Soaring Liability Insurance Rates Trouble Nursing Home Officials

By Ray Carter The Journal Record | THE JOURNAL RECORD, April 8, 2002 | Go to article overview

Soaring Liability Insurance Rates Trouble Nursing Home Officials


Ray Carter The Journal Record, THE JOURNAL RECORD


A rash of lawsuits has caused liability insurance rates to skyrocket for Oklahoma nursing homes and could reduce the quality of care and even increase Medicaid dependency, according to industry officials.

In a worst-case scenario, those officials say the state could see many nursing homes close their doors, leaving the elderly with nowhere to go for long-term care.

"If something doesn't happen, yes, I think we'll see a large number of Oklahoma homes go into bankruptcy or close," said Tom Coble, president and chief executive officer of Elmbrook Management.

Coble and other nursing home officials report dramatic increases in the cost of their liability insurance and warn that the money being diverted to higher insurance premiums means other aspects of long-term care go neglected.

"As a nonprofit facility, it means that it's going to take funds that normally we would have funneled into resident care -- equipment, supplies, staffing, those types of things," said Wendal Short, administrator of the Fairview Fellowship Home. "It's going to take those funds and impact what we're able to do in regard to those issues. We're not paying any dividends or anything like that back to anyone. Our money all goes right back into the facility and maintenance and upkeep and benefits for employees and competitive wages."

The Fairview Fellowship Home is a nonprofit corporation governed by the Mennonite Brethren Church in Fairview. The facility's liability insurance cost $13,000 last year. This year, the rate jumped to $130,000 for the same level of coverage.

Elmbrook Management, which runs five nursing homes and one assisted living center in Ardmore, Sulphur and Waurika, experienced a similar increase, although not as dramatic. The company's liability premium increased $280,000 this year -- a 260 percent increase.

Coble said Elmbrook has not been sued or suffered any losses as the result of lawsuits during the past nine years. Short said his facility has never experienced any major legal problems. But both companies are seeing their liability costs skyrocket -- and they say they're not alone.

"People who have not had any lawsuits are suffering the same rate increases," Coble said.

While problems in the reinsurance market have caused insurers to impose major increases in all lines of coverage, Coble said liability costs are still largely tied to the number of lawsuits filed against an industry in a region.

At Fairview, Short said the brunt of the premium increase would probably be carried by residents who pay for services from family funds.

"The 45 percent private-pay residents that we have would be responsible if we can't pass it on anywhere," Short said. "It's going to all fall into their laps."

The remaining 55 percent of residents at Fairview rely on Medicaid payments. Short said Medicaid reimbursement would not reflect the increased insurance costs for at least a year.

The home averages 119 residents, meaning 54 residents may have to make up the difference in insurance costs.

The shift to private-pay clients is only a short-term solution, however.

"If our rates continue to climb in order to offset these sizes of premium increases, they're going to run out of money sooner," Short said. "And it's going to become a burden on the state because it's going to increase (the number of) Medicaid recipients and in turn it's going to drive up the cost on the Medicaid reimbursement."

Providing coverage for those nursing home residents may be a problem for the state. Growth in Medicaid enrollment is already creating a budget pinch for the state that would only worsen if more elderly people were placed on the rolls. Between February 2001 and February 2002, the state's Medicaid enrollment grew 8 percent and hit 472,847. Of that total, 22,661 recipients in 2001 were in nursing facilities, according to the Oklahoma Health Care Authority. …

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