Long Term Care Marketplace: Is Your Insured Prepared?

A variety of factors are impacting the long term care industry, including more than half a dozen venues around the United States known to be plaintiff-friendly attracting more lawsuits against LTC facilities and driving change in the marketplace.


Retail agents and brokers serving long-term care facilities should prepare their insureds for changing insurance market conditions. In general, insurers are looking to stabilize rates and are seeking steep increases in particularly difficult legal venues. A variety of factors are having an impact on the insurance market for this healthcare segment. In particular, more than half a dozen venues around the United States known to be plaintiff-friendly are attracting more lawsuits against long-term care (LTC) facilities.


Long-term care facilities, ranging from assisted living to skilled nursing, serve critical needs for an aging population. While the outlook for growth in LTC is strong, the number of facilities and caregivers is struggling to keep pace with demand. The Department of Health and Human Services (HHS) forecasts that the long-term care population will double by 2020 and may even quadruple by 2040.1 HHS estimates that the number of people age 65 or over who may require care for a long-term disability will range from 14.8 million to 22.6 million by 2040.2

According to the National Center for Health Statistics at the Centers for Disease Control and Prevention, as of 2014, there were 15,600 nursing homes, with 1.7 million licensed beds. Ownership of LTC facilities varies by state, but it is consolidating into larger, for-profit organizations. Data compiled by the Kaiser Family Foundation shows that a large majority of U.S. certified nursing facilities in 2014, 69%, were owned by for-profit entities. Of this number, nearly half were owned by multi-facility or chain operators.3

Finding and retaining adequate staff is a challenge for many facilities, even though there are no federal minimum staffing requirements and relatively few states have such rules. Employee turnover is also high. A Kaiser Family Foundation study found that the average number of nursing hours of care provided in LTC facilities in 2014 was 4.0 per resident per day, compared with 3.9 in 2009. Much of that care is provided by non-licensed staff, such as nursing assistants or healthcare aides. The average amount of care provided by registered nurses in 2014, according to the Kaiser study, was 0.8 hours per resident per day, up from 0.7 in 2009.4 The Overview 3 CMS Mandatory Arbitration Ban Lifted in 2015 under the Obama administration, the Centers for Medicare and Medicaid Services (CMS) promulgated a rule that would have prohibited long-term care facilities that accept Medicaid and Medicare payments from requiring residents to sign pre-dispute binding arbitration agreements. Arbitration is widely used throughout the industry as a contractual tool to reduce the time and expense of defending litigation in court. Long-term care industry leaders and insurers believed that if the CMS rule stood it would have exposed LTC operators to more lawsuits and increased liability insurance claims at a time when the LTC sector has been struggling. Because Medicaid and Medicare are the largest payers of long-term care costs, and more than 90% of facilities nationally have Medicaid and Medicare beds, the arbitration rule would have applied to virtually all of the nation’s more than 15,000 long-term care facilities. The American Health Care Association filed a lawsuit to stop CMS from implementing the rule, and the Northern District Court of Mississippi granted a preliminary injunction on November 7, 2016 against enforcement of the rule, leaving the LTC industry in limbo. However, on June 5, 2017 under the Trump administration, CMS issued proposed revisions to its arbitration agreement requirements for LTC facilities removing the Obama administration’s arbitration ban and resolving the uncertainty facing the LTC industry.5


From a liability perspective, among the most common allegations by plaintiffs bringing nursing home malpractice claims are falls and pressure ulcers suffered by residents, and errors or omissions in patient charts. Modest increases in long-term care loss frequency and severity nationally are compounded by sharp increases in certain venues, including California, Florida, Illinois, Kentucky, Tennessee and West Virginia. Insurers writing long-term care risks in these areas are feeling greater financial pressure.