Facing the Liability Insurance Nightmare

all the profit involved in the operation of a nursing facility."
While nursing homes suffer in Ohio, so do the insurance companies. Bern says that many firms have left the business because their ratings and financial stability have suffered as a result of insuring nursing homes: "A lot of insurance companies have lost a lot of money by being in the [nursing home insurance] business."
To help its facilities deal with rising insurance rates, the Academy part-nered with Cincinnati-based insurance firm Neace Lukens and drafted The Alliance Program, which offers facilities premium rates locked at prices that will not change until November 1, 2002. Work on The Alliance Program actually began two years ago, but when rates began to skyrocket in November of 1999, Neace Lukens fully implemented the project.
"When this program was presented to our members, it was accepted with open arms," says Baker, and considering the rates The Alliance Program offers, it's no surprise. According to Neace Lukens President Joe Lukens, a 100-bed nursing home with average risk factors that paid $10,000 for insurance 6 months ago now pays about $20,000 through The Alliance Program. Outside the program the same facility faces premium rates of about $80,000.
Lukens says his firm's strict review process allows the company to offer such low rates to facilities. Before the firm insures a facility, Neace Lukens' risk management division-composed of RNs, licensed nursing home operators and risk management experts-spends a day and a half inspecting the nursing home and verifying that it meets the program's standards. Factors that Neace Lukens takes into account when deciding whether to insure the home and determining the rate to charge the facility include:

'the facility's state survey results
'whether the facility has risk management policies and procedures in effect
'the facility's skin care, wound and fall management policies
'the facility's elopement rate
'the facility's record on abuse, neglect, weight loss and dehydration
'the facility's loss experience in the past

Only Academy members can apply for the program. Although Baker insists that the Academy's members provide better care than their national-chain peers, some of its homes do not qualify for the program. "We had to be selective," says Baker, explaining the program's standards. "And that was probably the toughest obstacle from our perspective as a trade association." Yet intense interest in the program has fueled the Academy's recent expansion; Baker says that as a result of the barely year-old program, the number of beds the Academy represents has nearly tripled from 8,000 to 20,000, and virtually all of the approximately 215 members of the Academy are now in the program.
The Alliance Program's growth has slowed recently so that, as Baker and Lukens explain, only the best nursing homes will be included. However, Lukens says he is interested in expanding the program into neighboring Kentucky, Indiana and West Virginia within the next six months. The Association of Ohio Philanthropic Homes, Housing and Services for the Aging (AOPHA), representing nonprofit facilities in Ohio, also has an arrangement with Neace Lukens similar to the Academy's program-professional liability rates are locked in until November 2002. Clark Law, CEO of AOPHA, notes that AOPHA members that have been able to take advantage of the organization's relationship with Neace Lukens have received rates for professional liability insurance that are one-half to one-third less than the current market rates.

While The Alliance Program and Neace Luken's relationship with AOPHA provide relief for some nursing homes, rates will continue to be a serious problem for many. "Insurance rates are increasing and changing every month. At one point I'm sure rates will flatten out, but over the next 6 to 12 months I still think you will see increases," says Bern, who believes that the trend will continue to spread across the country. His advice for nursing home operators is simple: "Be aware and be prepared." He recommends that six months before a home's premium is scheduled to renew, the facility should evaluate its options: "Scour the market looking for the right deal and get the right product, because a lot of these companies that might be offering a solid premium, or at least a competitive premium, have contracts that aren't as strong."
Bern also says that forming purchasing groups and other types of alliances can prove beneficial for nursing homes seeking lower insurance rates, and he suggests that local firms provide the insurance, for he believes they are more likely to understand the market and provide better service. Thus, other facilities might be able to follow the Academy, AOPHA and Neace Lukens' example and attempt to make the best of a bad situation. As Baker says, "Instead of being reactionary, we attempted, and I think we were successful, to be proactive." Working together in this way just might be the key to nursing homes' survival in the foreseeable future. NH

Douglas J. Edwards is an assistant editor with Nursing Homes/Long Term Care Management.