The rapid increase in commercial property insurance rates in Florida was the final straw for some senior living providers still struggling with workforce challenges, rising wages and inflation.
Bloomberg News recently reported that some assisted living communities and nursing homes are closing their doors after insurance costs jumped almost five times the national rate. In the past five years, commercial property insurance premiums surged 125% in the Sunshine State, increasing 27% in 2023 compared with national rates rising nearly 6%, according to the media outlet.
Citing data from the National Centers for Environmental Information, Bloomberg reported that damage from natural disasters — such as tropical cyclones and severe storms — doubled to $200 billion compared with 10 years ago. Part of that increase was blamed on Hurricane Ian in 2022, the third-costliest hurricane in US history at $117.4 billion, just behind Hurricane Katrina in 2005 at $199 billion and Hurricane Harvey in 2017 at $159 billion.
Not just a Florida problem
The Florida Assisted Living Association said that increasing property insurance rates are a “huge” problem, especially for smaller and independently owned assisted living communities and those accepting Medicaid to care for low-income residents. Twenty-four percent of assisted living residents in Florida rely on Medicaid for their care, according to the American Health Care Association/National Center for Assisted Living, citing external data.
“Costs have gone up, but reimbursement rates have not kept up,” FALA CEO Bijou Ikli told McKnight’s Senior Living.
Ikli said members have reported having to change the way their properties are insured, lowering their coverage amounts and “praying for the best” to continue operating.
“We have had members who have sold or shut their doors over the past year, and while insurance is not cited as the only reason, it is certainly high on the list, in addition to rising labor costs, food — everything, really,” Ikli said.
Shady roofing companies that convinced property owners to transfer their assignment of benefits for a new roof were a big part of the problem in Florida, according to Shelagh Grubb, a FALA board member and an assisted living community specialist with the Plastridge Insurance Agency in Boca Raton, FL. Those roofing companies inflated the price of a new roof to insurance companies, who paid the roofing companies.
The Florida Legislature held two emergency sessions in December 2022 to “fix a broken system,” which included abolishing the assignment of benefits and ensuring insurance companies respond to catastrophic events in a timely manner. The effects of those legislative changes are just now being seen.
Grubb told McKnight’s Senior Living that things aren’t good by any means, but the insurance landscape is improving. Last year, communities saw insurance increases between 100% and 150%, if they could get insurance — a large number of communities were deemed “uninsurable” due to carriers pulling out of the marketplace and a tightening on what would and would not be covered.
This year, Grubb said, increases are “starting to trend in the right direction.” Although some insurance policy renewal increases still are in the 50% increase range, other rates are flat. The age of a building, construction, building envelopes and proximity to water come into play.
“There is light at the end of the tunnel,” Grubb said.
This is not just a Florida problem, Grubb said, but the Sunshine State accounts for 76% of property claims in the nation. In the last year, she said, 28 major weather events resulted in payouts of more than $1 billion across the nation, and last year alone, the Florida insurance industry paid out more than $20 billion due to major storms. A recent study in JAMA Network Open found that evacuation of assisted living residents during hurricanes was associated with increased odds of emergency department use and nursing home placement.
Grubb’s recommendation to providers to avoid pricey insurance claims is to follow the list of recommendations provided by the insurance company. And if a recommendation isn’t viable, Grubb suggested talking to an agency to advocate for the assisted living community. She also suggested replacing old roofs, updating plumbing and electrical, and assessing a property for anything that has the potential to cause a claim.
“Insurance is cyclical — it goes up and down,” Grubb said. “Right now, it’s up, but it’s slowly trending down.”
Feeling the pressure
In 2022, the National Investment Center for Seniors Housing & Care said that a “significant” increase in property insurance premiums was reported by 32% of assisted living, 25% of memory care and 24% of independent living operators. Last year, between 86% and 95% of operators across all care/service segments reported increases in property insurance rates.
Respondents to a NIC executive survey indicated COVID-19 litigation, increased fire insurance, inflation on replacement costs and insurance companies leaving local markets resulted in a lack of competition from carriers in certain markets.
The Florida Health Care Association said that although nursing homes fall under a certificate of need process to ensure that beds are available in areas of most need, assisted living communities do not. Instead, the state Agency for Health Care Administration has an approval process for assisted living communities, making it more likely that they will close their doors due to financial challenges rather than have a change of ownership to remain open.
Although there are more than 3,500 assisted living communities in Florida, many are smaller, with four to 16 beds. According to the Florida AHCA website, 165 assisted living communities with 10 beds closed within the last five years.
Financial challenges fuel bankruptcies
A majority of first-time debt payment defaults issued for Florida long-term care communities since 2009 occurred after the COVID-19 pandemic, according to data Bloomberg cited from Municipal Market Analytics. The media outlet reported that the default rate for senior living communities in Florida is 18%, almost twice the 8% national rate.
The 2024 first-quarter Polsinelli-TrBK Distress Indices Report, which tracks large Chapter 11 bankruptcy filings, revealed that healthcare distress (Polsinelli includes senior living in its definition of healthcare) reached its highest level in 15 years, 813% higher than in 2010 and 80% higher than in 2020.
For senior living and care providers — those who own or operate independent living, assisted living, memory care or continuing care retirement communities, or skilled nursing facilities — the news only worsened in the second quarter.
In a preview of the firm’s second-quarter report, Polsinelli said that the distress is “outrageously high” for healthcare — the real estate index has a distress level at 47.5, the general economy is at 84.81, and healthcare is at 913.33 due to an “unprecedented” number of bankruptcy filings in the healthcare industry.
Read more about the effects of property insurance rates on long-term care operators in sister publication McKnight’s Long-Term Care News.
Source: McKnights Seniorliving