exp PL GL 2nd yr CM 1.4MM• Renewal 3.0MM• Retentions from 250K aos 500K

Fla Tx to 500K all states• XS 10MM premium from 770K to

1.99MM

50 SNF 5 ALF

• Pacific north with 10% California• 1/3/15 claims made• 1MM deposit• 1.05% conversion factor• LOC to the agg• max premium on retro 15MM

Recent Renewal SNF 49 locations

• Some Fla exposure• 2MM retention no aggregate• Claims made• 25MM limit• Deposit premium 3.5MM• Each loss above 2MM and 3.5MM

paid $ for $ plus 4% to max of 22.5MM

Underwriters are looking at:

5 year loss history Admission agreements Staffing ratios Discharge protocols Cognitive assessments/ elopement

prevention Risk management programs