Washington, D.C. — The cost of liability continues to increase for the long term care profession, according to the findings of an analysis released today by the American Health Care Association (AHCA) and Aon Global Risk Consulting, the risk consulting business of Aon plc (NYSE:AON). The overall national long term care loss rate is expected to grow by 5 percent annually, with claim frequency driving the increase at an expected 3 percent growth rate.

The 13th published edition of the Aon/AHCA 2015 Long Term Care General Liability and Professional Liability Actuarial Analysis provides estimates of loss rates, or the cost of liability to skilled nursing care centers on a per-bed basis. The projected national 2016 loss rate, which is a combination of claim severity and frequency, is expected to increase from $2,030 to $2,150 per occupied bed. This means that a nursing center with 100 occupied beds can expect approximately $215,000 in liability expenses in 2016.

“Consolidation in the health care industry, uncertainty around health care reform and increasingly effective solicitation campaigns from plaintiffs’ attorneys are all factors impacting the long term care sector,” said Barry Weiner, managing director of Aon’s health care practice. “The findings in the analysis deliver tremendous value to providers in helping them effectively navigate this complex landscape.”

New findings from the analysis looked at the use of arbitration as an alternative to litigation, a practice that continues to pose challenges for the long term care profession. In particular, data show that claims resolved under arbitration agreements have a 7 percent lower cost and are finalized three months earlier than claims resolved without arbitration.

“The report validates what we have been saying about arbitration,” said Mark Parkinson, president and CEO of AHCA. “Arbitration is an important way to help protect the legal rights of patients and their families while providing a faster resolution of disputes. It also reduces costs for patients and their families, the nursing center, and the health care system.”

In addition to the national projection, 18 states are profiled individually in this annual report. Consistent with 2014 findings, this year’s data show that Kentucky is expected to remain the highest-cost state with a projected loss rate of $9,820 per occupied bed, while Texas, which has enacted substantive tort reforms, contrasts sharply with an anticipated $410 loss rate per occupied bed.

New to this year’s report, liability loss rate estimates for Cook County, Illinois, which includes Chicago, were studied separately from the rest of the state in response to provider requests. Interestingly, Cook County claims frequency was approximately 50 percent higher than claims frequency in the rest of the state, and 86 percent of claims in Cook County resulted in indemnification to the plaintiff compared with 72 percent in the rest of the state.

“The rising costs of litigation pose an ongoing challenge to long term care providers,” said Christian Coleianne, associate director and actuary from Aon Global Risk Consulting. “However, by leveraging the findings in this report, providers of long term care are better equipped to understand and help properly fund for liability costs.”

Note to editors: An abstract of the report and graphics illustrating results from the 2015 Aon/AHCA Long Term Care General Liability and Professional Liability Actuarial Analysis are available upon request. To access the report, visit www.ahca.org. The report is also available via registration at aon.com/ltcreport.

Methodology
Approximately 17,600 individual non-zero claims from long term care facilities were aggregated. The 35 providers represented in the national study operate approximately 240,000 long term care beds, consisting of skilled nursing facility beds and a number of independent living, assisted living, home health care and rehabilitation beds. They represent approximately 17 percent of the beds in the United States, and six of the 10 largest operators in the country.

About AHCA/NCAL
The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) represents more than 12,000 non-profit and proprietary skilled nursing centers, assisted living communities, sub-acute centers and homes for individuals with intellectual and development disabilities. By delivering solutions for quality care, AHCA/NCAL aims to improve the lives of the millions of frail, elderly and individuals with disabilities who receive long term or post-acute care in our member facilities each day. For more information, please visit www.ahca.org or www.ncal.org.

About Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 69,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global and principal partnership with Manchester United.

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