BILL ANALYSIS                                                                                                                                                                                                    




                                                                  AB 1523
                                                                  Page A
          CONCURRENCE IN SENATE AMENDMENTS
          AB 1523 (Atkins and Weber)
          As Amended  June 12, 2014
          Majority vote
           
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          |ASSEMBLY:  |77-0 |(May 15, 2014)  |SENATE: |32-0 |(June 26,      |
          |           |     |                |        |     |2014)          |
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           Original Committee Reference:    HUM. S.  

           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. 
                
            The Senate amendments  delete the requirement that a RCFE obtain  
          a bond in the amount of $3 million to cover liability costs. 

           AS PASSED BY THE ASSEMBLY  , this bill:

          1)Required 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)Provided 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 Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.  


           COMMENTS  :










                                                                  AB 1523
                                                                  Page B
          Background:  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 the Department  
          of Social Services (DSS) Community Care Licensing Division, 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  
          funding available through Medi-Cal, Supplemental Security  
          Income/State Supplementary Payment (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  
          ---------------------------
          <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
          $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.  

               Additionally, liability insurance is a consumer  
               protection that all residents and families of  



               ----------------------
          <5> http://www.ssa.gov/pressoffice/factsheets/colafacts2014.pdf








                                                                  AB 1523
                                                                  Page D
               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. 

          Additionally, 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: 0004107