1. LONG TERM CARE UNDERWRITING GUIDELINE
INTRODUCTION
The purpose of this document is to promote understanding of those risk exposures
considered by Insurance Carriers when determining coverage eligibility & applicable
insurance rates for Long Term Care Facilities. This document provides a window as to
how Insurance Carriers perceive and/or rate Quality Care.
KEY UNDERWRITING CONSIDERATIONS:
When considering Casualty (Liability) exposures, Insurers typically use state surveys as
a frontline underwriting tool. This provides data including but not limited to occupancy
rates, staffing levels, deficiencies and complaints. A favorable occupancy rate would be
85% or better. This is not a ‘hard & fast’ rule; insurers will consider facilities with lower
occupancy levels based on the circumstances. Occupancy rates can be viewed as a
sound indicator of a facility’s reputation.
Next the staffing rate is reviewed. Does the facility meet or exceed the state average?
This is an indicator as to how management approaches the fundamentals of the facility.
Are there financial issues which are causing the facility to cut corners via staffing? Do
they have enough staff to properly care for the residents?
Additional attention is paid to any deficiencies identified in State surveys, questions that
arise from these include: Are these are recurring problems or one off issues? Are these
life safety issues or care issues? How are these addressed and corrected? How long
does the facility typically take to correct a deficiency?
Complaints are considered as important. Carriers typically seek clarification as to
whether the facility has had complaints lodged by family members of residents, the
residents themselves, or by employees – these complaints may indicate that there are
potential issues of resident abuse, resident neglect, falsification of records, etc…? If
these complaints are substantiated, it is more difficult to find a competitive insurance
partner for the facility until the facility shows or can demonstrate an improvement in this
area and have no further substantiated complaints.
All insurance companies pay close attention to loss runs (claims history) from both a
property and casualty perspective to aid in evaluating eligibility and rate. With regards to
Liability claims in particular, additional clarification is usually sought as to the nature of
any allegation, and the outcome of any litigation (if applicable).
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2. When considering a Skilled Facility, carriers can access relevant data through a
reporting service to obtain an OSCAR or CASPER report. If the facility is an Assisted
Living or Intermediate Care facility the majority of the relevant data can be obtained from
the latest state inspections.
BASIC INSURANCE ELIGIBILITY REQUIREMENTS
 Facilities should be professionally managed by individuals who are experienced
in the operations of nursing homes.
 Adequate and competent staffing should be available on all three shifts
 Facilities must be financially stable (Financial Statements are requested)
 Homes must meet physical plant/patient safety requirements
 The facility must be historically profitable
To assess compliance with the Basic Insurance Eligibility requirements detailed above, a
comprehensive review of the following Risk Management & Operations topics is
suggested to enable a facility to identify areas that may need improvement or correction
prior to a formal survey being conducted or a submission made for insurance to a Long
Tern Care Carrier– typically, areas that should be reviewed include:
REVIEW OF MANAGEMENT EXPERIENCE
A new nursing home facility that is being run by individuals unfamiliar with nursing home
operations would probably not be considered an acceptable risk. A skilled care facility
without a medical director would also likely to be considered unacceptable.
Financial Stability
A review of the financials is done in part to access the probability of staffing cuts and/or
a reduction in services provided. Financial stability would also be relevant in maintaining
the physical components of the facility such as house keeping and general maintenance.
REVIEW OF STAFF EXPERIENCE & STAFFING LEVELS INCLUDING
ADMINISTRATOR & MEDICAL DIRECTOR
Review of employment application to ensure steps are taken to verify each employment
applicant’s qualifications, licensure status, references, and claims history to screen for
potential problems.
Training - It is critical that formal, ongoing skill assessments and training be conducted
for all staff providing care to residents. It is especially crucial for new hires to ensure that
they are capable of caring for the residents they are assigned.
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3. Job Descriptions - Ideally, written job descriptions should be maintained for all positions.
It is another indicator of a well-run, organized facility. Job descriptions define what
duties each person is expected to perform, and what the boundaries are regarding
designated tasks.
Turnover Rates - Nurse and aide turnover is a concern for the entire long term care
industry. It has recently been estimated that the average annual nurse and aide
turnover rates are 80 percent countrywide. The more turnover, the more management
systems are tested. Job candidate screening, orientation, training, and clearly
articulated policies and procedures become even more important.
The administrator should have a current, unrestricted administrator license.
Medicare requires that skilled care facilities have a physician medical director to
coordinate, supervise and monitor medical services at the facility. It is required that all
skilled care facilities employ or contract a medical director with a current, unrestricted
medical license. For small skilled care facilities, a part-time or contracted director
instead of a full-time employed director is acceptable.
REVIEW OF PHYSICAL PLANT/PATIENT SAFETY REQUIREMENTS
1. Homes must have been built for nursing home operations, converted dwellings are
generally not acceptable – exceptions can be made for former hospital buildings or
modified quality constructed apartment buildings that would meet all of the other
requirements.
2. If the building is more than 15 years old, all electric, heating and plumbing should
have undergone regular qualified inspections and should be updated as needed.
4. Homes must be in compliance with the National Fire Protection Association (NFPA)
Life Safety Codes.
6. Emergency evacuation plans should be posted. All shifts should be adequately
staffed and all employees trained in emergency evacuation procedures.
7. Adequate fire extinguishers, handrails in hallways and baths, non-slip surface
8. Source & Availability of Auxiliary Power
PATIENT CARE
Key issues/areas here reviewed by Carriers include:
A. Physician on Call – there should be a physician on-site or on-call on a 24-hour basis
to serve as a substitute for a resident’s attending physician when he or she cannot
be reached or in unable to respond as needed. The primary responsibility for
diagnosis and treatment of a resident is with their own attending physician. Patient
drugs, medicine, special diets and other specific therapy or treatment should be
Administered according to written attending physician orders. The attending
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4. B. physician would ordinarily be called upon to respond to any of his/her patient’s
immediate medical needs, as well as make the determination whether or not the
patient should be transferred to another medical facility, since he or she is familiar
with the patient’s medical condition. However, if the attending physician cannot be
reached, the on-site or on-call physician may make the decision with respect to
transferring the patient.
C. Restraints - It is essential that all long-term facilities have written policies and
procedures dealing with the use of physical and chemical restraints. It is expected
that most restraint rates indicated will be in the range of 5-10% or less.
D. Written Policies addressing Falls, Elopements/Wandering
SECURITY AND LIFE SAFETY ISSUES FOR REVIEW
A. Facility Smoking Policy
B. Entrance to Facility - Exit from Facility
• Should be Alarms on exit doors,
• Positioning of workstations at exit locations with continuous staff presence
required
• Anklets worn by patients which cause an alarm to sound when the patient
crosses a sensor
C. Handrails and Bathtubs
CURRENT COVERGE AND LOSS HISTORY
CLAIM HISTORY REVIEW (SEE PRIOR NOTES)
ARBITRATION AGREEMENTS IN CONTRACTS
Summary & Disclosure
The above guidelines are typical of what a carrier will use to determine rating for long
term care facilities. Each carrier will have specific criteria but in general the above is
used in the evaluation.
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