As nursing home liability coverage costs continue to climb, admitted carriers are pulling out of markets across the county. In Texas—considered, along with Florida, to be one of the most challenged states in this market—only two admitted carriers remain. Will a recommendation by the Texas Department of Insurance to include for-profit homes in the joint underwriting association make a difference? Or will it be too little too late?
The market for nursing home liability in Texas is bad, pure and simple.
Losses are exorbitant, premiums are exorbitant and, according to industry experts, questionable liability claims, which were already running rampant, are rising in numbers and costs. The outlook is grim, not only for insurers, but for nursing homes and their residents.
In 1996 there were eight admitted carriers doing business in the state. That number had dwindled to three by the beginning of 2000, and has now dropped to just two.
But it isn’t just the admitted carriers that are recoiling from the volatile market. Few non-admitted carriers are willing to write the coverage for fear of huge litigation costs. Those that are willing are charging as much as $5,000 per bed according to Tim Graves, a Texas Health Care Association representative.
The looming “staggering disaster” in the nursing home market has Graves and others concerned about the future of senior health care in the state. Many homes are going bare because they simply can’t afford the costs of liability insurance.
“It’s very risky,” he said. “The truly scary part of it is one claim, one bad claim, and you’re talking about closing facilities.”
In an effort to improve the situation, the Texas Department of Insurance decided Feb. 1 to include non-profit nursing facilities in the Texas Medical Liability Insurance Underwriting Association—commonly referred to as the joint underwriting association—to relieve some of the financial burden. It is the first time nursing homes will be included in the JUA since 1982.
The paperwork to accomplish that is still in the works, but TDI officials expect JUA coverage to be available to non-profits by the end of the month. TDI officials are also in the throes of compiling a legislative recommendation to include for-profit homes in the pool.
But since the JUA addresses availability rather than affordability, the efforts may be in vane in making more-affordable liability coverage a reality.
“Opening up the JUA for profits is a good thing, but it certainly doesn’t fix the issue,” Graves said. “We’re talking about hundreds of millions of dollars that nursing homes are having to pay for liability coverage in Texas, and the state bears about 70 percent of those costs.”
“And the problem is not going to stop with nursing homes. This is going to bleed over into the lighter care as well, like assisted living facilities.”
The problem, according to Ray Thomas, is lawsuits. Justifiable or frivolous, each suit filed against a nursing home costs money.
“We are resisting claims much harder,” said Thomas, president of Bunker Hill Insurance Agency in Houston and an industry representative for Gulf Insurance Group. “We’re taking them to trial and we’re winning, but they’re still expensive.”
To cover those expenses, Thomas estimates admitted carriers in the state are charging as much as $2,000 per bed. But claim costs are averaging between $2,500 and $2,600 per bed according to a recent A.M. Best report.
“The only thing that can change this is tort reform,” Thomas said. But the likelihood of that happening any time soon is dismally slim.
According to Rep. Craig Eiland, D-Galveston and a member of the House Insurance Committee, the legislature will be looking at increasing Medicaid funding for nursing facilities, but the issue of tort reform is not a high priority.
“We have concerns about the losses of nursing homes and the bankruptcies,” Eiland said. “But before the legislature goes in and bails them out-someone’s got to come forward and prove they’re viable. We’re going to be asking ‘tell me how you’re not going to go completely broke.’ “
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