Long-term care liability costs on the rise
Liability costs for long-term care providers are expected to increase by 5%, and claims frequency also is expected to rise, according to an analysis released recently by the American Health Care Association (AHCA) and Aon Global Risk Consulting, the risk consulting business of Aon. The report also indicated that plaintiff firms have focused attention on states with more vulnerable legal climates.
Across the country, long-term care and post-acute care centers provide care for 1.1 million frail and elderly and employ more than 1.5 million people, notes Mark Parkinson, president & CEO of AHCA. Rising liability costs drive up the cost of doing business and not only threaten access to care, but ultimately could cost jobs, he says.
The "2013 Long Term Care General Liability and Professional Liability Actuarial Analysis" provides estimates of loss rates, or the cost of liability to the beds that care providers operate. The projected national 2014 loss rate, which is a combination of claim severity and frequency, is $1,940 per occupied bed. This number means that an operator with 100 beds can expect $194,000 in liability expenses in 2014.
Kentucky's loss rate, the highest of the profiled states in the study, has been increasing since 2008 and is projected to reach $8,090 in 2014. Kentucky's state constitution prohibits limits on tort recoveries, and there are no statutes concerning qualification of expert witnesses, certificates of merit, pre-trial alternative dispute resolution, or limits on attorney's fees. West Virginia, the state with the second highest loss rate among the report's profiled states, has a reputation for high verdicts and a challenging appellate system.
Texas reports the second lowest loss rate in the study: $300 per occupied bed. The state experienced dramatic loss rate reductions following constitutionally protected tort reform in 2003. These reductions in loss rates have been sustained in the years following the legislation.
The study also examined claims resolved through arbitration agreements and discovered that the agreements often lead to resolution in a similar timeframe, but with a lower cost. The average cost of a claim under an arbitration agreement is $155,000, while a non-arbitrated outcome averages $184,000, which makes arbitrated outcomes 16% less costly.