In its report, 6Beds Inc., a group of small home providers, expressed concern that the additional cost of mandatory liability insurance will 'force small facilities to close their doors and subsequently leave seniors with reduced care options'.
As sponsor of AB 1523, CARR conducted research on the implications of mandatory liability insurance; chief among them, the issue of affordability. The results of CARR's research are shown in Table I, showing that the average monthly cost to a small, 6-bed facility is approximately $50 per month per resident.
These estimates offer the coverage required by AB 1523--$1 million/occurrence and $3 million/aggregate. And while these estimates were for discussion purposes only (with actual rates subject to variations given a facility's individual profile), they were provided by a number of different, well-established A+ carriers operating within the long-term care insurance market.
The opposition and concerns of 6beds Inc. that "insurance companies may decide arbitrarily to cancel policies or raise premiums to unaffordable levels" and that "this bill should be postponed until a risk pool arrangement or backup insurance plan is created" seem misguided.
The purpose of liability insurance is to protect both seniors and facilities in the event of loss or harm. Facilities with adequate experience who maintain reasonable compliance histories should not expect to experience the consequences 6beds mentions.
However, it is reasonable to expect that facilities who elect to care for a sicker and more frail population of residents may be required to carry more coverage (more than the $50 per month per resident) as the risk is greater. And, for those facilities who provide substandard care that places residents at risk of injury, they too should expect to see an increase in their premiums. Such increases are no different than increases in auto insurance rates experienced by California drivers who earn a DUI or engage in other risky behavior.
Further, should some of the well-performing facilities begin to encounter an issue with affordability, California statute, Section 11891 of the Insurance Code provides California's Insurance Commissioner with the authority to determine and "authorize the formation of a market assistance program to assist in securing insurance...for residential care facilities for the elderly". But the authorization may only come after the problem is actualized (i.e. after the passage of AB 1523).
Liability insurance is a fundamental consumer protection that every assisted living resident deserves regardless of the size of the facility they chose to live in. Given the recent media accounts of abuse and neglect in some of California's assisted living facilities, consumers and their families need the assurance that poor performing facilities are not simply judgment proof. And facilities need the assurance that should allegations of abuse or neglect surface, they will not be forced into bankruptcy to present their case.