Michigan Nursing Home Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Michigan Nursing Home bond
At a Glance:
- Lowest Cost: 0.75% of the bond amount per year based on the applicant’s credit
- Bond Amount: Determined on a case by case basis (more on this later)
- Who Needs it: All Michigan nursing homes that hold residents’ personal funds
- Purpose: To ensure that residents will receive compensation for financial harm if the nursing home mishandles their funds
- Who Regulates Nursing Homes in Michigan: The Michigan Department of Licensing and Regulatory Affairs
Background
Michigan Statute 333.21711 requires all nursing homes operating in the state to obtain a license with the Department of Licensing and Regulatory Affairs. The Michigan legislature enacted the licensing laws and regulations to ensure that nursing homes engage in ethical business practices. To provide financial security for the enforcement of the licensing law, nursing homes that hold residents’ personal funds must purchase and maintain a surety bond, to be eligible for licensure. Additionally, federal statute 483.10 requires all long-term care facilities that hold resident funds in a trust account to purchase a surety bond or other similar form of security. However, the federal regulation leaves the implementation and enforcement of this requirement to individual states.
What is the Purpose of the Michigan Nursing Home Bond?
Michigan requires nursing homes that hold resident funds to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that residents will receive compensation for financial harm if the nursing home fails to abide by the regulations set forth in Michigan statute 333.21721. Specifically, the bond protects residents if the nursing home in any way mismanages their personal funds. In short, the bond is a type of insurance that protects residents if the nursing home acts unethically with their money.
How Can an Insurance Agent Obtain a Michigan Nursing Home Surety Bond?
BondExchange makes obtaining a Michigan Nursing Home surety bond easy. Simply log in to your account and use our keyword search to find the “nursing home” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
How is the Bond Amount Determined?
Michigan statute 333.21721 dictates that the bond amount must be equal to 1¼ times the average balance of resident funds held in the previous calendar year. First-time license applicants will use the estimated average balance of resident funds held in their first year of operation.
Is a Credit Check Required for the Michigan Nursing Home Bond?
Surety companies will run a credit check on the owners of the nursing home to determine eligibility and pricing for the Michigan Nursing Home bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Michigan Nursing Home Bond Cost?
The Michigan Nursing Home bond can cost anywhere between 0.75% to 5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the bond cost on a $20,000 bond requirement.
$20,000 Nursing Home Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $150 | $15 |
| 625 – 799 | $200 | $20 |
| 600 – 624 | $500 | $50 |
| 575 – 599 | $600 | $60 |
| 500 – 574 | $1,000 | $100 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
Who is Required to Purchase the Bond?
Michigan requires all nursing homes that hold and manage residents’ personal funds to purchase a surety bond. Michigan statute 333.20109 defines a nursing home as any facility that provides organized nursing care and medical treatment to 7 or more unrelated individuals that are suffering from illness, injury, or infirmity. County medical care facilities are considered nursing homes in Michigan.
Exemptions to this definition include:
- Units in state correctional facilities
- Hospitals
- Veterans facilities
- Hospices and hospice residences
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How Do Nursing Homes Apply for a License in Michigan?
Nursing homes in Michigan must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the application form for details on the process.
License Period – All Michigan Nursing Home Licenses expire on July 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Nursing homes must that hold and manage residents’ personal funds must purchase and maintain a surety bond
Step 2 – Complete the Application
All Michigan Nursing Home License applications should be mailed to the following address:
MI Dept of Licensing & Regulatory Affairs
Bureau of Community and Health Systems
State Licensing
P. O. Box 30664
Lansing, MI 48909
Nursing homes must complete the application in its entirety, and submit the following documents:
-
- Appendix D is required for applicants operating a new facility as well as those seeking to increase their existing facility’s bed capacity
- Appendix C is required for both applicants operating a new facility and nursing homes applying for a change of ownership to an existing facility
Nursing homes must pay a $500 licensing fee plus an additional $3 per bed after the facility’s first 100 beds when submitting their license application:
Step 3 – Apply for a Certificate of Need
Nursing homes submitting a new facility, relocation, increase in bed capacity, and a change in ownership application must apply for a certificate of need through the Michigan Department of Health and Human Services.
How Do Michigan Nursing Homes Renew Their License?
Nursing homes can complete their renewal application online here. All Michigan Nursing Home Licenses expire on July 31 of each year and must be renewed before the expiration date. The Department of Licensing and Regulatory Affairs will send the nursing home a renewal invoice in June.
What are the Insurance Requirements for Nursing Homes in Michigan?
Michigan does not require nursing homes to obtain any form of liability insurance as a prerequisite to obtaining a business license. Nursing homes must that hold and manage residents’ personal funds must purchase and maintain a surety bond in an amount equal to equal to 1¼ times the average balance of resident funds held in the previous calendar year. First-time license applicants will use the estimated average balance of resident funds held in their first year of operation.
How Do Michigan Nursing Homes File Their Bond?
Nursing homes should mail their completed bond form, including the power of attorney, to the following address:
MI Dept of Licensing & Regulatory Affairs
Bureau of Community and Health Systems
State Licensing
P. O. Box 30664
Lansing, MI 48909
The surety bond requires signatures from both the surety company that issues the bond and from a representative of the nursing home. The surety company should include the following information on the bond form:
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Michigan Nursing Homes Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, nursing homes in Michigan must ensure that they:
- Hold all resident funds in a designated trust account
- Shall administer the funds according to the wishes of the residents or their representatives
- Accurately report on all resident funds
- Do not in any way mishandle resident funds
- Refund all remaining funds when upon the termination of an account
What Other Insurance Products Can Agents Offer Nursing Homes in Michigan?
Michigan does not require nursing homes to purchase any form of liability insurance as a prerequisite to obtaining a business license. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Michigan Nursing Home Customers?
Michigan conveniently provides a public database to search for active nursing homes in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.