1. Long Term Care: Will the Crisis Ever End? Alternative Solutions November 12, 2003

2. Marsh 2 The Perfect Storm LTC Industry Changes Legal Environment Societal Governmental Insurance Industry

3. Marsh 3 Recent Awards Litigation Continues and Migrates Sexual OffenseTX$65MM TreatmentFL$20MM MedicationAL$5MM SupervisionGA$3.3MM TreatmentIL$900K TreatmentTX$300MM+ TreatmentAR$72MM Treatment MS$7MM ETC.

4. Marsh 4 Setting Expectations “(residents) need credible and qualified health care alternatives to assure an independent lifestyle and the highest possible quality of care… All provided in an environment that is calming and caring.” Quote from LTC Website

5. Marsh 5 Setting Expectations “(residents) need credible and qualified health care alternatives to assure an independent lifestyle and the highest possible quality of care… All provided in an environment that is calming and caring.” Quote from LTC Website

6. Marsh 6 Setting Expectations “Assisting our residents in regaining mobility, their ability to communicate, their independence... is a daily occurrence” Quote from LTC Website

7. Marsh 7 Insurance Market Update Commercial Insurers: – Remain concerned about senior housing and health care liability exposure – Geographically driven – Differentiation between nursing home and senior housing – Unlikely to become competitive in the foreseeable future – More for less – Supply / demand – Finite Programs

8. Marsh 8 Roots of the Crisis Acuity Changes ALF Effect Risk Management Family Expectations Role of Long Term Care Industry

9. Marsh 9 Roots of the Crisis Resident Rights Facility on Trial 60% Success Rate Inflaming Juries Frightening Insurers Role of Legal Industry

10. Marsh 10 Roots of the Crisis Family Geographics – 65% of Residents Never Have a Personal Visitor – Abdication of Caregiver Role Society Demographics Lottery Mentality Role of Society

11. Marsh 11 Roots of the Crisis Regulation Survey Data Reimbursement – Avg. Medicaid payment for skilled nursing care: $ 4.45/hour – Dog Walker? – Baby Sitter? – Minimum Wage $5.15 Role of Federal/State Government

12. Marsh 12 Roots of the Crisis Failure to Recognize LTC Industry Changes Soft Market Occurrence Policies Deductibles Risk Management? Claim Management Role of Insurance Industry

13. Marsh 13 Result Insurance Industry Evacuates/Premiums Aggressive Plaintiffs LTC Bankruptcies “Faux” Insurance Medicaid Budget Crises Insurance “Schemes” Attn: Risk Management Some Bad Providers Out New Products/Services Review of LTC Model Quality of Care Tort Reform Focused Insurers Good Bad

14. Marsh 14 Recommendations For Long Term Care Clients Understand the Insurance Underwriter’s View Point Fully Understand Loss Trends/Projections of the Organization Tell a Good Risk Management Story Be Prepared - Plan B

15. Marsh 15 Is a Captive the Solution? Are you willing to run an insurance company? – Invest:  Time  Money (capital) – Take risk – Professionally manage risk and claims management Can you satisfy those that want you to have commercial insurance? – Lenders/Bondholders/State/Others

16. Marsh 16 Case Study Regional Nursing Home Chain - Single Parent Commercial insurance premium $900,000 to over $10,000,000 Leverage Points – Reimbursement – Risk Management – Coverages beyond PL/GL – Leverage collateral requirements

17. Marsh 17 Case Study Risk Retention Group Non-Profits, bare, high premiums, low losses Barriers – Group mentality and leadership – Reimbursement  Necessity to interact/satisfy state regulators – Legalities – Reinsurance – Fronting – Department of insurance Tort Reform Lobbyists

18. Marsh 18 Case Study Rent-a-Captives Licensure – Front Don’t just run around bare – Reimbursement Baby Steps – Strategic growth and plan Faux Insurance

19. Marsh 19 The Future Continuing Focus on Alternative Risk Vehicles – Need for Actuarial Analysis to Support Pressure from State’s to Require Minimum Levels of Insurance Tort Reform Return of Affordable Commercial Insurance?