5 Most Common Insurance Coverage Gaps in Home Healthcare

Home healthcare is expected to be the fastest growing sector over the next ten years.  This rapid pace of growth has expanded the market. Many entrepreneurs are getting their piece of the pie through homecare agency ownership.  This expansion has also brought on an influx of insurance brokers and carriers that now serve the industry.  These brokers and carriers may not have the experience, as they may not have served the industry in the past.  So needless to say, a number of insurance companies and brokers are entering unchartered waters.

In addition, the process of getting to know and understand the needs of the business has become very transactional.  Insurance products are generally templated and do not receive the careful attention and customization that they deserve.  This haste in doing business has resulted in the buyer not carrying adequate insurance or worse, being uninsured all together.  Below are a few examples of such scenarios:

Not Carrying Employment Practices Liability Insurance

Agency owners tend to focus their efforts on buying Workers Compensation Insurance and Business Insurance (which typically comes bundled as Professional Liability, General Liability, Property, Crime, and Auto).  If you are a franchisee, you need to evidence proof to the franchisor that you’ve simply purchased Workers Compensation, Professional Liability, and General Liability.  In most cases, no franchisor nor any third party vendor will ever require evidence of any other insurance.  Therein lies a major problem. If the franchisor isn’t requesting that specific coverage be purchased and the broker is not providing a full recommendation of insurance products, the owner may never be aware that they have a gap in place!

One of the most common products that is missed is Employment Practices Liability insurance.  For an industry where the employee turnover rate ranges somewhere between 25% – 35%, this should be a critical purchase for the business.  This insurance covers claims brought by employees related to discrimination, wrongful termination, failure to train, violation of employment contract, sexual harassment, and a number of other employment related circumstances.  These claims could be extremely costly. Even if a suit is filed without merit, the cost of legal expenses could add up.  Every home health agency should consider purchasing at least $1,000,000 in limits and should even entertain higher limits whenever the possibility exists.

Workers Compensation – Low Employers Liability Limits

Workers Compensation Insurance actually includes two components: Workers Compensation, known as part one, and Employers Liability, referred to as part two.  Workers Compensation provides statutory limits for worker injuries. It pays for medical expenses, provides coverage for disability/death, and provides insurance for lost wages.  The employee does not have to bring any type of suit to collect under Workers Compensation.  The Employers Liability portion is insurance for the employer in the event it is sued for its negligence in maintaining a safe work environment.  This is above and beyond what Workers Compensation covers.

Employers Liability limits carried by some insureds are only $100,000 per employee.  All carriers have the ability to provide a full $1,000,000 in limits.  The premium difference to go from $100,000 to $1,000,000 may only be a few hundred dollars (or less than 5% of the overall Workers Comp premiums).

Not Adopting All Carrier Loss Control Requirements

Often times, underwriters will review the risk management controls an organization has in place and impose some changes to the policies/procedures.  These recommendations aren’t meant to alter the patient mix, reduce potential revenues to the business, or change the organization’s mission statement.  Rather, carrier recommendations specifically aim to create a safer work environment. In turn, these recommendations also reduce the severity of certain claims or eliminate them altogether.  Some examples of recommendations may include performing motor vehicle report checks on all potential hires or implementing a safe driver program.

It should be noted when these safety improvements are merely recommendations or requirements to binding.  When these are requirements to binding, the insured must install the necessary changes within their operation. If not implemented, the policy may be nullified and cancellable.  In some cases, the changes must be made prior to binding. In other cases, the insured is given a specified timeframe, possibly 30 or 90 days.  So even though you’ve been paying your monthly premium installments on time to the carrier, when it comes time to paying a claim by the carrier, the carrier could quickly uncover that all conditions to binding were not satisfied.  This could result in not paying out on a claim.

Claims-Made or Occurrence?

A number of owners do not know whether their policies have a claims-made trigger or an occurrence trigger.  This really applies to three important types of coverages – Professional Liability (Medical Malpractice), General Liability, and Sexual Abuse Liability.  Differences between these two types of triggers, claims-made and occurrence, will be discussed in another article on the blog.  However, if this transition is mishandled and the owner goes from maintaining claims-made coverage with one carrier and moves to occurrence coverage the subsequent year with a different carrier, there could be significant coverage gaps created.  Essentially, any type of errors and omissions that occurred during the claims-made policy would no longer be reportable to the occurrence carrier as covered claims.  This could result in no coverage on the claim. The agency owner should discuss with the insurance broker on how to appropriately switch carriers to avoid gaps in coverage.

Two-Broker Dilemma

A broker should be used as your business partner.  The broker should have a keen understanding of your current operation, as well as your company’s future plans.  The carriers the broker puts in place should be well equipped to grow with your business for the foreseeable future.  The broker should be able to discuss industry trends and new products available to the industry.  The broker ought to be able to explain what is and what is not covered under the current policies.  Simply put, the broker should take an enterprise-wide view of your organization when making recommendations.

Now when multiple brokers are utilized, each broker is somewhat operating with one hand tied behind his back as he does not have a full picture of your insurance needs.  The broker takes on a reactive role in only finding you coverage that you, as the business owner, have explicitly asked for.  He might assume all of your other insurance needs are taken care of by someone else, the other broker.  You may run into situations where you have redundant insurance purchased from multiple parties, thus, costing you more money than necessary. Or another situation, which could be even worse, you may have created a gap by not purchasing a necessary insurance product.

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