Dave Achey has owned and operated Country Club Estates, an adult care facility in Paola, for 19 years.
For most of that time he has purchased professional liability insurance for medical malpractice claims from a well-known insurer: Lloyd’s of London.
But now that his facility is included under the Kansas Health Care Stabilization Fund, the state is telling him Lloyd’s is not an approved carrier and he must buy different insurance that comes with a fund surcharge.
Achey is not happy about it.
“Why do I have to pay into the stabilization fund?” he asked during a phone interview. “I don’t understand it.”
The short answer is that the Legislature required it when the House and Senate unanimously passed House Bill 2516 in 2014.
The bill added more than 600 adult care facilities — that provide assisted living and nursing home services — to the fund, which is intended to back up medical providers if a malpractice claim exceeds their primary insurance coverage.
It took effect Jan. 1, and 10 months later nearly all the facilities have purchased primary coverage from a fund-approved carrier and paid the surcharge on the coverage that provides the fund’s cash flow.
Achey’s facility is one of four that had not, as of this week, reported enrollment in a compliant plan to the fund. Insurers have 30 days from the date of purchase to report it.
Additional liability protection
The state’s two major advocacy organizations for adult care facilities, LeadingAge Kansas and the Kansas Health Care Association (KHCA), testified in favor of including their members in the fund, saying it would provide them an added layer of protection against liability.
LeadingAge represents nonprofits while KHCA represents for-profits. Of the four holdouts, only Indian Creek Health Care Center belongs to one of the two professional organizations, KHCA.
Rachel Monger, director of government affairs for LeadingAge, said the organization’s 160 members are on board with the change.
“Our transition, I believe, has gone well,” Monger said. “One hundred percent of our members are in the fund now. There hasn’t been anybody resisting that.”
Cindy Luxem, president of the KHCA, said she would seek more information from Indian Creek Health Care Center’s parent company, Sava Senior Care, about why the facility has yet to purchase a fund-compliant plan.
“I wish every home had their compliance in order, but from what I have heard as I’ve spoken with members, this has been a very difficult thing to get accomplished,” Luxem said. “I guess I’m not surprised there’s still a few out there who have not gotten their coverage.”
Chip Wheelen, executive director of the Health Care Stabilization Fund, said he suspected some facilities would be slow to comply when the Legislature added them to the fund in 2014. The Legislature, at his suggestion, gave the homes six additional months after the bill became law.
In the meantime, Wheelen said he and legal counsel Rita Noll “put a lot of miles on state cars” traveling to various meetings with facility administrators about the new requirements. The fund also sent a letter in April to administators of 96 facilities that were non-compliant at that time.
They also relied on LeadingAge and the KHCA to spread the word to their members.
But not everyone belongs to one of the professional organizations, Wheelen said, and he believes some facilities did not get the message.
Achey would be one of those.
“They said they warned us about this. But unless you read some articles about it or investigate certain websites, how would you know?” he said.
Navigating regulatory changes
Achey said the transition came at an inopportune time, given that he was already dealing with new administrative hurdles connected to the state’s switch to managed care Medicaid, or KanCare, in 2013.
He said he considers taking residents on Medicaid part of his service to the community of Paola but spends far more of his time trying to get reimbursed since the state contracted with three private managed care organizations to run Medicaid.
“I swear to you every day I’m messing with the MCOs trying to get paid,” Achey said.
“They said they warned us about this. But unless you read some articles about it or investigate certain websites, how would you know?”- Dave Achey, owner of Country Club Estates in Paola
Monger, who tracks new laws and regulations and communicates them to LeadingAge members, said she can sympathize.
The scope of recent regulatory changes at the state and federal level has made it hard for facilities to stay on top of everything, she said, especially if they don’t belong to a professional organization like hers.
“It’s much tougher if you’re going it alone,” Monger said.
Earlier this year, Wheelen brought a list of 16 facilities not in compliance to the fund’s board of governors. They approved a letter Wheelen sent to the Kansas Department for Aging and Disability Services, which holds the facilities’ licenses to operate.
“The law says I have a statutory duty to report noncompliance to the licensing agency,” he said.
After KDADS got involved, Wheelen said most of the facilities quickly got into compliance, some even going so far as to purchase qualified coverage that was retroactive to Jan. 1.
For the four that remain non-compliant, Wheelen said legislation is being drafted that would allow KDADS to levy daily fines until they purchase qualifying insurance that includes the stabilization fund surcharge.
The fine would be at the discretion of the KDADS secretary.
Seeking financial certainty
Achey said they shouldn’t be leveling any fines against him — not while he’s carrying an insurance policy from Lloyd’s that covers claims up to $1 million.
Wheelen said fund participants are required to purchase a plan from an approved carrier so that the fund doesn’t end up holding the bag for facilities that choose to buy coverage from fly-by-night insurers— though he acknowledged Lloyd’s doesn’t fit that category.
“No one questions whether Lloyd’s of London is a good insurer,” he said. “But there are others we know nothing about.”
Wheelen said he’s been in touch with Achey and recommended some options for getting a basic, low-cost compliant plan with the smallest fund surcharge while still using Lloyd’s for excess or surplus coverage.
He said joining the fund brings several advantages. It ensures that claims against the facilities fall under the state’s cap on non-economic damages awarded in malpractice cases.
Beyond that, Wheelen said facilities are increasingly considered health care providers and legislators know the fund provides more financial certainty for everyone affected by medical mistakes.
“The one thing you always conclude in the final analysis is, it protects patients,” Wheelen said. “Even though it’s good for doctors, it’s good for hospitals, it’s good for other types of facilities and other types of health care providers, in the final analysis, it guarantees that if a patient has a bad outcome, an unfortunate result … they always have a reliable remedy available to them.”