Higher insurance could close assisted-living homes

Posted: Tuesday, June 25, 2002

Assisted-living homes providing care and housing for seniors are facing hard times because of insurance costs that in some cases have increased by more than 500 percent within the last year.

More than 80 percent of the 153 assisted-living businesses in Alaska consist of smaller mom-and-pop outfits that take in 10 or fewer residents and operate out of a private house.

Three of the smaller homes are operated in Southeast - two in Juneau and one in Ketchikan.

Linda Smith has run an assisted-living home out of her seven-bedroom house in Lemon Creek for 17 years. For the last three years she has had to renew her insurance with a different company because the former company dropped her, although she never has filed a claim. This year Smith saw an increase in her premium from $2,025 to $10,845.

"I've never had a complaint," Smith said.

She said the increased cost of insurance is forcing her to pass on part of the expense to residents.

Smith provides care for five residents at her home with the help of one employee, providing meals, assistance with everyday tasks, and a relaxed environment.

During the last three years, Smith has paid between $1,600 and $2,300 in insurance premiums to cover the state-mandated $100,000 in liability per resident.

Smith received a letter in March from her Fairbanks insurance broker Baker and Associates notifying her that the policy would not be renewed in June.

She said Baker and Associates worked to help her find another carrier, but the first companies willing to provide coverage would have charged about $30,000 for five people. This would have put her out of business, Smith said.

She was later approved for the less expensive policy.

"It's a done deal - at a 500 percent increase," Smith said, noting that the new policy could last only a year.

Gary Ward, the state's assisted-living home licensing coordinator, said the cost of bodily injury liability insurance has been skyrocketing all over the country.

Ward said rates have been increasing by as much as 800 percent in some places, noting that premiums for one assisted-living home in Montana went from about $2,000 to $16,000 in just a few years.

"I spoke to a person in Texas that said the liability insurance for a nursing bed there is $6,000 a bed," Ward said.

He attributed the rising costs to lawsuits across the country against nursing homes for mistreatment of seniors, a downturn in the stock market, and the events of Sept. 11.

Alberta Granger, Florida's assisted-living unit manager, said her state passed tort reform bills last year to alleviate the stress of lawsuits. New statutes capped the amount of damages that can be awarded due to neglect.

"The laws were put in place to bring providers back into the marketplace," Granger said.

Larry Baker, of the Fairbanks insurance broker Baker and Associates, said states with larger populations more easily are able to absorb the impact of rising costs. Baker and Associates is the major liability insurance provider for assisted-living homes in Alaska.

Baker said assisted-living homes in Alaska are hit harder by the increase in insurance costs because they are not able to support the customer base necessary to absorb the cost of expensive lawsuits.

He said Baker and Associates is working to form an "affinity group" with northwestern states that have similarly small populations to pool the insurance and attract larger carriers.

Baker said many assisted-living homes likely would go out of business, leaving residents in nursing homes, if something isn't done to help reduce insurance costs.

"Those people will end up going into a nursing home and the state ends up paying more anyway," Baker said.

Ward, the state official who licenses such homes, said a couple of assisted-living homes in Alaska have closed within the last year because they couldn't afford insurance.

He agreed that residents living in homes that close down could end up moving into more costly institutions.

"There are people in assisted-living homes that would be eligible for nursing homes," Ward said. Other options include relying on personal care attendants, applying for a spot in the state-funded Pioneers' Homes, or living with relatives.

Timothy Inklebarger can be reached at timothyi@juneauempire.com.

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