Insurance agents to the rescue! (Feature Article).

Help with the liability insurance mess from an unexpected quarter--that's the promise of the National Council of HealthCare Agents, a group of 11 insurance agencies from around the nation responsible for insuring (or trying to insure) more than one-fourth of policyholding nursing homes in the United States (see "National Council of HealthCare Agents Members"). The group was founded not quite two years ago by a Nebraska-based insurance agent named Linda Boyle, who explains that she wondered why she felt she was trying to cope with the industry's liability insurance crisis on her own when she could ask for help from "some of the best minds in the country" among her colleagues. Since then the Council (www.nchacouncil.com) has conducted risk management research and--at least for five of the agencies--offers risk management specialists providing direct assistance to facility customers. Recently Boyle, who owns Care Insurance Services, Inc., of Omaha, Nebraska--itself overseeing the insurance of some 175 nursing h omes--discussed the liability insurance crisis and what, from her perspective, nursing homes should be doing about it. She responded to questions from Nursing Homes/Long Term Care Management Editor Richard L. Peck.

Peck: Many nursing homes are having tremendous difficulty these days affording liability insurance coverage. Where did this problem come from?

Boyle: The insurance world is a cyclical one; it has hard markets and soft markets. The past 10 years have been a soft market, in that insurance companies were doing so well in the stock market that they didn't emphasize underwriting profits very much. They kept premiums relatively low to keep the premium dollars coming in, so that they could make more investments. Then three things happened:

* Nursing homes became the target of the plaintiffs bar, helped largely by Florida's residents' rights law, which opened the door. Residents' families felt encouraged to sue, and did so often from feelings of fear of the unknown, guilt or greed. And large awards started occurring.

* When the stock market turned shaky, insurance companies started reviewing some of the underwriting decisions they had made.

* September 11 led to huge losses for insurance companies--some $40 to 50 billion, or 15%, of worldwide reserves. One result of this has been that insurance companies are almost universally writing terrorism exclusions.

All of this led insurance companies to increase their premiums and narrow their scope of coverage for the nursing home industry. In my area of the Midwest, which is relatively low cost, premiums increased from about $40 a bed two years ago to as much as $400 a bed. Florida homes, of course, are seeing $6,000 a bed and Texas homes $3,500. A lot of nursing homes, not surprisingly, don't have this kind of money and have decided to go bare, i.e., operate without any liability insurance. The idea behind this is that if the money isn't there, plaintiffs attorneys won't be attracted to them and their clients won't want to become the nursing home owners of the 21st century by default. This might be true, but it seems like an awfully risky way to go.

Peck: What about some of the insurance alternatives out there, such as self-insurance or captive insurance organizations?

Boyle: Self-insurance is the old way of doing it--setting aside money to cover some liability contingencies, and having a third-party administrator to run it and an attorney to handle claims. A more affordable approach for many facilities, particularly the for-profit mom and pops, might be a captive organization. A group of-long-term care facilities forms a "pool" of dollars that will be used to pay the claims of the members. It is not unlike developing a mini-insurance company. The group needs to put together a formal policy, specifying coverage and limits; they need to hire an underwriter who will help them select the "best risk" facilities for participation, and they need to hire a third-party administrator (TPA) to handle claims and an attorney for legal defense. Although start-up fees are costly, many facilities think they can handle this better than standard insurance carriers, whom they sometimes accuse of "rolling over" on claims. Of course, insurance companies think some claims should just be paid b ecause they can't be won in the courtroom.

One problem with captives, though, is the typical "joint and several liability" provision they require, which means that all members are deemed financially responsible for the "sins" of one. That can be worrisome when you don't have any control over how someone else does his business.

Some insurance agencies have had good success with captives--for example, Robinson Adams in Birmingham, Alabama, and the Assurance Agency in Rolling Meadows, Illinois.

But the overriding problem with any of these alternatives is that they still need to deal with reinsurance to cover those out-of-the-ordinary, budget-busting outlier claims, and the reinsurance industry isn't very friendly to long-term care these days, either.

Peck: Whether insured or not, what can facilities do to at least try to reduce their exposure?

Boyle: Basically, every carrier is looking for evidence that facilities understand their risks and know how to avoid losses. With nursing home risks, you have the "Big Six": falls, pressure sores, elopement, abuse, weight loss and dehydration. My agency, Care Insurance Services, created the Health Care Safety Specialist training program (see "The Health Care Safety Specialist") to help facilities address, primarily, three of these issues:

Falls. We look at resident mobility and lift-and-transfer techniques, including no lift" policies. The Vancare company here in Nebraska has provided us with lift equipment to use in training caregivers in its use. We also go into the use of gait belts and provide training in back protection exercises.

Pressure sores. Most insurance companies are now mandating the use of photo charting of pressure sores to monitor the healing process, and we train in that procedure.

Elopement. We have the advantage of ready access to another Nebraska company, Senior Technologies, which participates in training regarding departure alert equipment. Insurance companies are requiring this type of equipment, too.

Companies are moving toward another requirement, as well, with the issue of resident abuse: criminal background checks.

A facility's survey and enforcement performance is also an extremely important issue for underwriting, because plaintiffs' attorneys are reading these survey results and targeting homes with serious deficiencies, such as Level Gs, for example.

All of these are important issues for facilities to deal with to enhance their insurability at affordable rates.

Peck: Will the Council's programs help nursing homes become lawsuit-proof?

Boyle: No, they wouldn't go that far. But we do think we can help our clients understand the issues involved in underwriting today and to avoid losses-not only financial, but in terms of family and public relations-and to respond appropriately should a lawsuit occur. We can't eliminate the threat, but we can minimize it.

National Council of HealthCare Agents Members

Assurance Agency, Ltd.-Illinois [phone]

BB&T Insurance Services - North Carolina [phone], [phone]

Bulloch Insurance Agency - Arkansas [phone]

Care Insurance Services-Nebraska [phone]

Cool Insuring Agency-New York [phone]

Golden Age Insurance-Kansas [phone]

HCIS & Vaaler Insurance-North Dakota [phone], [phone]

Johnson, Kendall & Johnson-Pennsylvania [phone], [phone]

Lewis & Associates Insurance Brokers-California (800) 74-LEWIS

Rich & Cartmill-Oklahoma [phone]

Robinson Adams Insurance- Alabama [phone]

The Courses

Risk Management                           Fire, Disaster &
& Resident Safety   Employee Safety       Emergency Planning

Identification of   Employee Selection    NFPA Codes
Exposures
                    Training              Fire Evacuation
Safety Programs                           Procedures
That Work!          Accident
                    Investigation         Staff Training
Employee Selection                        Programs
                    How to Work With
Safety Incentives   Adjusters             Fire Drill Training
Make OSCAR Work     Your Experience       Dealing With the
for You             Modification          Media
Vehicle Safety      Return to Work        Disaster Plans
Wound Care          Aggressive Behaviors  Loss of Central
Management                                Services
                    Uh-Oh! OSHA!
"No Lift" Concept                         Technological
                    Resident Transfers    Disaster
Medical Records
                                          Missing Residents
Resident Falls

Elopement

RELATED ARTICLE: The Health Care Safety Specialist

The Health Care Safety Specialist (HCSS) program presented by insurance agency "safety specialists" provides hands-on training in risk management to interested long-term care personnel: administrators, nurses, maintenance staff or others delegated with specific responsibility for a facility's safety. Courses are presented in cities convenient to low-cost air travel and consist of three basic presentations: Risk Management & Resident Safety; Employee Safety; and Fire, Disaster & Emergency Planning (see below for specific topics covered). Courses are eligible for state continuing education credits. Completion of all three courses leads to a Health Care Safety Specialist certification; some liability insurers have indicated they might offer a premium discount for facilities with an HCSS on staff. Registration for each of the three courses is $595. For further information, phone [phone] or fax [phone].