Risk. Reinsurance. Human Resources.
2016 Long Term CareGeneral Liability and Professional Liability Actuarial Analysis
November 2016
Aon Risk Solutions
Table of Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Liability and the Long Term Care Profession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Advisory Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3State Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Indemnity and Expense Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Claim Lag Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Occurrence to Closing Lag . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Reporting Lag . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Report to Closing Lag . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Countrywide Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Illinois – Cook County. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Illinois – Excluding Cook County . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
West Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Database and Collection Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Actuarial Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Conditions and Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
About Aon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Introduction
Purpose
Aon Global Risk Consulting’s (Aon) Actuarial and Analytics practice conducted an actuarial analysis of general liability
and professional liability (GL/PL) claim costs for the long term care profession in the United States .
Scope
The specific objectives of this study are to:
§ Identify the overall trends in the cost of GL/PL claims for long term care
§ Identify state specific trends in the cost of GL/PL claims for long term care
§ Identify trends in frequency and severity overall and on a state by state basis
§ Present closed claim statistics related to claim lag and expense versus indemnity
An overview of the findings can be found in the Executive Summary section of this report .
Please contact us if you have any questions regarding this report .
Respectfully submitted,
Christian Coleianne, FCAS, MAAAAssociate Director and Actuary 1 .410 .309 .0741christian .coleianne@aon .com
Meredith Huskey, ACAS, MAAAConsultant and Actuary1 .410 .381 .1876meredith .huskey@aon .com
Molly RozranActuarial Analyst 1 .410 .381 .2439molly .rozran@aon .com
Donald Riggins, FCAS, MAAA, CPCUAssociate Director and Actuary1 .410 .309 .4539donald .riggins@aon .com
Konstantin SakherzonSenior Actuarial Analyst1 .215 .255 .1806konstantin .sakherzon@aon .com
1 2016 Long Term Care Actuarial Analysis
Executive Summary
Key Findings
Based on the actuarial analysis of GL/PL claims data from long term care providers on a national level:
§ Long term care loss rates are increasing by 6 .0% annually .
§ The overall forecasted 2017 occurrence year long term care GL/PL loss rate limited to $1 million per occurrence is
$2,350 per bed .
§ Long term care frequency is increasing by 4 .0% annually .
§ The forecasted 2017 occurrence year long term care GL/PL frequency is 1 .08 claims per 100 occupied beds .
§ Long term care claim severity is increasing by 2 .0% annually on an overall basis .
§ The forecasted 2017 occurrence year long term care GL/PL severity is $218,000 per claim limited to $1 million per
occurrence .
Liability and the Long Term Care Profession
The cost of liability continues to increase for the Long Term Care profession . At the national level, the overall loss rate is
expected to grow by six percent annually, with claim frequency driving the increase at an expected four percent growth
rate . We have increased our estimate of frequency trend to reflect a deteriorating claims environment .
The most significant development related to liability for Long Term Care providers in 2016 is the Centers for Medicare and
Medicaid Services (CMS) ban on the use of pre-dispute binding arbitration agreements . Last year, members of Congress
and a number of states’ attorneys general sent letters asking CMS for this ban . On September 28, 2016, CMS issued a final
rule for participants in Medicare and Medicaid . Included in the rule was a prohibition on the use of pre-dispute binding
arbitration agreements, effective November 28, 2016 .
The American Healthcare Association (AHCA), in association with several providers, has filed for declaratory and injunctive
relief to prevent this part of the rule from taking effect . AHCA contends that the CMS rule bypasses the legislative process
and is in conflict with the Federal Arbitration Act (FAA) . Historically, AHCA has promoted best practices for arbitration,
recommending voluntary agreements that are set apart from the admission document and that include rescission language .
Providers are facing another challenge to managing liability costs if arbitration is no longer available .
1 http://www.franken.senate.gov/files/documents/150923CMSArbitration.pdf retrieved September 24, 2015 http://hankjohnson.house.gov/sites/hankjohnson.house.gov/files/documents/ Nursing_Home_Arbitration1.pdf retrieved October 21, 2015 http://www.ag.state.mn.us/Office/PressRelease/PDF/LTCArbitrationComments.pdf retrieved October 21, 2015
2 https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-09-28.html retrieved October 18, 2016
3 https://www.ahcancal.org/News/news_releases/Pages/American-Health-Care-Association-Files-Court-Challenge-to-Arbitration-Rule.aspx retrieved October 18, 2016
Aon Global Risk Consulting 2
Advisory EstimatesThe following table presents a summary of our findings for long term care GL/PL:
LTC Estimates and Annual Trends for Losses Limited to $1 Million per Occurrence
Projected 2017 estimate Annual trend
Overall claim frequency* 1 .08 4 .00%
Indemnity claim frequency* 0 .80 4 .00%
Severity $218,000 2 .00%
Loss rate** $2,350 6 .00%
*number of claims per 100 occupied beds**liability cost per occupied bed
§ Overall claim frequency is the number of claims per 100 occupied beds . Indemnity claim
frequency is the number of claims that resolve with a payment to the claimant per 100
occupied beds .
§ Claim severity is the average size of claims, with claims limited to $1 million per occurrence .
§ The loss rate is the annual amount per occupied bed required to defend, settle or litigate claims
in a given year .
§ The projected 2017 loss rate is $2,350 and is projected to grow by six percent annually .
State FindingsThe following chart shows projected 2017 loss rate levels for the states that we have profiled in this
study . The 2017 projected loss rates are determined by applying trend to our 2016 estimates by state .
The states were profiled based on the volume of data received, the stability of the results compared to
prior years, and the number of providers represented in the data .
Comparison of Projected 2017 Loss Rates Limited to $1 Million per Occurrence
$2,350
100%
$3,320
6.0%
$7,400
3.4%
$2,880
4.2%
$3,410
4.6%
$1,210
4.1%
$7,500
2.6%
$500
4.7%
$1,530
3.5%
$890
2.3%
$480
2.3%
$2,790
4.5%
$1,050
5.2%
$1,000
4.4%
$2,210
9.4%
$3,800
3.7%
$510
6.3%
$7,360
2.2%
$1,650
26.4%
Loss Rate
Loss Rates are relative to 2017 occupied beds. The % of Database is measured by occupied beds.
% of Database
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
All OtherWVTXTNPAOHNCNJMNMIMDMAKYINILGAFLCA
Countrywide
3 2016 Long Term Care Actuarial Analysis
Closed claims are presented to show the relationship between indemnity and expense . The claims
were limited to those that are seven or less years from the occurrence date . This represents 99% of
the claims in each closing year .
The following chart shows the distribution of claims closed with expense only versus claims closed
with indemnity .
The percent of claims closed with indemnity is 72% over the experience period, but only 66% of
claims closed with indemnity in 2015 .
Indemnity and Expense Only Claim Counts
The following chart shows the average paid indemnity and expense for claims closed with an
indemnity payment . Indemnity costs are about 75% of total costs on claims closed with indemnity .
The average indemnity has grown since 2008, while the average expense is relatively flat .
Claims Closed with Indemnity: Average Size - Unlimited
Indemnity and Expense Statistics
0
500
1,000
1,500
2,000
2,500
2015201420132012201120102009200820072006
232
618
266
643
306
813
443
784
374
1,128
304
907
380
1,293
431
1,305
509
1,240
740
1,406
2.05%1.98%1.86%2.14%
Closed Year
Cla
im C
oun
t
Expense Only Claims Indemnity Claims
0%
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
2015201420132012201120102009200820072006
$77,
770
$218
,919
$76,
281
$203
,186
$52,
539
$152
,377
$59,
906
$160
,126
$66,
937
$183
,609
$56,
632
$177
,601
$60,
140
$207
,608
$56,
705
$180
,983
$54,
664
$178
,273
$68,
722
$233
,959
Closed Year
Ave
rag
e C
laim
Siz
e
Average Paid Expense Average Paid Indemnity
Aon Global Risk Consulting 4
The following chart shows the average paid expense for claims closed without an indemnity
payment . The average expense on claims closed without indemnity averages $19,000 .
Claims Closed without Indemnity: Average Expense - Unlimited
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
20152014201320122011201020092008
$33,027
$10,840
$16,955
$23,372
$18,872
$16,255 $16,046$17,141
Closed Year
Ave
rag
e Ex
pen
se
5 2016 Long Term Care Actuarial Analysis
Occurrence to Closing LagThe occurrence to closing lag is number of months between the occurrence date of an event
and the time it is closed . Our analysis shows 19% of incidents are closed within 12 months of the
occurrence, and 42% are closed within 24 months . Four years after an occurrence, 81% of
claims are closed .
Closing Lag: Cumulative Percent of Claims Closed
0%
20%
40%
60%
80%
100%
60-7248-6036-4824-3612-240-12
19.3%
41.7%
64.3%
81.1%
92.2%97.1%
Number of Months from Occurrence to Close
0%
20%
40%
60%
80%
100%
60-7248-6036-4824-3612-240-12
71.2%
92.2%98.2% 99.5% 99.7% 99.9%
Number of Months from Incident to Report
Claim Lag Statistics
Reporting LagThe reporting lag is time between the occurrence date of an event and the time it is reported to the
provider . 71% of incidents are reported within 12 months of the occurrence, and 92% are reported
within 24 months .
Reporting Lag: Cumulative Percent of Claims Reported
Aon Global Risk Consulting 6
Report to Closing LagThe report to closing lag is the number of months between the report date of the incident and the
final settlement . 34% of claims close within 12 months of being reported and 63% of claims close
within the first 24 months after being reported .
Report to Closing Lag: Cumulative Percent of Claims Closed
0%
20%
40%
60%
80%
100%
60-7248-6036-4824-3612-240-12
34.4%
63.3%
81.9%
91.5%96.8% 98.6%
Number of Months from Report to Close
7 2016 Long Term Care Actuarial Analysis
The following table shows the distribution of claim sizes and incurred dollars in our database .
Distribution of Claim Counts and Claim Dollars
Total Claim Size Claim CountDistribution of Claim Count
Distribution of Incurred Dollars
$50,000 or less 8,818 47 .7% 19 .8%
$50,001 - $250,000 5,865 31 .7% 43 .5%
$250,001 - $500,000 2,599 14 .1% 18 .7%
$500,001 - $1,000,000 931 5 .0% 9 .6%
$1,000,001 - $2,500,000 232 1 .3% 5 .6%
$2,500,001 - $5,000,000 34 0 .2% 1 .3%
$5,000,001 and Greater 6 0 .0% 1 .5%
Total 18,485 100.0% 100.0%
In our analyses, except where noted, we limit the size of each claim to $1 million . This limitation
reduces the influence and skew of individual large claims on our calculations .
Claim Size Distribution
Aon Global Risk Consulting 8
Countrywide Estimates
Loss RateThe following chart shows the loss rate per
occupied bed .
Loss rates are increasing since 2010 .
The current annual loss rate trend is
projected at 6 .0% .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
20162015201420132012201120102009200820072006
$1,100$1,170 $1,130 $1,150
$1,430$1,560 $1,640
$1,830$1,990
$2,090$2,220
Occurrence Year
Claim Frequency per 100 Occupied Beds
0.00
0.20
0.40
0.60
0.80
1.00
1.20
20162015201420132012201120102009200820072006
0.49
0.67
0.51
0.71
0.49
0.66
0.53
0.71
0.59
0.80
0.63
0.85
0.64
0.89
0.71
0.96
0.71
0.96
0.74
1.00
0.77
0.19 0.20 0.17 0.180.20
0.22 0.250.25 0.25
0.26 0.27
1.04
Occurrence Year
Expense ClaimsIndemnity ClaimsClaim FrequencyThe following graph shows the frequency
per 100 occupied beds . The stacked bar
chart provides frequency estimates for claims
with indemnity (indemnity claims) and claims
without indemnity (expense only claims) .
Claim frequency has increased from 0 .67 per
100 occupied beds to 1 .04 per 100 occupied
beds .
The participants in this study represent approximately 223,600 occupied beds in the country . This is approximately 17% of
the beds in the country .
9 2016 Long Term Care Actuarial Analysis
SeverityThe following graph shows the average size
per claim, also called claim severity .
Claim severity has grown over the experience
period from $164,000 in 2006 to a projected
$214,000 in 2016 .
Claim Severity Limited to $1M per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
20162015201420132012201120102009200820072006
$164
,000
$165
,000
$171
,000
$163
,000
$179
,000
$183
,000
$184
,000
$190
,000
$207
,000
$210
,000
$214
,000
Occurrence Year
Liability Costs and Medicaid Reimbursement TrendsMedicaid is a significant source of revenue
for long term care providers .
The following graph shows the per diem
loss rate per bed as a percentage of the
Overall Medicaid per diem reimbursement
rate . The Overall Medicaid reimbursement
rate shown here is a state rate weighted by
the exposure distribution underlying the
per diem loss rate .
Concurrent with the recent loss rate
growth, liability costs as a percent of the
Medicaid Reimbursement rate has increased
in recent years .
Loss Rate as a Percentage of Medical Reimbursement Limited to $1M per Occurrence
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2015201420132012201120102009200820072006
$146.49
$3.01
$154.38
$3.20
$162.16
$3.09
$167.22
$3.15
$171.58
$3.92
$174.47
$4.27
$179.12
$4.49
$181.34
$5.01
$185.73
$5.45
$190.40
$5.72
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
2.05% 2.07%1.91% 1.88%
2.28%2.45% 2.51%
2.76%2.93% 3.00%
Occurrence Year
Aon Global Risk Consulting 10
California
Loss RateLoss rates have increased to a level above
$2,300 since 2012 .
FrequencyClaims frequency is fairly flat since 2010, with
a spike in 2012 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 15,900 occupied beds in the state . This is approximately 16%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
20162015201420132012201120102009200820072006
$1,560 $1,590 $1,530 $1,570
$1,920
$1,500
$2,360
$2,850 $2,760$2,940
$3,110
Occurrence Year
0.00
0.20
0.40
0.60
0.80
1.00
1.20
20162015201420132012201120102009200820072006
0.70 0.640.72
0.620.70
0.51
0.700.61 0.63 0.63
0.65
0.32
1.03
0.43
1.07
0.29
1.00
0.22
0.840.25
0.95
0.40
0.920.36
1.06
0.29
0.90
0.29
0.92
0.29
0.92
0.30
0.96
Occurrence Year
Expense ClaimsIndemnity Claims
11 2016 Long Term Care Actuarial Analysis
Severity In 2013, claim severity has exceeded
$300,000 per claim and appears to be
holding at that level .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percentage of the
Medicaid Reimbursement Rate is 4 .21% .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
20162015201420132012201120102009200820072006
$152
,000
$149
,000
$153
,000
$187
,000
$202
,000
$164
,000 $2
22,0
00
$317
,000
$300
,000
$319
,000
$325
,000
Occurrence Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%4.00%
4.50%
5.00%
2015201420132012201120102009200820072006
$142.14
$4.27
$150.69
$4.35
$156.56
$4.19
$163.40
$4.30
$168.05
$5.26
$175.24
$4.11
$179.14
$6.46
$178.61
$7.80
$185.09
$7.56
$191.33
$8.05
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
3.00% 2.89%2.68% 2.63%
3.13%
2.35%
3.61%
4.37%4.08% 4.21%
Occurrence Year
Aon Global Risk Consulting 12
Florida
Loss RateFlorida loss rates are increasing since 2007,
with a projected 2016 loss rate at $6,960 per
occupied bed .
The sharp increase in 2009 is attributable to
rising claims frequency .
Florida’s loss rate is the second highest
among the profiled states and is noteworthy
because of the elevated frequency of claims .
FrequencyFlorida’s frequency is the highest of the
profiled states at 2 .79 claims per 100
occupied beds .
Frequency has been elevated since 2009 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 6,400 occupied beds in the state . This is approximately nine percent
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
20162015201420132012201120102009200820072006
$3,250$2,900 $2,980
$4,880
$4,180
$5,780
$4,830$5,300
$5,660
$6,560$6,960
Occurrence Year
0.0
0.5
1.0
1.5
2.0
2.5
3.0
20162015201420132012201120102009200820072006
1.35
0.31
1.67
1.15
0.191.33
1.30
0.69
1.98
2.021.61
0.27
1.88
2.201.63
2.001.96 2.03 2.11
0.68
2.79
0.32 0.43 0.43
2.450.49
2.69
0.92
2.54
0.64
2.64
0.63
2.58
0.65
2.68
0.30
Occurrence Year
Expense ClaimsIndemnity Claims
13 2016 Long Term Care Actuarial Analysis
Severity Florida’s claim severity has been over
$190,000 since 2009 .
Liability Costs and Medicaid Reimbursement TrendsThe liability costs as a percent of the
Medicaid Reimbursement Rate is 7 .98%,
and is the second highest among the
profiled states .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
20162015201420132012201120102009200820072006
$195
,000
$218
,000
$150
,000 $1
99,0
00
$222
,000
$215
,000
$190
,000
$201
,000
$219
,000
$245
,000
$250
,000
Occurrence Year
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2015201420132012201120102009200820072006
$160.43
$8.90
$175.00
$7.94
$180.05
$8.16
$202.66
$13.36
$206.47
$11.44
$205.61
$15.82
$211.98
$13.22
$211.98
$14.51
$218.64
$15.50
$225.14
$17.96
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
5.55%
4.54% 4.53%
6.59%
5.54%
7.69%
6.24%6.84% 7.09%
7.98%
Occurrence Year
Aon Global Risk Consulting 14
Georgia
Loss RateGeorgia’s loss rate has been increasing
over time .
The sharp increase in 2010 may be related
to the removal of the $350,000 cap on
non-economic damages .
FrequencyClaim frequency in Georgia spiked in 2010
coincident with the Georgia Supreme Court’s
ruling striking down the $350,000 cap on
non-economic damages .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 9,400 occupied beds in the state . This is approximately 28%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
20162015201420132012201120102009200820072006
$950$850
$1,030 $960
$2,540
$1,980
$2,960
$2,680$2,500 $2,550
$2,700
Occurrence Year
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
20162015201420132012201120102009200820072006
0.44
0.19
0.62
0.45
0.090.53
0.51
0.14
0.65
0.48
0.88
0.32
1.21
0.70
0.95 0.91 0.90 0.94 0.97
1.29
0.43
0.24
0.72 0.19
0.890.26
1.20
0.30
1.21
0.30
1.19
0.31
1.24
0.32
Occurrence Year
Expense ClaimsIndemnity Claims
15 2016 Long Term Care Actuarial Analysis
Severity Claim severity in Georgia also increased
in 2010, around the time of the Georgia
Supreme Court ruling, which struck down the
$350,000 cap on non-economic damages .
Liability Costs and Medicaid Reimbursement TrendsGeorgia’s loss rates relative to the
Medicaid Per Diem Reimbursement rate is
substantially higher than levels pre-2010 .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
20162015201420132012201120102009200820072006
$152
,000
$159
,000
$159
,000
$134
,000
$210
,000
$222
,000
$246
,000
$221
,000
$210
,000
$205
,000
$209
,000
Occurrence Year
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
2015201420132012201120102009200820072006
$126.61
$2.60
$127.43
$2.33
$133.48
$2.82
$135.22
$2.63
$141.78
$6.95
$141.59
$5.42
$146.90
$8.10
$156.10
$7.34
$158.33
$6.84
$164.02
$6.98
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
2.05%1.83%
2.11% 1.94%
4.90%
3.83%
5.51%
4.70%4.32% 4.26%
Occurrence Year
Aon Global Risk Consulting 16
Illinois
Loss RateThe loss rate in Illinois has been increasing
moderately since 2008 .
FrequencyClaim frequency in Illinois is the third highest
among the states profiled in this report .
The claims frequency is higher than historical
levels since 2011 .
The overall indemnification rate for Illinois
is 83% .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 9,300 occupied beds in the state . This is approximately 14%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
20162015201420132012201120102009200820072006
$1,600
$2,590
$2,330 $2,410$2,530
$3,080
$2,640
$2,970 $2,950 $3,020$3,210
Occurrence Year
0.00
0.50
1.00
1.50
2.00
2.50
20162015201420132012201120102009200820072006
0.82
0.09
0.91
1.10
0.191.29
1.03
0.191.22
1.331.39
0.241.62
1.621.48
1.83 1.891.81
1.88
2.26
0.43
0.29
1.62 0.36
1.98
0.30
1.790.37
2.200.38
2.27
0.36
2.180.38
Occurrence Year
Expense ClaimsIndemnity Claims
17 2016 Long Term Care Actuarial Analysis
Severity Severity has been under $150,000 since
2011 .
Liability Costs and Medicaid Reimbursement TrendsIllinois’ loss rate relative to the Medicaid
Per Diem Reimbursement rate is above
five percent .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
20162015201420132012201120102009200820072006
$176
,000
$201
,000
$191
,000
$149
,000
$156
,000
$156
,000
$148
,000
$135
,000
$130
,000
$139
,000
$142
,000
Occurrence Year
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
2015201420132012201120102009200820072006
$96.94
$4.38
$103.89
$7.09
$112.20
$6.38
$117.29
$6.60
$117.88
$6.93
$130.47
$8.43
$135.28
$7.23
$129.30
$8.13
$136.14
$8.08
$145.99
$8.27
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
4.52%
6.82%
5.69% 5.63% 5.88%
6.46%
5.34%
6.29%5.94%
5.66%
Occurrence Year
Aon Global Risk Consulting 18
Illinois - Cook County
Loss RateThe loss rate in Cook County, Illinois has
been increasing since 2009 and is nearly 30%
higher than the Illinois state loss rate .
FrequencyClaim frequency in Cook County, Illinois is
has been increasing over the experience
period . The claim frequency is currently 26%
higher than the Illinois state frequency .
Interestingly 85% of claims in Cook County
result in indemnification to the plaintiffs .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 5,900 occupied beds in Cook County, Illinois . This is approximately
nine percent of the Illinois state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
20162015201420132012201120102009200820072006
$1,560
$3,290
$2,810$2,670
$2,840
$3,170 $3,140
$3,830$3,700
$3,880$4,120
Occurrence Year
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
20162015201420132012201120102009200820072006
0.82
0.07
0.89
1.20
0.151.35
1.15
0.201.35
1.41 1.47
0.231.70
1.79 1.81
2.322.30 2.32 2.41
2.86
0.43
0.301.71
0.372.16
0.342.15
0.43
2.75
0.43
2.72
0.43
2.750.45
Occurrence Year
Expense ClaimsIndemnity Claims
19 2016 Long Term Care Actuarial Analysis
Severity Severity is around $144,000 per claim and
has been stable since 2011 .
Liability Costs and Medicaid Reimbursement TrendsWhen compared to the Medicaid Per Diem
Reimbursement rate, Cook County’s loss
rate per bed is over seven percent . This is
comparable to the West Virginia and Florida,
the states with the second and third highest
loss rates among the profiled states .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
20162015201420132012201120102009200820072006
$175
,000
$244
,000
$208
,000
$156
,000
$167
,000
$147
,000
$146
,000
$139
,000
$136
,000
$141
,000
$144
,000
Occurrence Year
0.00%
1.00%
2.00%
3.00%4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
2015201420132012201120102009200820072006
$96.94
$4.27
$103.89
$9.01
$112.20
$7.69
$117.29
$7.31
$117.88
$7.78
$130.47
$8.68
$135.28
$8.60
$129.30
$10.49
$136.14
$10.13
$145.99
$10.62
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
4.40%
8.67%
6.85% 6.23% 6.60%6.65%
6.36%
8.11%7.44% 7.27%
Occurrence Year
Aon Global Risk Consulting 20
Illinois - Excluding Cook County
Loss RateThe loss rate in counties other than Cook
County, Illinois is generally under $2,000 per
occupied bed .
2011 was influenced by several claims over
$600,000 .
FrequencyClaim frequency in counties other than Cook
County show an increase in 2011, but has
been stable near 1 .40 claims per occupied
bed in recent history .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 3,400 occupied beds in counties other than Cook County .
This is approximately five percent of the Illinois state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
20162015201420132012201120102009200820072006
$1,710
$1,290
$1,700 $1,710$1,530
$3,000
$1,750$1,580 $1,670 $1,690
$1,800
Occurrence Year
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
20162015201420132012201120102009200820072006
0.90
0.141.04
0.85
0.32
1.17
0.90
0.21
1.11
1.201.08
0.22
1.30
1.17
0.821.06 1.09 1.06 1.10
1.400.24
1.44
0.31
1.49
0.40
1.220.29
1.34
0.30
1.38
0.29
1.35
0.30
Occurrence Year
Expense ClaimsIndemnity Claims
21 2016 Long Term Care Actuarial Analysis
Severity Severity is currently around $128,000 per
claim .
2011 was influenced by several claims over
$600,000 .
Liability Costs and Medicaid Reimbursement TrendsFor counties other than Cook County, the
loss rate relative to the Medicaid Per Diem
Reimbursement rate is generally below
four percent .
This is a bit higher than the countrywide
average of three percent .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
20162015201420132012201120102009200820072006
$164
,000
$111
,000 $1
53,0
00
$119
,000
$118
,000
$202
,000
$143
,000
$118
,000
$121
,000
$125
,000
$128
,000
Occurrence Year
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
2015201420132012201120102009200820072006
$96.94
$4.68
$103.89
$3.53
$112.20
$4.65
$117.29
$4.68
$117.88
$4.19
$130.47
$8.21
$135.28
$4.79
$129.30
$4.33
$136.14
$4.57
$145.99
$4.63
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
4.83%
3.40%
4.14% 3.99%3.55%
6.29%
3.54% 3.35% 3.36% 3.17%
Occurrence Year
Aon Global Risk Consulting 22
Indiana
Loss RateIndiana’s loss rates increased sharply in 2012
due to increasing severity .
FrequencySince 2012, claim frequency has been near
the current level of 0 .78 claims per 100
occupied beds .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 12,400 occupied beds in the state . This is approximately 32%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$200
$400
$600
$800
$1,000
$1,200
20162015201420132012201120102009200820072006
$430 $440
$330 $310
$600$560
$840$880
$1,050 $1,070$1,140
Occurrence Year
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
20162015201420132012201120102009200820072006
0.42
0.17
0.59
0.31
0.13
0.44
0.28
0.19
0.47
0.23
0.53
0.16
0.69
0.500.59 0.52 0.60 0.55 0.57
0.78
0.10
0.33
0.14
0.65 0.13
0.73
0.19
0.710.22
0.82
0.20
0.75
0.21
Occurrence Year
Expense ClaimsIndemnity Claims
23 2016 Long Term Care Actuarial Analysis
Severity Claim severity is increasing since 2012 .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
Reimbursement Rate has increased from a
low of 0 .56% in 2009 to 1 .63% in 2015 .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
20162015201420132012201120102009200820072006
$73,
000 $1
00,0
00
$70,
000 $9
4,00
0
$86,
000
$87,
000 $1
15,0
00
$124
,000
$128
,000
$143
,000
$146
,000
Occurrence Year
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2015201420132012201120102009200820072006
$114.92
$1.18
$132.94
$1.20
$148.57
$0.90
$151.69
$0.85
$153.79
$1.64
$158.25
$1.53
$163.95
$2.30
$168.87
$2.41
$173.76
$2.87
$179.32
$2.93
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
1.03%
0.90%
0.61% 0.56%
1.07%0.97%
1.40% 1.43%
1.65% 1.63%
Occurrence Year
Aon Global Risk Consulting 24
Kentucky
Loss RateKentucky has the highest loss rate of the
profiled states in this study .
The loss rate has increased from $1,500 in
2007 to a projected $7,070 in 2016 .
FrequencyClaim frequency in Kentucky is the second
highest among the profiled states .
Frequency has increased from a low of
0 .72 claims per occupied bed in 2007 to a
projected high of 2 .32 claims per occupied
bed in 2016 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 6,100 occupied beds in the state . This is approximately 26%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
20162015201420132012201120102009200820072006
$2,660
$1,500
$3,320 $3,440
$5,080
$6,210$5,750 $5,900
$6,240$6,660
$7,070
Occurrence Year
0.00
0.50
1.00
1.50
2.00
2.50
20162015201420132012201120102009200820072006
0.91
0.221.13
0.53
0.180.72
0.87
0.40
1.27
0.87
1.33
0.31
1.64
1.531.30 1.47
1.79 1.69 1.76
2.32
0.171.04
0.46
1.99
0.64
1.94
0.48
1.95 0.58
2.37
0.55
2.24
0.57
Occurrence Year
Expense ClaimsIndemnity Claims
25 2016 Long Term Care Actuarial Analysis
Severity Claim severity in Kentucky is the highest of
the states profiled in this study and has been
above $250,000 per claim since 2008 .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percentage of the per
diem Medicaid Reimbursement rate is
10 .63% in 2015 .
This is the highest level among the
profiled states .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
20162015201420132012201120102009200820072006
$235
,000
$209
,000 $2
61,0
00
$330
,000
$310
,000
$312
,000
$297
,000
$303
,000
$263
,000
$298
,000
$304
,000
Occurrence Year
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2015201420132012201120102009200820072006
$125.56
$7.28
$132.72
$4.11
$137.49
$9.09
$142.72
$9.42
$147.14
$13.91
$151.41
$17.00
$156.86
$15.74
$161.57
$16.15
$166.25
$17.08
$171.57
$18.23
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
5.80%
3.10%
6.61% 6.60%
9.45%
11.23%
10.03% 10.00% 10.27% 10.63%
Occurrence Year
Aon Global Risk Consulting 26
Maryland
Loss RateThe loss rates in Maryland have increased
since 2013 .
FrequencyClaim frequency in Maryland is stable around
0 .75 claims per 100 occupied beds .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 7,500 occupied beds in the state . This is approximately 30%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
20162015201420132012201120102009200820072006
$1,280
$950 $970
$1,130 $1,090 $1,120
$760
$1,560
$1,350 $1,350$1,440
Occurrence Year
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
20162015201420132012201120102009200820072006
0.65
0.13
0.78
0.53
0.18
0.71
0.53
0.050.58
0.54 0.49
0.12
0.60
0.530.44
0.61 0.57 0.62 0.64
0.75
0.10
0.64
0.12
0.65
0.020.46
0.10
0.71
0.090.67 0.10
0.720.11
Occurrence Year
Expense ClaimsIndemnity Claims
27 2016 Long Term Care Actuarial Analysis
Severity Claim severity in Maryland increased sharply
in 2013 .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
Reimbursement Rate is 1 .55% .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
20162015201420132012201120102009200820072006
$163
,000
$133
,000 $1
66,0
00
$176
,000
$180
,000
$171
,000
$165
,000
$219
,000
$202
,000
$188
,000
$192
,000
Occurrence Year
0.00%0.20%
0.40%
0.60%
0.80%
1.00%1.20%
1.40%
1.60%
1.80%
2.00%
2015201420132012201120102009200820072006
$186.41
$3.50
$194.10
$2.60
$213.27
$2.66
$212.29
$3.09
$222.47
$2.98
$231.81
$3.07
$239.63
$2.08
$237.86
$4.27
$243.47
$3.70
$239.37
$3.70
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
1.88%
1.34%1.25%
1.46%1.34% 1.32%
0.87%
1.80%
1.52% 1.55%
Occurrence Year
Aon Global Risk Consulting 28
Massachusetts
Loss RateThe loss rate in Massachusetts has been
near $450 per occupied bed since 2009,
with a surge to $530 in 2011 driven by claim
severity .
Massachusetts has a $500,000 per occurrence
limit on non-economic damages and
limitations on plaintiff’s attorneys’ fees . These
may contribute to the stable environment,
low claims incidence and low severity .
FrequencyClaim frequency in Massachusetts has been
stable over the experience and is currently
at 0 .34 per 100 occupied beds, the lowest
frequency among the profiled states .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 12,900 occupied beds in the state . This is approximately 32%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$100
$200
$300
$400
$500
$600
$700
20162015201420132012201120102009200820072006
$390
$620
$480
$420$370
$530
$390
$320
$440 $440$460
Occurrence Year
0.00
0.10
0.20
0.30
0.40
0.50
0.60
20162015201420132012201120102009200820072006
0.21
0.20
0.41
0.30
0.21
0.51
0.25
0.12
0.37
0.24 0.24
0.13
0.37
0.26 0.23 0.21 0.23 0.23 0.24
0.34
0.08
0.310.09
0.34
0.10
0.33
0.09
0.300.10
0.33
0.10
0.33
0.10
Occurrence Year
Expense ClaimsIndemnity Claims
29 2016 Long Term Care Actuarial Analysis
Severity Claim severity in Massachusetts has been
under $155,000 for the entire experience
period .
The projected severity in 2016 is $135,000 .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
Reimbursement Rate has been declining
over the experience period and, at 0 .60%, is
the lowest of the profiled states .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
20162015201420132012201120102009200820072006
$96,
000
$122
,000
$131
,000
$133
,000
$99,
000
$155
,000
$116
,000
$107
,000 $1
31,0
00
$132
,000
$135
,000
Occurrence Year
0.0%0.1%
0.2%
0.3%
0.4%
0.5%0.6%
0.7%
0.8%
0.9%
1.0%
2015201420132012201120102009200820072006
$177.16
$1.07
$191.30
$1.70
$191.30
$1.31
$192.84
$1.15
$196.84
$1.01
$197.40
$1.45
$197.39
$1.07
$197.91
$0.88
$199.00
$1.20
$201.44
$1.20
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
0.60%
0.89%
0.68%
0.60%
0.51%
0.73%
0.54%
0.44%
0.60% 0.60%
Occurrence Year
Aon Global Risk Consulting 30
Michigan
Loss RateThe loss rate in Michigan surged in 2011, but
has since subsided to a projected $840 per
occupied bed in 2016 .
FrequencyFrequency has leveled at 0 .90 claims per 100
occupied beds .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 4,300 occupied beds in the state . This is approximately 11%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
20162015201420132012201120102009200820072006
$1,160
$780
$1,020$960
$530
$1,190
$1,010
$840$790 $790
$840
Occurrence Year
0.00
0.20
0.40
0.60
0.80
1.00
1.20
20162015201420132012201120102009200820072006
0.71
0.26
0.98
0.49
0.33
0.82
0.54
0.17
0.71
0.56 0.48
0.26
0.74
0.870.68 0.70 0.70 0.73
0.76
0.90
0.090.66
0.040.90
0.080.76 0.13
0.83
0.13
0.840.14
0.870.14
Occurrence Year
Expense ClaimsIndemnity Claims
31 2016 Long Term Care Actuarial Analysis
Severity Severity peaked at $147,000 in 2009 and has
since decreased to under $100,000 .
Michigan has the second lowest severity
among the profiled states .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
reimbursement rate is at 0 .91% .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
20162015201420132012201120102009200820072006
$119
,000
$96,
000
$144
,000
$147
,000
$72,
000
$132
,000
$133
,000
$101
,000
$94,
000
$91,
000
$93,
000
Occurrence Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2015201420132012201120102009200820072006
$163.84
$3.18
$180.92
$2.14
$187.31
$2.79
$195.18
$2.63
$207.40
$1.45
$211.44
$3.26
$219.05
$2.77
$223.76
$2.30
$230.25
$2.16
$237.62
$2.16
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
1.94%
1.18%
1.49%1.35%
0.70%
1.54%
1.26%
1.03%0.94% 0.91%
Occurrence Year
Aon Global Risk Consulting 32
Minnesota
Loss RateThe loss rate in Minnesota has been growing
during the experience period, from $260 per
occupied bed in 2006 to $450 per occupied
bed in 2016 .
Minnesota has the lowest loss rate among the
profiled states .
FrequencyClaim frequency has been level since 2011
and is currently 0 .35 claims per 100 occupied
beds .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 4,600 occupied beds in the state . This is approximately 18%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$100
$200
$300
$400
$500
$600
20162015201420132012201120102009200820072006
$260
$360
$480
$390
$190
$270 $260
$390$360
$420$450
Occurrence Year
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
20162015201420132012201120102009200820072006
0.17
0.11
0.28
0.23
0.040.28
0.20
0.16
0.37
0.28
0.20
0.06
0.26
0.140.19 0.20 0.20 0.20 0.21
0.350.14
0.42
0.20
0.33
0.16
0.34
0.14
0.33
0.14
0.34
0.14
0.34
0.15
Occurrence Year
Expense ClaimsIndemnity Claims
33 2016 Long Term Care Actuarial Analysis
Severity Severity has increased from a low of $72,000
per occurrence in 2010 to a projected
$128,000 per occurrence in 2016 .
This is the third lowest severity among the
profiled states .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
reimbursement rate is 0 .64% .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
20162015201420132012201120102009200820072006
$91,
000
$131
,000
$130
,000
$94,
000
$72,
000
$82,
000
$76,
000
$117
,000
$105
,000 $1
25,0
00
$128
,000
Occurrence Year
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
0.90%
2015201420132012201120102009200820072006
$142.02
$0.71
$147.68
$0.99
$154.24
$1.31
$164.34
$1.07
$164.34
$0.52
$165.82
$0.74
$170.05
$0.71
$169.63
$1.07
$177.94
$0.99
$179.96
$1.15
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
0.50%
0.67%
0.85%
0.65%
0.32%
0.45% 0.42%
0.63%
0.56%
0.64%
Occurrence Year
Aon Global Risk Consulting 34
New Jersey
Loss RateThe loss rate per occupied bed in New Jersey
has been generally between $2,110 and
$2,640 since 2010 .
FrequencyThe frequency per 100 occupied beds has
been fairly level between 1 .13 and 1 .25 since
2009 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 8,500 occupied beds in the state . This is approximately 19%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
20162015201420132012201120102009200820072006
$1,220$1,380
$1,180
$1,680
$2,110$2,240
$1,550
$2,250$2,450 $2,490
$2,640
Occurrence Year
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
20162015201420132012201120102009200820072006
0.63
0.56
1.19
0.70
0.66
1.36
0.71
0.30
1.01
0.740.84
0.31
1.15
0.980.67
0.84 0.82 0.82 0.86
1.24
0.39
1.130.27
1.25
0.44
1.110.37
1.21
0.36
1.18
0.36
1.19
0.38
Occurrence Year
Expense ClaimsIndemnity Claims
35 2016 Long Term Care Actuarial Analysis
Severity Claim severity increased sharply in 2009
and has grown steadily since then, reaching
$214,000 per claim in 2016 .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
reimbursement rate is at 3 .29% .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
20162015201420132012201120102009200820072006
$103
,000
$102
,000
$117
,000
$149
,000 $1
83,0
00
$179
,000
$139
,000
$186
,000
$208
,000
$210
,000
$214
,000
Occurrence Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2015201420132012201120102009200820072006
$187.10
$3.34
$187.17
$3.78
$204.96
$3.23
$204.96
$4.60
$207.76
$5.78
$203.13
$6.13
$200.96
$4.24
$203.85
$6.16
$205.75
$6.71
$207.35
$6.82
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
1.79%2.02%
1.58%
2.24%
2.78%3.02%
2.11%
3.02%3.26% 3.29%
Occurrence Year
Aon Global Risk Consulting 36
North Carolina
Loss RateThe loss rate in North Carolina has been
volatile over the experience period .
The projected loss rate per occupied bed is
expected to reach $990 in 2016 .
A $500,000 non-economic damages cap
became effective October 1, 2011 .
FrequencyThe frequency increase in 2010 may be
related to claimants presenting before the
implementation of tort reform effective
October 1, 2011 . Claim frequency has not
subsided since the legislation became
effective .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 12,600 occupied beds in the state . This is approximately 34%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
20162015201420132012201120102009200820072006
$470
$1,220
$600$540
$930
$480
$650
$880$920 $930
$990
Occurrence Year
0.00
0.10
0.20
0.30
0.40
0.50
0.60
20162015201420132012201120102009200820072006
0.23
0.09
0.32
0.42
0.07
0.49
0.35
0.10
0.45
0.37
0.45
0.10
0.55
0.350.38 0.35 0.37 0.38 0.39
0.49
0.060.43
0.09
0.440.11
0.49
0.09
0.440.09
0.47
0.10
0.47
0.10
Occurrence Year
Expense ClaimsIndemnity Claims
37 2016 Long Term Care Actuarial Analysis
Severity Claim severity has increased since 2011 and
is now $201,000
The claim severity spike in 2007 reflects
several claims that exceed $1 million .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
reimbursement rate is at 1 .36% .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
20162015201420132012201120102009200820072006
$147
,000
$250
,000
$135
,000
$126
,000 $1
70,0
00
$110
,000
$133
,000
$199
,000
$196
,000
$197
,000
$201
,000
Occurrence Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2015201420132012201120102009200820072006
$134.18
$1.29
$136.54
$3.34
$150.33
$1.64
$155.69
$1.48
$160.52
$2.55
$165.17
$1.31
$171.12
$1.78
$176.25
$2.41
$181.36
$2.52
$187.17
$2.55
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
0.96%
2.45%
1.09%0.95%
1.59%
0.79%
1.04%
1.37% 1.39% 1.36%
Occurrence Year
Aon Global Risk Consulting 38
Ohio
Loss RateLoss rates in Ohio have grown from a low
point of $420 per occupied bed in 2007 .
The growth is related to increases in claim
severity .
FrequencyClaim frequency in Ohio has been between
0 .50 and 0 .65 claims per 100 occupied beds
since 2009 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 11,300 occupied beds in the state . This is approximately 15%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
20162015201420132012201120102009200820072006
$540
$420
$650
$450$490
$590
$710
$900$840
$890$950
Occurrence Year
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
20162015201420132012201120102009200820072006
0.37
0.32
0.69
0.36
0.21
0.57
0.43
0.18
0.62
0.230.28
0.24
0.52
0.28 0.38 0.380.34 0.32 0.34
0.58
0.27
0.50
0.24
0.57
0.23
0.61
0.27
0.65
0.25
0.59
0.23
0.55
0.24
Occurrence Year
Expense ClaimsIndemnity Claims
39 2016 Long Term Care Actuarial Analysis
Severity Claim severity has grown strongly over the
experience period and is projected to be
$164,000 in 2016 .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
reimbursement rate is around 1 .39% .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
20162015201420132012201120102009200820072006
$79,
000
$74,
000 $1
05,0
00
$90,
000
$94,
000
$103
,000
$117
,000
$137
,000
$142
,000
$161
,000
$164
,000
Occurrence Year
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
2015201420132012201120102009200820072006
$158.71
$1.48
$163.96
$1.15
$166.07
$1.78
$172.16
$1.23
$177.77
$1.34
$172.33
$1.62
$170.63
$1.94
$174.64
$2.46
$174.35
$2.30
$175.10
$2.44
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
0.93%
0.70%
1.07%
0.71%0.75%
0.94%
1.14%
1.41%1.32%
1.39%
Occurrence Year
Aon Global Risk Consulting 40
Pennsylvania
Loss RateThe 2016 projected loss rate in Pennsylvania
is $2,090 per occupied bed .
FrequencyThe frequency of losses has increased from
a low of 0 .53 in 2006 to a projected 1 .26
in 2016 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 20,100 occupied beds in the state . This is approximately 26%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
20162015201420132012201120102009200820072006
$980
$810$970
$1,190
$1,610
$2,080
$1,770$1,840
$1,990 $1,970$2,090
Occurrence Year
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
20162015201420132012201120102009200820072006
0.40
0.130.53
0.44
0.16
0.60
0.47
0.19
0.66
0.570.69
0.28
0.97
0.79 0.72 0.81 0.89 0.89 0.92
1.26
0.18
0.740.28
1.08
0.25
0.970.30
1.110.32
1.21
0.32
1.21
0.34
Occurrence Year
Expense ClaimsIndemnity Claims
41 2016 Long Term Care Actuarial Analysis
Severity Since 2009, claim severity has been near
$165,000 with the exception of 2011 and
2012 .
Liability Costs and Medicaid Reimbursement TrendsThe liability cost as a percent of Medicaid
per diem rate has grown over the
experience period and is currently at 2 .49%
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
20162015201420132012201120102009200820072006
$186
,000
$134
,000
$147
,000
$161
,000
$166
,000
$193
,000
$182
,000
$166
,000
$165
,000
$163
,000
$166
,000
Occurrence Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2015201420132012201120102009200820072006
$179.17
$2.68
$190.83
$2.22
$197.61
$2.66
$199.42
$3.26
$203.54
$4.41
$204.63
$5.69
$207.61
$4.85
$209.65
$5.04
$214.64
$5.45
$216.75
$5.39
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
1.50%
1.16%1.35%
1.63%
2.17%
2.78%
2.34% 2.40%2.54% 2.49%
Occurrence Year
Aon Global Risk Consulting 42
Tennessee
Loss RateThe loss rate in Tennessee has grown from a
low in 2009 of $1,170 per occupied bed to a
projected $3,580 per occupied bed in 2016 .
The growth is primarily due to growth in
frequency .
Tennessee enacted limits on non-economic
damages effective October 1, 2011 . The
enacted cap on noneconomic damages was
$750,000 for most allegations . This cap is
higher than the caps implemented in other
states .
FrequencyClaim frequency has increased since 2008 .
The continued growth in claim frequency
after the implementation of tort limits in 2011
is surprising .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 8,400 occupied beds in the state . This is approximately 30%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
20162015201420132012201120102009200820072006
$2,060$1,840
$1,230 $1,170$1,370
$2,150$2,410
$3,060$3,330 $3,370
$3,580
Occurrence Year
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
20162015201420132012201120102009200820072006
0.68
0.18
0.86
0.67
0.16
0.83
0.42
0.16
0.59
0.520.58
0.21
0.79
0.83 0.79 0.810.90 0.89 0.92
1.23
0.16
0.68
0.21
1.04
0.30
1.10
0.27
1.080.30
1.21
0.30
1.18
0.31
Occurrence Year
Expense ClaimsIndemnity Claims
43 2016 Long Term Care Actuarial Analysis
Severity Claim severity has increased since 2009 and
is the fourth highest severity of the profiled
states .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
per diem reimbursement has increased from
a low of 2 .22% in 2009 to 5 .32% in 2015 .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
20162015201420132012201120102009200820072006
$239
,000
$221
,000
$210
,000
$173
,000
$174
,000
$207
,000
$220
,000
$283
,000
$276
,000
$285
,000
$291
,000
Occurrence Year
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
2015201420132012201120102009200820072006
$131.05
$5.64
$136.12
$5.04
$141.56
$3.37
$144.30
$3.20
$148.77
$3.75
$153.09
$5.89
$158.60
$6.60
$163.36
$8.38
$168.09
$9.12
$173.47
$9.23
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
4.30%
3.70%
2.38% 2.22%2.52%
3.85%4.16%
5.13%5.43% 5.32%
Occurrence Year
Aon Global Risk Consulting 44
Texas
Loss RateThe loss rate in Texas has been growing since
2010 .
The increases are related to severity growth .
FrequencyThe claim frequency in Texas is generally
around 0 .55 per 100 occupied beds since
2010 .
Texas has the fourth lowest frequency rate
among the profiled states .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 12,900 occupied beds in the state . This is approximately 14%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$100
$200
$300
$400
$500
$600
20162015201420132012201120102009200820072006
$380$430
$280 $280
$220
$270
$320
$460$480
$450$480
Occurrence Year
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
20162015201420132012201120102009200820072006
0.36
0.25
0.61
0.35
0.29
0.63
0.25
0.19
0.44
0.260.22
0.31
0.53
0.170.23
0.26 0.26 0.25 0.26
0.55
0.25
0.51
0.21
0.380.25
0.48
0.28
0.55
0.28
0.55
0.27
0.53
0.28
Occurrence Year
Expense ClaimsIndemnity Claims
45 2016 Long Term Care Actuarial Analysis
Severity Claim severity in Texas has grown to just
under $90,000 .
Despite this growth, Texas has the lowest
severity of the profiled states .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
per diem reimbursement rate has grown
from a low of 0 .47% in 2010 to 0 .87% in
2015 . Texas has the third lowest rate among
the profiled states .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
20162015201420132012201120102009200820072006
$62,
000
$68,
000
$62,
000
$54,
000
$42,
000
$71,
000
$67,
000 $8
3,00
0
$88,
000
$86,
000
$88,
000
Occurrence Year
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
2015201420132012201120102009200820072006
$107.26
$1.04
$106.48
$1.18
$111.89
$0.77
$123.20
$0.77
$128.09
$0.60
$126.87
$0.74
$129.98
$0.88
$131.61
$1.26
$133.42
$1.31
$141.64
$1.23
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
0.97%
1.11%
0.69%0.63%
0.47%
0.58%
0.68%
0.96% 0.98%
0.87%
Occurrence Year
Aon Global Risk Consulting 46
West Virginia
Loss RateThe loss rate in West Virginia has grown from
a low in 2007 of $2,480 to a projected $6,940
in 2016 .
West Virginia has the third highest loss rate
among the profiled states .
FrequencyFrequency has increased from 1 .03 claims per
100 occupied beds in 2007 to a projected
2 .19 claims per 100 occupied beds in
2016 . West Virginia has the fourth highest
frequency among the profiled states .
The bulge in claims for occurrence years
2010 and subsequent may be related to the
large jury award in 2011 .
The state legislature explicitly applied
statutory caps to long term care providers
in 2013 and this may have reduced claims
frequency from its peak in 2012 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 5,100 occupied beds in the state . This is approximately 55%
of the state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
20162015201420132012201120102009200820072006
$2,750$2,480
$3,560
$5,270
$7,680
$5,350
$8,350
$7,010
$6,450 $6,550$6,940
Occurrence Year
0.00
0.50
1.00
1.50
2.00
2.50
3.00
20162015201420132012201120102009200820072006
0.87
0.211.09
0.90
0.141.03
1.04
0.141.18
1.311.75
0.44
2.19
1.23
1.79 1.611.38 1.50 1.56
2.19
0.251.56
0.56
1.790.66
2.45
0.66
2.27
0.54
1.910.60
2.10
0.62
Occurrence Year
Expense ClaimsIndemnity Claims
47 2016 Long Term Care Actuarial Analysis
Severity Severity in West Virginia has been between
$299,000 and $351,000 since 2008 .
This is more than 150% of the countrywide
average severity over the same time period .
Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid
reimbursement rate has increased from a
low of 3 .89% in 2007 to 7 .95% in 2015 .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
20162015201420132012201120102009200820072006
$253
,000
$240
,000 $3
02,0
00
$338
,000
$351
,000
$299
,000
$341
,000
$309
,000
$337
,000
$311
,000
$317
,000
Occurrence Year
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2015201420132012201120102009200820072006
$168.11
$7.53
$174.36
$6.79
$180.64
$9.75
$187.50
$14.43
$193.31
$21.03
$198.92
$14.65
$206.08
$22.86
$212.26
$19.19
$218.42
$17.66
$225.41
$17.93
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
4.48%3.89%
5.40%
7.70%
10.88%
7.36%
11.09%
9.04%
8.09% 7.95%
Occurrence Year
Aon Global Risk Consulting 48
All Other States
Loss RateThe All Other States loss rate is increasing
since 2009 .
FrequencyThe All Other States frequency has increased
from a low of 0 .56 claims per 100 occupied
beds in 2006 to a projected 0 .72 claims per
100 occupied beds in 2016 .
Claim Frequency per 100 Occupied Beds
The participants in this study represent approximately 52,600 occupied beds in the remaining states . This is
approximately 11% of the remaining state total beds .
Loss Rate per Occupied Bed Limited to $1M Occurrence
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
20162015201420132012201120102009200820072006
$1,050
$1,260
$1,070
$820
$970
$1,150$1,210 $1,240
$1,400$1,460
$1,550
Occurrence Year
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
20162015201420132012201120102009200820072006
0.42
0.14
0.56
0.48
0.17
0.65
0.41
0.15
0.56
0.410.42
0.15
0.57
0.430.48 0.47 0.48 0.49 0.51
0.72
0.17
0.58
0.20
0.64
0.20
0.67
0.19
0.66
0.20
0.67
0.20
0.69
0.21
Occurrence Year
Expense ClaimsIndemnity Claims
49 2016 Long Term Care Actuarial Analysis
Severity All Other States claim severity is growing
since 2009 and is projected to reach
$216,000 per claim in 2016 .
Liability Costs and Medicaid Reimbursement TrendsThe All Other States liability cost as a
percent of the Medicaid Reimbursement
rate has increased from 1 .36% in 2009 to
2 .09% in 2015 .
Severity per Claim Limited to $1M per Occurrence
Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence
$0
$50,000
$100,000
$150,000
$200,000
$250,000
20162015201420132012201120102009200820072006
$187
,000
$194
,000
$191
,000
$142
,000
$171
,000
$180
,000
$180
,000
$188
,00
$208
,000
$212
,000
$216
,000
Occurrence Year
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2015201420132012201120102009200820072006
$144.21
$2.87
$153.28
$3.45
$160.65
$2.93
$165.06
$2.25
$168.84
$2.66
$172.71
$3.15
$179.73
$3.31
$181.88
$3.39
$186.49
$3.83
$191.55
$4.00
Avg. Medicaid per Diem Reimbursement
Per Diem Loss Rate per Bed
1.99%
2.25%
1.82%
1.36%
1.58%
1.82% 1.84% 1.86%
2.05% 2.09%
Occurrence Year
Aon Global Risk Consulting 50
Database and Collection Methodology
In an effort to present a comprehensive analysis from the perspective of all long term care systems,
Aon disseminated a request for data to for-profit and not-for-profit providers including independent
providers, regional multi-facility providers and national multi-facility providers .
The results presented in this study are based on the ensuing database of long term care GL/PL losses
and allocated loss adjustment expenses (ALAE) as reported to us by 31 long term care participants .
Participants included large national providers, regional providers, single state operators and
insurance companies . Data from the participants was aggregated, resulting in 18,300 non-zero
claims and $2 .9 billion in incurred losses . The facilities represented in the national study operate
approximately 224,000 long term care beds, consisting primarily of skilled nursing facility beds but
also including a number of independent living, assisted living, home health care and rehabilitation
beds . They represent approximately 17% of the beds in the United States, and include six of the ten
largest providers in the country .
The results found in this study are based on calculations of participant provided data . Providers that
did not participate may have different results, either higher or lower . This may be due to any number
of reasons, including levels of effectiveness in quality of care initiatives and the attractiveness of the
provider for tort actions . Based on standard actuarial techniques, the number of claims, number of
participants and bed representation ensure significant credibility of the results at the national level .
The proportion of statewide bed representation assures significant credibility of the results at the
state level . To increase credibility, a higher response rate among providers would be required .
All long term care results published in this report are based on losses (indemnity plus allocated
adjustment expense) limited to $1 million per occurrence unless otherwise noted . The $1 million per
occurrence limitation was selected to limit the impact of large claims on the results .
Statutory limitations were based on National Conference of State Legislatures research updated
August 2011, accessed October 18, 2016 from http://www .ncsl .org/issues-research/banking/medical-
liability-medical-malpractice-laws .aspx . Referenced statutory limitations were confirmed by retrieving
the individual state codes online .
The loss rates are presented relative to the Medicaid per diem reimbursement rate . The Medicaid
per diem reimbursement rate is based on data from “A Report on Shortfalls in Medicaid Funding for
Nursing Home Care” produced by Eljay LLC and Hansen Hunter & Company, PC for the American
Health Care Association and dated April 2016 . The Overall Medicaid per diem reimbursement rate is
based on the state exposure distribution inherent in this study .
51 2016 Long Term Care Actuarial Analysis
The statistics presented in this report are based on an actuarial analysis of the aggregated long term care
GL/PL claim database and related exposure data . The analysis applies standard actuarial methods to the
claim data to develop ultimate losses and claim counts by occurrence year . These projections are used to
calculate the following statistics presented in this report:
• Loss Rate – ultimate loss projection per occupied bed equivalent
• Overall Frequency – annual number of non-zero claims per 100 occupied bed equivalents
• Indemnity Frequency – annual number of claims with indemnity payments per 100 occupied bed
equivalents
• Severity – average ultimate size of each claim, where each claim is limited to $1 million per occurrence
Actuarial Analysis
Aon Global Risk Consulting 52
Conditions and Limitations
Inherent UncertaintyActuarial calculations produce estimates of inherently uncertain future contingent events . We
believe that the estimates provided represent reasonable provisions based on the appropriate
application of actuarial techniques to the available data . However, there is no guarantee that actual
future payments will not differ from estimates included herein .
Extraordinary Future EmergenceOur projections make no provision for the extraordinary future emergence of losses or types of
losses not sufficiently represented in the historical data or which are not yet quantifiable .
Data RelianceIn conducting this analysis, we relied upon the provided data without audit or independent
verification; however, we reviewed it for reasonableness and consistency . Any inaccuracies in
quantitative data or qualitative representations could have a significant effect on the results of our
review and analysis .
Use and DistributionUse of this report is limited for the specific purpose described in the Introduction . Other uses are
prohibited without an executed release with Aon .
We request that Aon be notified of further distribution of this report . This report should only be
distributed in its entirety, including all supporting exhibits .
53 2016 Long Term Care Actuarial Analysis
Definitions
ALAE ALAE is an abbreviation for allocated loss adjustment expense .
ALAE refers to costs, in addition to indemnity payments and
reserves, which are incurred in handling claims . Typically, these
costs are comprised of legal fees paid by the insured entity in
investigating and defending claims . In the context of this study
ALAE represents defense costs . The majority of claim data used
in this study contained a separate field to identify ALAE costs
separately from indemnity costs . Whether separately identified
or not, allocated loss adjustment expenses are included in the
reported loss information, loss reserving methodologies and
loss projections contained in this report . All references to losses
throughout the report and exhibits include ALAE except where
noted otherwise .
Claim A claim is a demand by an individual or other entity to recover
for a loss . It may involve a formal lawsuit but not necessarily,
especially in the case of a general liability claim .
Exposure Actuaries select an exposure base such that the incidence of
claims will tend to vary directly with the exposure of the entity
at risk . The actuary must consider both the historical loss level
and the corresponding exposures in evaluating historical claim
liabilities and expected future costs . It is important to choose an
exposure measure that is relevant to the unique situation of each
risk group .
In this study the exposure base is occupied beds . Occupied
beds are calculated by multiplying the number of licensed
beds by the average annual occupancy rate . There is a strong
correlation between the number of occupied beds and the
total amount of losses incurred by a long term care facility .
Not all beds are equal in terms of their risk exposure, however .
An assisted living bed generates fewer dollars of GL/PL claim
activity than a skilled care bed . All beds in this study have been
adjusted to the equivalent of a skilled nursing care bed .
By dividing losses by exposures, comparative estimates of the
long term care industry GL/PL loss rates are developed .
Frequency Frequency is the ratio of the number of claims divided by
exposures . In this report, frequency is measured on an annual
basis as the number of claims projected for the given time
period divided by the number of occupied beds during that
same period . In the summary exhibits, frequency is the annual
number of claims per 100 occupied beds .
General Liability (GL) General liability exposure relates to those sums an entity
becomes legally obligated to pay as damages because of a
bodily injury (typically including personal and advertising
injury) or property damage .
IndemnityIndemnity refers to the component of claim costs actually paid
or reserved to be paid to the plaintiff . Indemnity costs include
both the amount provided for the plaintiff, either as a jury award
or a settlement, and the amount retained by the plaintiff’s
attorney . However, in most claim files, including those used to do
this study, the split between plaintiff award and plaintiff attorney
is not provided . Indemnity may also include punitive damages,
although this is not consistently treated among companies .
Indemnification Rate This is the ratio of claims that result in indemnity to all
claims (claims with indemnity and claims with expense
only) . This reflects the likelihood that a claimant will receive
indemnification .
The following definitions are provided to help the users of this report to fully understand the analyses presented and the resulting conclusions .
Aon Global Risk Consulting 54
Definitions
Limit of Liability A limit of liability is a maximum amount of coverage provided by an insurance transaction . Above the limit of liability, the insured is responsible for all losses . Limits of liability may be expressed on a per occurrence basis or an aggregate basis, similar to deductibles . The losses included in this study are limited to $1,000,000 per occurrence .
Loss RateLoss rate is the cost per exposure of settling and defending claims . Loss rate is calculated as the ratio of total dollars of losses (indemnity and ALAE) to total exposures for a given period of time . In this report exposures are selected to be occupied beds and the time period is one year . Consequently, a loss rate represents the annual amount per occupied bed expected to be paid to defend, settle and/or litigate GL/PL claims arising from incidents occurring during the respective year .
Loss Trend Loss trend is the change in claim frequency and/or severity from one time period to the next . Factors that affect the frequency and severity of claims are constantly changing over time . Examples of causes include inflation, societal attitudes toward legal action, and changes in laws . Actuaries use trend factors to adjust historical loss experience to comparable levels .
Occurrence Year An occurrence year is the year in which an incident giving rise to a claim occurred . All of the loss rate, frequency and severity analyses use grouped data by occurrence year, unless specifically noted otherwise . Accident year is interchangeable with occurrence year .
Professional Liability (PL) Professional liability exposure relates to those sums an entity becomes legally obligated to pay as damages and associated claims and defense expenses because of a negligent act, error or omission in the rendering or failure to render professional services .
Severity Severity refers to the total dollar amount of a claim including indemnity and ALAE . In this report, the average severity for a given year is measured by dividing the total dollars of losses for all claims incurred in the year by the total number of claims .
55 2016 Long Term Care Actuarial Analysis
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© Aon plc 2016. All rights reserved.The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is re-ceived or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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