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Digital EditionHow the Care Gap Fuels Claims and Costs in Long-Term Care
In the long-term care sector, the vacancy at the nursing station has become a direct liability on the balance sheet, transforming a chronic labor shortage into a systemic contagion for the insurance industry. When facilities lack consistent, skilled staffing, the resulting quality gap triggers a domino effect of rising premiums, liability exposure and administrative friction.
The labor shortage in long-term health care has been widening for decades, but recent pressures and demographic shifts are exacerbating the problem. According to the U.S. Census Bureau, by 2030, about 20% of the U.S. population will be 65 or older, a veritable surge of geriatric patients who will want to age in place or in long-term care settings. At the same time, more health care workers are also aging and retiring from the workforce. And since 2025, the crackdown on immigrant populations has further decimated the workforce.
“We now have the challenge of immigration, both deportation and fewer people coming into the country,” said Tom Riekse Jr., managing director at LTCI Partners. “Eighteen percent of the nation’s 15 million health care workers are immigrants, including 40% of home health care aides and 28% of personal care aides.”
With fewer staff in long-term health care settings — especially in remote and underserved areas — facilities must grapple with higher workloads for existing staff, reduced or lower quality services, financial strain, and even facility closures.
The Industry Ripple Effect
Insurers, for their part, are seeing increased risk exposure and rising costs. The impacts keep rippling outward: Delayed care and deepened severity lead to higher risk claims. Fewer staff translates to medical errors. A surge in claims related to falls, medication mistakes, and neglect is forcing a sharp uptick in medical malpractice and general liability (GL/PL) premiums. The growing reliance on staffing agencies to fill personnel gaps reduces the continuity of care, potentially leading to even more medical errors and claims.
“The labor shortage impacts quality care. And quality care has implications for claims. And while that’s not a direct line, that dotted line was enough for us to say we need to focus on staffing resources, particularly for our senior care insureds,” said Lynette Perkins, director of risk management, health care, Liberty Mutual.
On the administrative side, insurers are seeing more inaccurate claim processing. Denied claims and increased appeals cost insurers time and money to resolve. Meanwhile, rising labor costs have been passed onto insurers.
Meredith Zaita, AVP health care, Arch Insurance
Even as insurance premiums have risen 5% to account for these trends, medical cost inflation continues to explode. And Medicaid cuts could worsen the crisis. With Medicaid as the primary payer for long-term care, any further cuts to reimbursement rates threaten to bankrupt facilities already operating on razor-thin margins or force them to reduce staff further. If Medicaid stops covering the “true cost” of care, the burden shifts onto private insurers and individual policyholders.
Amid a climate of social inflation and nuclear verdicts, insurers in the long-term health care space face difficult legal odds, said Meredith Zaita, AVP health care at Arch Insurance.
“It’s a really tough claims environment out there right now,” she said. “If a resident falls and breaks their hip in a nursing home, there’s not much they have to do to win their case.”
Adapting and Evolving Around the Gap
As standards of care in the long-term space come under increased scrutiny, underwriters and risk managers are looking for ways to mitigate risk and reduce cost.
While insurers may not have firm benchmarks for staffing ratios — outside of the Centers for Medicare and Medicaid Services (CMS) standards for quality care — they are looking to motivate insureds to meet baseline metrics but also provide evidence of a healthy environment for employees that minimizes turnover.
“I like to look at my accounts holistically,” Zaita said. “Certainly, the staffing rating that’s given to a facility by CMS is a factor to be considered.”
Insurers are also encouraging the adoption of tools to help engender quality delivery. MSIG, for instance, will send risk engineers to client facilities to assess risk and posit solutions for mitigating it.
“If we’re seeing more claims of bedsores, we would like to incentivize people to implement different strategies. If the client is willing to use these strategies, it will improve their pricing,” Jayson Taylor, head of casualty at MSIG USA, said. “It’s a much better approach to work with our insureds and incentivize them to improve rather than to exclude them.”
Falls remain a significant challenge in health care facilities, Taylor said. “Emerging technologies such as smart furniture monitoring systems have the potential to help staff detect when a fall may have occurred. ”
Bridging the Gaps
The insurance industry cannot solve the labor shortage in long term health care, but it can support facility clients with resources to compensate for it. Liberty Mutual U.S. Healthcare has placed a strong emphasis on offering its care facility clients tools and programming to improve the entire lifespan of talent acquisition, from recruiting and hiring through retention and leadership development.
“We’ve created a staffing resource guide that extends from hiring all the way through growing leadership and retention for our insureds, particularly in the post-acute or ancillary settings to help address some of the shortage links that we were seeing in claims,” Perkins said.
The process starts with hiring the right talent, Perkins said, and making sure the individual fits with the company’s culture, which in turn should feel inclusive and welcoming to new staff. Keeping workers happy in a difficult field requires an active commitment to communication and thoughtful outreach, she says.
“We know that work-life balance is crucial. The value of frequent check-ins and rounding cannot be overstated, including specific questions: Do you have the tools that you need to do your job? Do you feel that the staffing is adequate for this unit for your role?”
Long-Term Solutions
Looking ahead, many insurers are looking toward external technological and legal safeguards to help bridge the gaps left by the labor shortage.
“Using loss prevention technology will be key for faster reactions and improving health care outcomes,” Taylor said. “The nuclear verdicts and litigation funding is another major concern as investments explode claim amounts.”
The health care worker shortage requires truly systemic solutions. In the meantime, the insurance industry can respond by supporting its clients with talent retention and clinical technologies to improve care, mitigate loss, and prevent disruption to needed services that we will increasingly be relying on. &
