The pandemic exacerbated healthcare staffing shortages, pushing many organizations to rely on staffing agencies for help. However, this can increase the risk of claims. Because claim severity continues to be an issue, many markets have narrowed their appetite or chosen to exit the sector entirely, creating a harder insurance landscape for healthcare staffing.
When the COVID-19 pandemic began in early 2020, the healthcare industry experienced a 60% drop in volume due to the mandated cancellation of elective surgeries, growing safety concerns, and capacity constraints.3 The decrease in patient volumes resulted in huge financial losses for hospitals and healthcare systems, with many ultimately deciding to furlough or lay off staff in an attempt to offset poor financial performance. As demand gradually increased, staff was rehired, but they often returned to treat patients in more difficult workplace conditions.3
The healthcare industry now faces a rising tide of burnout and staffing shortages. According to the National Academies of Medicine (NAM), burnout has reached a crisis level with up to 54% of nurses and physicians, and up to 60% of medical students and residents, suffering from burnout.2 Compounding the problem is the fact that the baby boomer generation will reach age 65 or older by 2030, increasing the sense of urgency for healthcare employers to find and retain qualified team members to meet the expanded need for medical care.1
The demand for staff has increasingly caused many healthcare organizations to turn to professional staffing agencies to help bridge the gap. Because healthcare entities continue to watch costs closely, healthcare workers are often working through staffing companies to achieve a higher salary and more favorable employment terms. Pre-pandemic, it wasn’t uncommon for hospitals or nursing homes to utilize staffing agencies, especially in more rural or seasonally busy areas. However, the pandemic and ensuing fallout have increased the use of outside staff, often by those that haven’t had to rely on them as heavily in the past.
Unfortunately, many staffing agencies are also having difficulty finding qualified and willing candidates, which can cause overall care quality to drop. While hospitals or care facilities are responsible for directing and supervising activities, a staff member who isn’t an actual employee of the healthcare organization may not have the same sense of ownership for their role. This can increase the likelihood of errors, and subsequently, claims. In addition, staffing agency employees are constantly moving among healthcare organizations with different policies, procedures, and protocols, which increases the margin for error or other claims of negligence.
THE CHALLENGES OF INSURING HEALTHCARE STAFFING RISKS
The primary issue affecting the insurance market for healthcare staffing is claim severity. The national perspective shift towards social justice reform continues to soften jury sentiments and evoke shockingly high verdicts. In response, many staffing agencies are requiring not only general liability and professional liability, but also excess coverage. However, claim severity has led to underwriting correction in both rate and appetite. Many markets are choosing to narrow their appetite in this space or not enter it at all, leading to a hardening in the staffing sector of healthcare.
Insuring healthcare workers has always been more difficult, especially when it comes to physicians or higher risk areas such as obstetrics, surgical units, NICU/ICU, or emergency departments that treat higher value cases. However, the most difficult class is correctional care. There are only a few markets willing to entertain staffing risks working in correctional environments – especially if the exposure is more than a minor portion of operations. Locum tenens continue to be challenging to insure as viable markets have dwindled. Minimum premiums have also risen as a result of the higher standard of care physicians are held to. Organizations that handle a large percentage of higher risk cases like emergency room, surgical, ICU/NICU, and obstetrics will find fewer carriers willing to provide coverage. In addition, rates are up, as are retentions. With most staffing agencies growing due to increased demand; premiums are rising based on rate and the amount of staff deployed.
Allied staffing has also seen increasing rates and retentions as a result of adverse loss experience. Terms and conditions are tightening, making it more difficult to place business. With the extensive cost and time associated with completing medical school, many potential physicians are choosing to become Nurse Practitioners or Physician Assistants. However, in recent years, these roles have expanded regarding the extent of care they provide and the resulting exposure has become closer to that of a physician.
While the senior living sector has historically utilized staffing agencies more often than other sectors, senior living facilities are doing so more frequently post-pandemic. While the exposure to claim severity is lower than that of hospitals, claim frequency is generally higher. Most of the time, agency staff in a senior living environment are insured under the facility’s policy as those policies are typically written to grant coverage for agency staff under the control, supervision, and direction of the insured. However, outside agencies are now providing a greater percentage of staff than before, which makes the risk of claims higher and the inclusion of agency staff a bigger factor going forward.
EXTERNAL STAFFING CREATES INSURANCE COMPLEXITIES
The risks associated with staffing agency partnerships have always existed. But, one of the present challenges is that staffing agencies and their clients do not always contract with each other in a consistent manner as it relates to indemnification. It’s almost impossible to underwrite every agreement a staffing agency enters with clients. Many staffing agencies push clients to assume liability for staff members provided by the staffing company. Some staffing agencies also require that they be added as additional insureds on the client’s professional liability policy or require specific policy language such as Waiver of Subrogation or Separation of Insureds. Additionally, staffing agency clients, like hospitals, are more aggressively trying to transfer their risk to the staffing agencies and their insurers.
The business dynamic comes into play for this line of business more than many others because a claim can involve multiple co-defendants, including physicians, nurses, anesthesiologists, and staffing agency employees, among others. Retailers need to be aware of the growing exposure as well as the potential litigation around claims. If the healthcare personnel named in a claim is part of a staffing agency, the facility is likely to attempt placing the blame on the staffing company. Unfortunately, it is not unusual for the staffing company to assume a disproportionate piece of the liability as the cost of doing business. In addition, external staff in a healthcare setting creates a situation where multiple providers (often covered under separate policies) are treating the same patient, which leads to several providers being named in a lawsuit regardless of actual liability. Defense costs alone for staffing agency employees are higher because of the complexity around determining the extent of liability for each respective employee.
A claim could have as many as 5-10 codefendants with various insurers involved. In such scenarios, insurance companies and defendants often point the finger at each other. However, most of the time insurers defending hospitals and physicians are very experienced. On the flip side, some of the markets insuring staffing agencies, may not have the same level of claim experience in this sector, which contributes to those insurers and their staffing agency insureds holding the bag for a larger piece of the global settlement than might be appropriate. When it comes to risk management, staffing agencies are best served by utilizing consistent contract language with clients that doesn’t over-indemnify or allow clients to transfer their own risk to the staffing agency and their insurer.
From the healthcare client perspective, organizations must understand the terms of agreement and indemnification between any chosen staffing agency and themselves. It’s also wise to make sure the facility is listed as an additional insured on staffing agency general liability and professional liability policies. Unfortunately, it’s not uncommon for clients to rely on outdated contract language that only includes a facility as an additional insured on the general liability. Because contracts can be complex, healthcare clients utilizing staffing agencies would be wise to have both an attorney and insurance broker experienced in healthcare liability review contracts to ensure they are consistent with the current state of the insurance and liability marketplace.
HOW RETAIL AGENTS CAN HELP
Understanding the nature of each healthcare specialty and why some carry a higher risk than others can help set appropriate expectations with the client and support a more complete dialogue with underwriting. Underwriters are busier than ever before, and taking the steps below can ensure that your wholesale broker has the key information needed to achieve a positive outcome for your client.
Know where agency staff is physically working. Areas including Philadelphia, New York City, New Mexico, Southern California, and other metro areas such as Atlanta, Chicago, or Detroit are challenging jury venues. Understanding where staff is actually working is important because underwriters want to know which jurisdictions would be involved should a claim arise. In addition, underwriters seek to understand the type of facility the agency staff are working for and what kind of services are being provided because working in a high risk unit impacts the scope of the risk.
Consider evolving insurance needs. It’s also important for the retail agent to have a clear idea of the client’s plans for any future growth. Not every carrier is able to offer nationwide coverage or specialty endorsements. If a staffing agency plans to expand into new areas, it’s important to ensure coverage is placed with a carrier capable of handling that growth. In the current environment, smaller staffing agencies also have greater opportunity to partner with national staffing firms, making it a good idea for them to review evolving insurance requirements.
Review all available contracts. It’s vital to obtain and review all contracts in place to understand if the staffing agency is using the same contract and indemnification language with all clients. This helps ensure that the broker is able to obtain proper endorsements up front. It’s also important to communicate a client’s employee screening protocols, policies and procedures with respect to sexual abuse prevention, and the nature of hold harmless agreements to help underwriting visualize how an insured is striving to prevent claims. It is also valuable to remind clients that not everything they agree to in a contract is automatically insured or even insurable. That is why is it important for clients to use consistent contract language that has been vetted by their insurance broker and insurer.
Provide thorough loss history. When approaching the marketplace, it’s best to have at least 5 years of currently valued, detailed loss history available. For higher risk classes some markets may seek up to 10 years of loss information. Locum tenens groups likely need to provide 7 years of loss history at a minimum. Allied staffing groups (CNAs, PAs, NPs, etc.) may need to supply only 5 years; however, larger accounts in tougher venues should expect to produce 7-10 years of loss history to achieve the best possible result.
Start the renewal process early. For harder classes of business with fewer markets available, starting the renewal process early allows agents and brokers the time needed to collaborate effectively with underwriting. It’s helpful to get your submission to the broker 60-90 days out, especially for large accounts that require more extensive documentation.
Staffing shortages in the healthcare industry have been a concern for several years, but the recent pandemic exacerbated the issue, causing many to rely on staffing agencies to help alleviate worker shortages. While these partnerships may be necessary, utilizing contract staff can increase the risk of claims and potential lawsuits. Because claim severity continues to be an issue, many markets have narrowed their appetite in the healthcare staffing space or chosen to exit the sector entirely, leading to a hardening in healthcare staffing. Navigating the marketplace can be complicated, making collaboration with a knowledgeable wholesaler a clear advantage. Reach out to your local CRC Group producer today to learn more about how we can help your healthcare staffing clients obtain the coverage they need.
- Josh Anderson is an Associate Broker with CRC Group’s Chicago Office where he specializes in Healthcare Liability.
- Shavarra Davis is a Broker with CRC Group’s Norcross, GA Office, where she specializes in Professional Liability and Medical Malpractice.
- Jason Lewis is President of CRC Denver and National Healthcare Practice Leader for CRC Group.
- Why Healthcare Employers are Shifting Toward Staffing Agencies, PRS Global. https://prsglobal.com/why-healthcare-employers-are- shifting-toward-staffing-agencies/
- New Surgeon General Advisory Sounds Alarm on Health Worker Burnout and Resignation, U.S. Dept. of Health & Human Services, May 23, 2022. https://www.hhs.gov/about/news/2022/05/23/new-surgeon-general-advisory-sounds-alarm-on-health-worker-burnout-and-resignation.html#:~:text=This%20Surgeon%20General's%20Advisory%20outlines,much%20to%20help%20us%20 heal.%E2%80%9D&text=%2C%20with%20up%20to%2054%25%20of,and%20residents%2C%20suffering%20from%20burnout.
- Staffing Shortages: Responses and Risks at Hospitals and Health Systems, ECG Management Consultants, February 10, 2022. https://www.ecgmc.com/thought-leadership/articles/staffing-shortages-responses-and-risks-at-hospitals-and-health-systems
- Staffing Shortages Joins Health Inequities as Patient Safety Risks, Patient Engagement HIT, March 14, 2022. https://patientengagementhit.com/news/staffing-shortages-joins-health-inequities-as-patient-safety-risks