By Andy Marso
A representative of a large Kansas nursing home system testified Wednesday for the right to self-insure its facilities under the Health Care Stabilization Fund, like hospitals can.
Legislation passed last year added hundreds of nursing homes to the state fund, which backs up health care providers’ private medical malpractice insurance with additional coverage to diminish their financial risk. All providers who participate in the fund must have private malpractice insurance, but health care systems that already were in the fund are allowed to self-insure if they have two or more facilities with a combined premium cost of $100,000 or more.
Jennifer Sourk, an attorney for Midwest Health, told the Senate Committee on Financial Institutions and Insurance that the company had self-insured its 53 assisted living facilities in four states since 2004. She said the system’s 29 assisted living facilities in Kansas that now fall under the Health Care Stabilization Act also should be allowed to use its self-insurance to satisfy the stabilization fund requirements.
“Adult long-term care facilities are asking to be allowed the opportunity to apply for self-insurance just as other defined health care providers are allowed under the law,” Sourk said. Not being able to self-insure under the stabilization fund will cost the company $50,000 this year, she said.
“This amount will only increase as Midwest Health grows in Kansas,” Sourk said, “which plays a part into the calculation of whether an operation will be successful.” The bill’s cost to the fund is estimated at about $40,000 in administrative expenses to vet new applications for self-insurance.
Cindy Luxem, CEO of the Kansas Health Care Association, said her group, which represents assisted living facilities, was testifying in support of Midwest Health because its financial strength is integral to the communities where it operates. “In most of these communities this is the main employer, and in many it’s the only health care provider,” Luxem said.
Charles Wheelen, the stabilization fund’s executive director, said a rigorous review process ensures that systems applying for self-insurance have the financial strength to handle it.
“Under a worst-case scenario, a self-insured facility might declare bankruptcy and discontinue operations,” Wheelen said. “In that case, the HCSF would become liable for any and all unresolved claims against the facility as well as any claims that might arise after the facility closed its doors.”
Wheelen said not only is the initial application “somewhat demanding,” systems that have been granted a certificate of self-insurance must provide updated information annually. The stabilization fund is funded through a fee assessed on providers’ private liability coverage.
Jerry Slaughter, executive director of the Kansas Medical Society, said his group is neutral on the bill although “we do have some concerns.” The medical society represents hundreds of physicians across the state who also pay into the stabilization fund. Slaughter said the stabilization fund has worked well for 40 years, and his group is leery of structural changes that might increase the risk of the fund having to pay out large sums of money.
That risk, he reminded legislators, is shared by all who use the fund. “Though we understand the desire of the proponents of this bill to take advantage of the self-insurance provision in the HCSF law,” Slaughter said, “we are concerned that it will make it difficult to say no to other groups of providers in the future who will see this as an opportunity to avoid having to purchase a policy of professional liability insurance.”
Andy Marso is a reporter for Heartland Health Monitor, a news collaboration focusing on health issues and their impact in Missouri and Kansas.
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