While long-term care liability costs are stable across much of the nation, Arkansas, Tennessee and West Virginia are experiencing exceptionally high expenses — known as loss costs — related to insurance claims, according to a study from Aon Corporation. The study measures the frequency and severity of claims, tracks the loss cost as a percent of the Medicaid per diem reimbursement rate and calculates the overall loss cost per occupied long-term care bed.
Nationwide, the average annual loss cost per bed has decreased from $1,710 in 2001 to $1,270 in 2009. The frequency rate has slightly decreased from 1.05 percent in 2007 to .94 percent in 2009 and the severity rate has been stable since 2007 at $135,000. The loss cost as a percent of the Medicaid per diem reimbursement rate has also decreased — from 4.07 percent in 2001 to 2.09 percent in 2009.
Of the states profiled, Arkansas is experiencing the highest loss cost per occupied long-term care bed, the most severe claim trend and the highest loss cost as a percent of the Medicaid per diem reimbursement rate. The estimated loss cost per bed in 2009 was $3,990, down from a peak of $6,800 in 2001. While Arkansas remains the highest loss cost of the profiled states, the state's legislature enacted a $1 million cap on non-economic damages in 2003, which may have had some impact on the downward loss cost trend. In 2009, the average claim severity in Arkansas was $380,000, down $110,000 from 2005. The loss cost as a percent of the Medicaid per diem reimbursement rate was down from 23.98 percent in 2001 to 7.63 percent in 2009.
Since 2001, the loss cost per occupied long-term care bed in West Virginia has increased from $1,380 to $3,770 in 2009 — the second highest of the profiled states. At $290,000 per claim, West Virginia's average claim severity was the third highest as was the loss cost as a percent of the Medicaid per diem reimbursement rate at 5.51 percent.
Tennessee had the third highest loss cost per occupied long-term care bed at $3,070 and the second highest average claim severity at $357,000. Increasing severity per claim was the driver behind loss cost increases. The loss cost as a percent of the Medicaid per diem reimbursement rate was flat over the past several years, but at 5.83 percent, it was still the second highest of the profiled states.
Source: Aon Corporation, August 5, 2010
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