Washington, D.C. (Dec. 1, 2016) – 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 loss rate is expected to grow by 6 percent annually, with claim frequency driving the increase at an expected 4 percent growth rate.

The 14th published edition of the Aon/AHCA 2016 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 2017 loss rate, which is a combination of claim severity and frequency, is expected to increase to $2,350 per occupied bed. This means that a nursing center with 100 occupied beds can expect approximately $235,000 in liability expenses in 2017.

“The long term care industry is facing a deteriorating claims environment,” said Barry Weiner, managing director of Aon’s health care practice. “But, the most top-of-mind development facing providers is the CMS ban on the use of pre-dispute binding arbitration agreements, which is currently being contested in the courts.”  

Previous analysis has shown that arbitration results in lower liability costs and faster claims resolution, which benefits providers and injured parties. Providers are facing another challenge to managing liability costs if arbitration is no longer available.

“Arbitration is an important way to help protect the legal rights of patients and their families,” said Mark Parkinson, AHCA President and CEO.  “It also reduces costs for patients and their families, for the nursing center, and for the health care system.”

Statewide Results
In addition to the national projection, 17 states are profiled individually in this annual report. This year’s data show that three states in particular are projected to have higher-than-average loss rates per occupied bed in the coming year: Florida’s projected loss rate is $7,400 per occupied bed, $7,500 in Kentucky, and $7,360 in West Virginia. This contrasts sharply with an anticipated $480 loss rate per occupied bed in Minnesota and $500 in Massachusetts.

Similar to last year’s study, 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. The claims frequency in Cook County is 26 percent higher than the claims frequency in the rest of the state, and 85 percent of claims in Cook County resulted in recoveries for the plaintiff compared with 83 percent in the rest of the state.

“Overall, what we are seeing on a state level – increasing loss rates, claim frequency and claim severity – mirrors what we are seeing at the national level,” said Christian Coleianne, associate director and actuary from Aon Global Risk Consulting. “The findings in this analysis help providers understand where their risks and costs are to properly fund those costs.”

Note to editors
An abstract of the report and graphics illustrating results from the 2016 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 18,300 individual non-zero claims from long term care facilities were aggregated. The 31 providers represented in the national study operate approximately 224,000 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.

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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 brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com.

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Media Contact:
Meg Cotiguala
312.459.6362
Meg.cotiguala@kemperlesnik.com