BILL ANALYSIS Ó
AB 332
Page 1
Date of Hearing: April 21, 2015
ASSEMBLY COMMITTEE ON AGING AND LONG-TERM CARE
Cheryl Brown, Chair
AB 332
(Calderon) - As Introduced February 13, 2015
SUBJECT: Long-term care insurance: task force on statewide
long-term care insurance program.
SUMMARY: Would require the Insurance Commissioner to convene a
task force ("Task Force") to study the components necessary to
design a statewide long-term care insurance program and submit a
report to the Commissioner, the Governor, and the Legislature by
July 1, 2017. Specifically, this bill:
1)Establishes legislative findings and declarations that:
a. Public opinion polls show that Californians are
worried about the costs of growing older.
b. That they are apprehensive about being able to pay for
the costs of long-term care.
c. They worry about long-term care as much as they do
about their regular health care.
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d. A majority of respondents in a survey indicate that
they could not afford three months of care in a skilled
nursing facility; and that a significant number, though
not a majority, could not afford even one month of skilled
nursing facility costs.
e. Concerns about paying for long-term care cut across
all income levels and across all affiliations.
2)Would require the Insurance Commissioner to convene a task
force composed of specified stakeholders and representatives
of government agencies to examine the components necessary to
design a statewide long-term care insurance program, as
specified.
3)Would require the task force to recommend options for
establishing this program and to comment on their respective
degrees of feasibility in a report submitted to the
Commissioner, the Governor, and the Legislature by July 1,
2017.
4)Allows the Commissioner to seek private funding to support the
task force, and repeals the task force authorization on July
1, 2019.
EXISTING LAW:
1)Provides for the regulation of long-term care insurance by the
Insurance Commissioner and prescribes various requirements and
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conditions governing the delivery of individual or group
long-term care insurance in the state.
2)Establishes the California Partnership for Long-Term Care
Program to link private long-term care insurance and health
care service plan contracts that cover long-term care with the
In-Home Supportive Services program and Medi-Cal and to provide
Medi-Cal benefits to certain individuals who have income and
resources above the eligibility levels for receipt of medical
assistance, but who have purchased certified private long-term
care insurance policies and subsequently exhausted the
benefits of these private policies.
FISCAL EFFECT: Unknown.
COMMENTS:
Purpose of the bill: The author raises a critical concern about
California's preparedness for the care needs, along with the
economic, workforce, and policy implications, of a rapidly
growing cohort of older, mostly non-working people with a high
likelihood of disability living amongst a shrinking cohort of
younger, working-age people. The "baby-boom" generation, those
born between 1946 and 1964, began turning 65 in 2011. Today,
roughly 13 percent (5,109,207 of 38,926,281) of California's
population is age 65 or older, with about 1,000 people turning
65 each day, for about the next 14 years. By 2030, about 20
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percent of the state's population will be age 65 or older
(8,382,458 of 44,279,354). The 85+ population in California,
the population most likely to require long-term care, services,
and supports, currently stands at about 676,000 people, making
up about 1.7 percent of the population, but will grow by 32
percent to over 993,000 by 2030, comprising of 2.7 percent of
the total statewide population. The "baby-boom" population will
begin turning 85 in 2031. The 85+ cohort will eventually grow
to 5.4 percent of the total population by 2060 (2,851,396 of
52,693,383), according to the California Department of Finance's
"Report P-1; State and County Population Projections July 1,
2010-2060." Continued medical and public health advances may
contribute to even larger cohorts of the 65+ and 85+
populations.
A worker is considered to be at risk for serious economic
hardship in old age if his or her retirement income falls under
200 percent of the poverty threshold for individuals. A study
of retirement readiness published in 2011 by the UC Berkeley
Center for Labor Research and Education found that 47 percent of
Californians are projected to have retirement incomes below 300
percent of the poverty level ($34,470 in 2013). Individuals who
have not been able to save enough to provide adequate retirement
income are unlikely to be able to support the added cost of LTC
insurance premiums either before or, especially, during
retirement. Individuals with low retirement incomes who need
long-term care (LTC) services are most likely going spend-down
their assets and rely on Medi-Cal to pay for those services.
The author notes that California does not have a reliable option
for middle class seniors and persons with disabilities to obtain
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affordable long-term care. By liquidating and exhausting
personal resources, seniors and persons with disabilities may
access programs such as In-Home Supportive Services (IHSS), or
skilled nursing facility care, for free, or with a share of cost
if income levels demand. The other option, for those who have
sufficient income, belongings and other financial resources, is
to hire a private home, or home-health care aide - often
exceeding $30 per hour depending on the level of, or length of
time of the service.
Based on information presented during a recent joint
informational hearing on financing long-term care, baby-boomers
are not like their parents. In comparison to their parents,
baby-boomers, particularly women, have fewer savings and fewer
assets than previous generations. With the recession and the
massive loss of home equity fresh in people's minds, it should
be no surprise that baby-boomers are less likely to own a home,
more likely to have moved frequently, and thus, less tied to a
neighborhood or community. Baby-boomers are generally less
healthy, and afflicted with more obesity, diabetes, and heart
diseases (i.e., high cholesterol, high blood pressure). Boomers
are more likely to have been divorced, more likely to live
alone, and more likely to have fewer, or no children.
Background on LTC Insurance: Information provided by the
Assembly and Senate Committees on Insurance describe long-term
care insurance (LTCI) as a policy which covers the costs of some
or all long-term care services when insureds are unable to take
care of themselves. Coverage is triggered when an insured
develops a "chronic illness" typically defined as an inability
to perform a set number of "activities of daily living" such as
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ambulating, toileting, feeding, dressing, and bathing; or a
cognitive impairment, such as dementia caused by Alzheimer's,
Parkinson's or Huntington's disease. A policy may cover care
within a facility, or home/home-health care, or both.
Approximately 599,000 policies are currently in force in
California, up from about 497,000 five years ago. 115,000
Californians own long-term care insurance policies through the
state's Partnership for Long-Term Care. LTCI is a relatively
new form of insurance though it has a volatile history.
Insurers first sold LTCI policies covering nursing homes in the
1970s and expanded coverage in the 1980s to cover a wider
variety of settings. Unfortunately, those insurers failed to
accurately estimate future costs and losses. Increasing life
expectancies, faulty assumptions on lapse rates (policies
dropped before benefits are triggered), and the cost of care,
coupled with poor performance of insurer investments and other
insurer marketing practices have all contributed to dramatic
increases in LTCI premiums. Attempts in the 1990s and early
2000s to stabilize rates have had some impact, but some carriers
are still requesting and waiting on approval for additional rate
hikes as they are informed by more recent loss data.
State-based innovation: California supports an innovative
strategy to help citizens avoid dependence upon Medi-Cal through
LTCI policies sold by a program of the Department of Health Care
Services known as the California Partnership for Long-Term Care.
The Partnership program is dedicated to educating Californians
on the need to plan ahead for their future long-term care and to
consider private insurance as a vehicle to fund that care
through a select group of insurers. These companies have agreed
to offer high quality policies that must meet stringent
requirements set by the Partnership and the State of California.
These special policies are commonly called "Partnership
policies," and do not discriminate based upon the gender of the
insured as many private market policies do. In the last 6
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years, about 46,000 people have opted for a partnership product,
though sales have dropped precipitously since 2010 when over
12,000 policies were sold; in 2014, only 848 policies were sold.
CalPERS: CalPERS is a recent example of an LTC insurer that
underestimated the cost of insuring LTC. It has pushed through
multiple premium increases (30 percent in 2003, 43.8 percent in
2007, and 85 percent in 2015) in an effort to correct
inaccurate, decades-old assumptions. While premium increases of
this size are difficult to absorb for those who are still
working, it can be impossible for retirees on a fixed income and
narrower range coping skills to counteract economic variations
and absorb the higher premiums. CalPERS administers its LTCI
product using resources that the giant retirement program owns,
so as a self-funded product, it is exempt from regulation by the
Department of Insurance It is, nonetheless, a component of
state government and a recognized partner in addressing needs,
though multiple statewide public referendums have affirmed the
entity's independence from legislative and administrative
influences.
Previous Federal effort: Community Living Assistance Services
and Supports program (CLASS Act). The federal Patient
Protection and Affordable Care Act established the Community
Living Assistance Services and Supports program (CLASS). The
CLASS program was intended to be a national, voluntary insurance
program designed to provide assistance to qualified individuals
to obtain help with many basic daily living activities. On
October 14, 2011, the federal Department of Health and Human
Services transmitted the CLASS report and letter to Congress
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stating that CLASS implementation would not be viable. The
CLASS Act was repealed January 1, 2013. Key provisions included
monthly premium through payroll deduction, guaranteed-issue, and
eligibility within five years. Enrollees would have received a
lifetime cash benefit after meeting eligibility criteria.
Proposed Long-Term Care Task Force: Given the growing
recognition of California's demographic shifts, chaos in the
private insurance market, and under exploited state innovations
like the California Partnership for long-term care, it is widely
regarded as an opportune time to focus upon the strategies
available to a dynamic and diverse market like California's, to
begin to chart a successful path to long-term care economic
stability. AB 332 would require the Commissioner of the
California Department of Insurance to convene a task force to
study how to best design a statewide long-term care insurance
program for Californians. These policy experts and state
officials will examine the components necessary to design a
long-term care insurance program, including eligibility,
enrollment, financing, administration, work-force needs, and
interaction with the state's Medicaid program. One year later,
the task force would report to the Insurance Commissioner, the
Legislature, and the Governor on the options for statewide
long-term care insurance programs. This task force would be
comprised of expert long-term care insurance stakeholders, as
well as representatives from the following offices or agencies:
a. Insurance Commissioner. The Insurance Commissioner
oversees the California Department of Insurance (CDI). The
CDI enforces insurance-related laws and regulates industry
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practices.
b. Department of Health Care Services (DHCS). The DHCS
houses the California Partnership for Long-Term Care
Program which links private long-term care insurance and
health care service plan contracts that cover long-term
care with the In-Home Supportive Services program and
Medi-Cal.
c. Employment Development Department (EDD). The EDD
administers the State Disability Insurance (SDI), a partial
wage-replacement insurance plan for California workers.
The SDI programs are state-mandated, and funded through
employee payroll deductions. The author's office has
indicated in part that EDD may provide some guidance on how
to administer an employee payroll deduction program.
d. Labor Union Representing Long-Term Care Workers.
Workers in the In-Home Supportive Services program, some
private home and home-health workers, state-workers working
within state supported long-term care institutional
settings, and others are often represented for purposes of
advancing career development and training, achieving fair
working conditions, and other protections in what can be a
volatile industry. As needs rise for a well-trained,
culturally competent workforce, so will partnerships to
assure an adequate supply of workers.
e. Other Relevant Federal, State, and Local Government
Agencies. AB 332 does not specify what other state or
local agencies may be involved, nor does it provide any
criteria or specific appointment powers.
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QUESTIONS:
1.In addition to feasibility of developing a statewide insurance
program, should AB 332 be amended to explicitly include
implementation strategies of a statewide LTCI program as a
topic for the task force to address?
2.The Assembly Committee on Aging and Long-Term Care recently
completed a year-long series of informational hearings
assessing the state's preparedness for the cultural
competencies necessary among California's aging and long-term
care programs and services. Significant disparities exist
from one culture or ethnic group to the next in terms of
available caregivers, likelihood of disability and what type,
life expectancy, and competencies necessary to meet diverse
needs and expectations. To what extant are cultural
competencies necessary when developing and/or implementing a
broad-based insurance program?
Related Legislation:
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SB 1438 (Alquist, 2012): Called for a Long-Term Care Task force
convened by the Commissioner of the Department of Insurance,
similar to AB 332. SB 1438 was held in Senate Appropriations
Committee in 2012.
AB 999 (Yamada, Chapter 627, Statutes of 2012): Revised
long-term care (LTC) insurance oversight to enhance consumer
information and revise rate calculation requirements.
AB 1553 (Yamada, 2014): Prohibited the use of gender as a factor
to determine the premium for LTC insurance. AB 1553 was held in
the Assembly Insurance Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
California State Council of the Service Employees International
Union (SEIU) - Sponsor
California Health Advocates
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Older Women's League (OWL)
United Domestic Workers of America-UDW/AFSCME Local 3930
Numerous individuals.
Opposition
None on file.
Suggested amendments:
1. On page 2, lines 17-20:
17 (c) It is the intent of the Legislature to enact
legislation
18 establishing a task force to explore the feasibility of
developing and implementing a
19 culturally competent statewide insurance program for
long-term care , services , and
20 supports.
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2. On page 2, lines 26-29
26 (1) Explore how a statewide long-term care insurance
program
27 could be designed and implemented to expand the options for
people interested in insuring themselves against the risk of
costs associated with who become
28 functional ly or cognitive ly disabled disability and require
long-term care ,
29 services , and supports.
Analysis Prepared by:Robert MacLaughlin / AGING & L.T.C. / (916)
319-3990