2012 Long Term Care General Liability and Professional Liability Actuarial Analysis is the terribly boring title of a recent report by Aon Risk Solutions.
The report is written from the point of view of risk managers and insurance companies that have an interest in keeping the liability losses of facilities such as nursing homes as low as possible. The less money insurance companies have to pay out for nursing home negligence, the more profit the insurance companies will make. So anything that reduces payments is good for the insurance companies.
It would be great for everyone if the means for reducing payments was to reduce medical negligence. But instead, the industry seems more focused on just eliminating or severely restricting the legal rights of patients and their families. This is why we had medical malpractice “tort reform” in Texas in 2003. And it’s also why there has been such a big push in recent years on behalf of long-term care facilities to force patients to sign mandatory arbitration agreements before being admitted to the facilities. Negligence cases submitted to arbitration result in lower payments than those allowed to go to court.
Here is an excerpt from the lengthy report:
Long term care liability loss rates and claim severity have reached an eight-year high and are expected to grow steadily in 2013 against a backdrop of health care provider budget constraints and uncertainty about health care reform, according to Aon Risk Solutions, the global risk management business of Aon plc. This analysis is reflected in the 2012 Long Term Care General Liability and Professional Liability Actuarial Analysis from Aon Global Risk Consulting and published in partnership with the American Health Care Association.
My comment — BUT, and this is really important, the results are exactly opposite for the state of Texas. In 2003, a “tort reform” bill was passed that essentially took away the rights of injured nursing home residents to sue for damages.
More excerpts, from the section of the report specifically about Texas:
Loss Rate
For years, the Aon study has cited Texas as the example for effective tort reform. Texas enacted tort reform in 2003 and shortly thereafter saw remarkable reductions in loss rates. In prior studies, we have estimated pre-refom loss rates in Texas above $5,500 per occupied bed.8 In 2005, just two years after tort reform became effective, the loss rate was $460 per occupied bed, This reduced rate level has persisted.
Periodically, the tort law has been challenged. It was recently affirmed by a court ruling in March 2012, maintaining Texas’s tort environment. The tort limits have survived challenges in part due to constitutional amendments that allow for limits on tort damages in state law.
The 2012 forecast loss rate in Texas is $320, the lowest loss rate of the profiled states.
Frequency
Shortly after tort reform was enacted, loss frequency in Texas began a precipitous drop. The forecast 2011 frequency is 0.43%, the lowest of the profiled states.
Severity
Claim severity also decreased after tort limits were enacted. Since 2005, severity has grown a slow pace. The 2012 forecast severity of $73,000 is the lowest of the profiled states.
Arbitration Results
Arbitration continues to be an effective cost limiting tool for long term care providers. In our study of 1,449 closed claims, we found that claims settled under valid ADR agreements are 21% less costly than other claims.
We first examined arbitration in the wake of efforts on the national stage to outlaw the use of pre-dispute arbitration agreements in long term care settings. Congress has considered this legislation each year since 2008, but no laws have been enacted.
Although the plaintiff’s advocates continue to look for ways to limit their use, arbitration appears to have the support of the Supreme Court of the United States.
