Liability claims and costs on the rise for long-term care providers

A new actuarial analysis of general and professional liability (GL/PL) claim costs for long-term care facilities suggests that the years of flat claims frequency are over.

Aon Global Risk Consulting, in association with the American Health Care Association (AHCA), a nonprofit, long-term care membership organization, released in late November its annual assessment of the long-term care market’s GL and PL risks.

[See also: Long-term care providers face liability challenges]

Aon found that since 2010, claim frequency has been rising after a decade of remaining essentially flat. The consultant estimates a 2 percent increase in claims frequency in 2014. Coupled with a 3 percent increase in claims severity, Aon estimates that long-term care providers are facing an annual loss rate increase of 5 percent.

Why these increases are being seen is hard to pinpoint and varies from state to state, said Christian Coleianne, author of the report and associate director and actuary at Aon. Among the possible reasons are increases in the usage of long-term care and plaintiffs’ attorneys who are more aggressive.

Coleianne said that providers participating in the survey for the analysis noted that advertising by plaintiffs’ attorneys has increased and appears to be more effective, especially in states such as Tennessee and Kentucky.

Thirty-four long-term care providers participated in the analysis. The providers make up eight of 10 of the nation’s largest providers, representing approximately 220,000 beds, or about 16 percent of beds in the country.

In Aon’s analysis, Kentucky has the highest loss rate and third highest frequency of claims of those participating in the survey. The state’s constitution prohibits limits on non-economic damages. Tennessee’s new tort limits became effective in October 2011, Aon’s report noted. Providers participating in the survey said they had noticed a surge in advertising prior to the limits becoming active encouraging claimants to come forward. It remains to be seen if the claims will drop off now that the tort limits are in effect.

Traditionally, long-term care providers try to limit their liability risk by looking for ways to legislatively limit awards for non-economic damages, said Coleianne, and focusing on quality improvement. “I think that’s a continuous effort because certainly the best way to avoid liability is to reduce your incidents that might give rise to liabilities,” he said.

New to the analysis this year is a look at claims frequency by payer type, said Coleianne. Providers submitted 845 total claims, of which 249 from one provider were eligible for analysis. From this one provider, Aon found that claims from Medicaid patients are lower in frequency and total severity than other payer types; claims from Medicare patients are higher in severity; and claims from payers other than Medicare or Medicaid are associated with the highest expenses.

Aon will continue to develop its analysis of claims by provider type, Coleianne said.