Aon Study reveals an increase in average long term care liability claims

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Long Term Care CostsAon Risk Solutions has released the results of research in its 2011 Long term Care General Liability and Professional Liability Actuarial Analysis, which showed that even though the frequency of claims is declining, the costs of long term care liability are on the rise as a result of an increasing average size of the claims.

When compared to 2010, this year has shown a rise in the average size of claims that equals approximately 4 percent.

Across the country, the severity and size of the liability claims saw a steady climb, starting in 2005 at an average of $125,000, and having increased to $153,000 by 2010. This year, the study has forecasted that the average claim severity will be $159,000.

Furthermore, while the past five years have held the annual loss rate per bed at a steady $1,400, this year is projected to see a rate closer to $1,430. Similarly, since 2005, the Medicaid’s daily reimbursement rate’s loss cost percentage has remained close to its 2.22 percent level from 2010.

As the severity of the claims rises, the frequency of liability claims has been reduced beyond the 1.07 percent seen back in 2003, to last year’s 0.91 percent. It is forecasted that this year’s claim frequency will slip a little bit more, reaching 0.90 percent, meaning that for every 110 long term care facility residents, there will be fewer than one liability claim.

According to the study, the slip in frequency of claims was outweighed by the rise in the severity of the claims. That same research suggested that the increase in liability costs is significant for the providers of long term care as it is also their responsibility to manage uncertain funding and reductions in reimbursements from Medicare.

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