BILL ANALYSIS Ó
AB 1523
Page A
ASSEMBLY THIRD READING
AB 1523 (Atkins and Weber)
As Amended April 1, 2014
Majority vote
HUMAN SERVICES 6-0 APPROPRIATIONS 16-0
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|Ayes:|Stone, Maienschein, |Ayes:|Gatto, Bigelow, |
| |Ammiano, | |Bocanegra, Bradford, Ian |
| |Ian Calderon, Garcia, | |Calderon, Campos, Eggman, |
| |Grove | |Gomez, Holden, Jones, |
| | | |Linder, Pan Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires all Residential Care Facilities for the
Elderly (RCFE) to carry liability insurance. Specifically, this
bill :
1)Requires all RCFEs, on or after July 1, 2015, to acquire
liability insurance to cover injury to residents and guests in
the amount of at least $1 million per occurrence and $3
million in total or a bond in the amount of $3 million.
2)Provides that the liability insurance will cover injuries
sustained by acts, omission to act, or neglect of the licensee
or his or her employees.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Minor costs to the Department of Social Services (DSS) in the
range of $32,000 to ensure each facility complies with the
requirement.
2)Unknown costs to RCFEs licensees to acquire insurance.
COMMENTS :
Background: It is the intent of the Legislature, in
establishing the RCFE Act, to help provide a system of
AB 1523
Page B
residential care to allow older persons be able to voluntarily
live independently in a homelike environment as opposed to being
forced to live in an institutionalized facility, such as a
nursing home, or having to move between medical and nonmedical
environments. RCFEs, commonly referred to as assisted living
facilities, are licensed retirement residential homes and board
and care homes that accommodate and provide services to meet the
varying, and at times, fluctuating health care needs of
individuals who are 60 years of age and over, and persons under
the age of 60 with compatible needs. Licensed by DSS Community
Care Licensing Division (CCLD), they can range in size from
residential homes with six or less beds to more formal
residential facilities with 100 beds or more.
Growing demand: Over the past 30 years, the demand for RCFEs
has grown substantially. Although RCFEs have been generally
available, they experienced explosive growth in the 1990s, more
than doubling the number of beds between 1990 and 2002,<1> and
continued to grow 16% between 2001 and 2010.<2> Nationwide,
states reported 1.2 million beds in licensed RCFEs in 2010.<3>
That same year, the national Centers for Disease Control and
Prevention reported that 40% of RCFE residents needed help with
three or more activities of daily living and three-fourths of
residents had at least two of the 10 most common chronic
conditions.<4> According to DSS, as of March 5, 2014, there are
7,589 licensed RCFEs in California with a capacity to serve
176,317 residents.
Financial Structure: More than 90% of RCFE licenses in
California are held by for-profit providers, the majority of
which have six or fewer beds. Most residents pay privately or
with long-term care insurance since there is very little public
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<1> Flores and Newcomer, "Monitoring Quality of Care in
Residential Care for the Elderly: The Information Challenge".
Journal of Aging and Social Policy, 21:225-242, 2009.
<2> SCAN Foundation. "Long Term Care Fundamentals: Residential
Care Facilities for the Elderly." March 2011.
http://thescanfoundation.org/sites/thescanfoundation.org/files/LT
C_Fundamental_7_0.pdf
<3> "Assisted Living and Residential Care in the States in
2010," Mollica, Robert, AARP Public Policy Institute
<4> "Residents Living in Residential Care Facilities: United
States, 2010, Caffrey, Christine, et al., US Centers for
Disease Control, April 2012
AB 1523
Page C
funding available through Medi-Cal, Supplemental Security Income
(SSI/SSP) or Medicare, and fees can range from $1,500 to more
than $8,000 per month. Very few beds are available to seniors
who use their entire SSI/SSP checks to pay rent. In 2013, the
maximum SSI/SSP grant was $866.40. Residents who rely solely on
Social Security Income may have a maximum payment of $2,642 per
month in 2014,<5> although that amount varies widely based on
the recipient's prior income while working.
As a result, low-income seniors and middle-income seniors who do
not have long-term care insurance are largely unable to afford
to reside in a RCFE. Most low-income seniors may receive
services through In-Home Supportive Services or a skilled
nursing facility if they are Medi-Cal eligible. A small number
of Medi-Cal patients who are eligible for nursing home care may
be placed in an RCFE through the state's Assisted Living Waiver,
which began in 2006. According to state data, 172 RCFEs
currently participate in the waiver program benefitting 2,200
residents. There are an additional 3,700 slots available.
Need for the bill: Writing for the need of this bill, the
author states:
Neither statute nor regulation requires any RCFE to carry
liability insurance as a condition of licensure. As a
result, many facilities lack even the minimum liability
insurance coverage, exposing both them and residents to
great financial risk.
Currently, the only action residents have to be compensated
for damages sustained from elder abuse or neglect is civil
litigation. Civil litigation is expensive, and typically,
the only way most families can actually seek damages from a
licensed provider is on a contingency basis. If the
licensee does not carry liability insurance, it would be
very difficult for the resident, or his/her heirs, to find
an attorney willing to litigate a wrongful death or neglect
case on contingency. And in the event the case is accepted
and successfully litigated, an uninsured facility would
have a difficult time paying from their own budget, forcing
them to consider claiming bankruptcy. This circumstance
benefits no one: the RCFE is out of business and the
victim is left with no recourse for compensation.
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<5> http://www.ssa.gov/pressoffice/factsheets/colafacts2014.pdf
AB 1523
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Additionally, liability insurance is a consumer protection
that all residents and families of residents in assisted
living deserve. As most often the case, only when there is
a belief that a resident living in assisted living was
harmed through neglect, negligence, or other criminal act
does the resident or family discover the facility does not
have liability insurance. With no guarantee of RCFE's
maintaining liability coverage, residents and their
families will continue to be at the mercy of uninsured
facilities, hoping that nothing goes wrong.
Intentional versus unintentional acts: The author is correct
that currently, under state law, RCFEs are not required to have
liability insurance. Although it is considered a best practice
and a statewide business industry standard, many RCFEs do not
have liability insurance for a variety of reasons, but most
predominantly because of its costs. In stating the need for the
bill, the author states that it will help residents of RCFEs "to
be compensated for damages sustained from elder abuse or
neglect." However, it is unclear whether the bill, as currently
written, will achieve this goal because it is unclear whether
the required liability insurance will cover both general
liability and intentional acts, such as abuse and neglect.
This bill requires all RCFEs to maintain either liability
insurance in the amount of at least $1 million per occurrence
(incident) and $3 million in the total annual aggregate, or at
least a $3 million bond, to cover injuries to residents and
guests "sustained on account of the acts, omissions to act, or
negligence of the licensee or its employees." At minimum, this
required coverage could cover up to three incidents for up to $3
million per year for accidents that may occur as a result of
unintentional actions, such as accidents or negligence, that
result in physical harm to a resident. However, the language
does not specifically require coverage of intentional acts, such
as abuse, neglect, or molestation, and could be interpreted to
only require RCFEs to carry general liability insurance to cover
unintentional acts.
Adequacy, proportionality and cost of coverage: It is also
unclear whether the measure requires adequate or inadequate
levels of liability insurance coverage. Because the requirement
for RCFEs to carry liability insurance coverage is not a
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statewide industry standard, it is difficult to ascertain
whether a $3 million liability insurance policy is sufficient to
cover accidental injury within a RCFE. Additionally, RCFEs
range in size from small three to six bed residential homes to
larger facilities with 75 beds or more with commercial kitchens,
common areas, and recreational programs. Given that RCFEs range
widely in size, required liability insurance should be scaled
proportionately to the number of residents housed by the RCFE in
order to adequately provide liability compensation for coverable
incidences.
Lastly, according to the author, "anecdotally, the range of
premiums appears to be $2,000 to $4,000 annually." However, it
is unclear whether this range of premiums is reflective of the
proposed $3 million minimum coverage. Further, it is unclear
how these additional costs will be borne by RCFEs, which could
ultimately be passed on to residents. This could place
additional financial burdens on seniors with limited resources,
and potentially reduce options for those who live on fixed
incomes, such as seniors whose only income is SSI/SSP.
Analysis Prepared by : Chris Reefe / HUM. S. / (916) 319-2089
FN: 0003359