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Nursing homes choose captives to survive liability crisis

LTC Liability Monitor, January 22, 2004

Long-term care facilities have been seeking insurance alternatives as liability coverage becomes more difficult and expensive to acquire. No stranger to the market's dismal outlook, one Illinois nursing home association went looking for a solution, according to BestWire.

Rates in the long-term care insurance market had skyrocketed from $28 per bed through the mid-1990s to $240 per bed in 1999. As premiums reached $400 per bed in rural parts of the state and $800 per bed in the Chicago area, the Nursing Home Risk Management Association (NHRMA) in 2001 formed LTC Insurance Ltd.—a segregated-cell captive, reported BestWire. A segregated-cell captive is a method of self-insurance that legally protects participants' assets from third-party creditors.

Since NHRMA's formation of LTC Insurance Ltd., rates have risen to $800 per bed throughout much of Illinois, and a whopping $1,000 per bed in the Chicago area—whereas the captive is currently offering rates of $375 per bed, according to the company's Web site.

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