BILL ANALYSIS Ó
AB 332
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ASSEMBLY THIRD READING
AB
332 (Calderon)
As Amended April 27, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+---------------------|
|Insurance |9-4 |Daly, Calderon, |Beth Gaines, Travis |
| | |Cooley, Cooper, |Allen, Grove, Mayes |
| | |Dababneh, Frazier, | |
| | |Gatto, Gonzalez, | |
| | |Rodriguez | |
| | | | |
|----------------+------+--------------------+---------------------|
|Aging |7-0 |Brown, Hadley, | |
| | |Gipson, Gray, | |
| | |Levine, Lopez, | |
| | |Mathis | |
| | | | |
|----------------+------+--------------------+---------------------|
|Appropriations |12-5 |Gomez, Bloom, |Bigelow, Chang, |
| | |Bonta, Calderon, |Gallagher, Jones, |
| | |Daly, Eggman, |Wagner |
| | |Eduardo Garcia, | |
| | |Holden, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
AB 332
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SUMMARY: Establishes a task force to design a statewide, public
long-term care insurance program. Specifically, this bill:
1)Requires the Insurance Commissioner (commissioner) to appoint a
task force to design a statewide long-term care (LTC) insurance
program.
2)Requires the task force to explore the following aspects of the
program:
a) Program design options for eligibility, enrollment,
benefits, financing, administration and interaction with
Medi-Cal and other public programs.
b) The feasibility of including a LTC benefit in the State
Disability Insurance program (SDI).
c) Payroll deductions for premiums.
d) Mandatory enrollment options.
e) Coordination of benefits with other private insurance.
f) Impact on the LTC workforce.
1)Requires the commissioner to appoint senior health policy and
LTC insurance stakeholders to the task force including one
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representative of a labor union representing LTC workers, the
Department of Health Care Services, and the Employment
Development Department.
2)Requires the Department of Insurance and other participating
governmental agencies to fund the task force with existing
resources.
3)Requires the task force to issue its report on or before January
1, 2017.
4)Permits the commissioner to seek private funds to pay for the
task force.
5)Makes numerous findings and declarations regarding LTC costs.
EXISTING LAW:
1) Provides for the regulation of LTC insurance by the
commissioner and prescribes various requirements and 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.
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FISCAL EFFECT: According to the Assembly Appropriations
Committee, estimated one-time costs for staff support for the task
force of $115,000 a year for two years from the Insurance Fund.
COMMENTS:
1)Purpose of the Bill. According to the author, Californian's
have two options for the elderly to receive the care and
personal assistance they need to remain in their home. The
first is for a person to qualify for Medi-Cal. By qualifying
for Medi-Cal, seniors and persons with disabilities may qualify
for many programs administered by the state such as In-Home
Supportive Services. The second option is for a person to earn
and/or save enough disposable income to hire a private home care
aide or pay for residential care. Recent public opinion
research shows over 60% of working adults fear they will not be
able to afford long-term care and health care costs during their
golden years. The majority of participants indicated they could
not afford more than 3 months of care at a nursing facility with
an average cost of $6,000 per month, while 40% of participants
indicated they could not afford a single month of care in a
nursing home. Among the Latino population, 88% of participants
do not have long-term care insurance and are unaware if they
qualify for public benefits. A long-term care insurance task
force would be the first step towards building a robust
long-term care system in California.
2)Long Term Care. LTC services provide individuals who, because
of illness or disability, are generally unable to perform
activities of daily living, such as bathing, dressing,
toileting, and getting around the house, or suffer from
cognitive impairments. LTC services are provided in a variety
of settings, such as nursing homes, assisted living facilities,
and private residences. Only about 20% of the elderly who need
LTC services live in an institutional setting. The roughly 80%
living in the community primarily live in private homes, but a
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small number live in residential communities catering to the
needs of elderly people. For those living at home, most receive
assistance from unpaid family members and friends (referred to
as informal care) while some pay for assistance (referred to as
formal care) from home health aides. Elderly people with severe
functional and cognitive limitations who require around-the
clock assistance often live in institutional settings.
According to data from the Medicare Current Beneficiary Survey,
the elderly nursing home population has declined over the past
10 years as more elderly people are living in residential care
facilities, community-based housing with supportive services,
and in their homes.
3)Retirement Readiness. It is well accepted that the average
American worker has inadequate retirement savings. A worker is
considered to be at risk for serious economic hardship in old
age if his or her retirement income falls under 200% of the
poverty threshold for individuals. A study of retirement
readiness published in 2011 by the University of California,
Berkeley Center for Labor Research and Education found that 47%
of Californians are projected to have retirement incomes below
300% 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
LTC services are most likely going spend down their assets and
rely on Medi-Cal to pay for those services.
4)How is LTC Paid For? More than half of LTC services are
provided as informal care. The Congressional Budget Office
estimates that the value of informal care provided in 2011 was
approximately $234 billion. Of the $192 billion spent on formal
LTC services in 2011 roughly two-thirds is paid by Medicare and
Medicaid (with the remainder paid out-of-pocket by consumers or
by private insurance). Medi-Cal (sometimes with a little
Medicare added in) is the de facto LTC insurance policy for
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those who aren't wealthy enough to afford LTC insurance premiums
or to pay LTC costs out-of-pocket. Creating a public LTC
insurance product as envisioned by the bill would be protective
of the state General Fund (which pays for 50% of Medi-Cal costs
for most recipients) to the extent that consumers elect to buy
the insurance. However, given that a reasonably affordable LTC
policy will cover only a part of the LTC expenses for most
people, it is likely that a great many of those who buy the
policy will spend down their assets and become Medi-Cal eligible
at some point. For most Californians, buying an LTC insurance
policy shifts the financial burden for the LTC services away
from the General Fund and onto the individual.
5)Problems in the LTC Market. The long-term care insurance
marketplace is problematic for both insurers and consumers. In
the past five years, 10 of the top 20 LTC insurers have stopped
selling new LTC policies. Insurers have struggled with setting
premiums adequate to cover their costs in the absence of
sufficient claims data. LTC insurance is a relatively new
product that requires years of paying premiums before claims are
made. Only in recent years have the insurers begun to receive
claims for many of the policies sold early on, and those claims
have been much higher than the insurers anticipated. In
addition to misjudging the cost of claims, insurers have
struggled with anticipating policy lapse rates, LTC inflation,
and life span increases. All of those factors, and others, have
led to LTC insurance being much more expensive than previously
expected. The early mistakes in pricing LTC policies has led to
rounds of major premium increases which adds marketing
challenges to a product that is already, according to insurance
agents, difficult to sell. CalPERS is a recent example of an
LTC insurer that underestimated the cost of insuring LTC. It
has pushed through multiple premium increases (30% in 2003,
43.8% in 2007, and 85% in 2015) in an attempt to set premiums in
line with its costs. 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 to absorb the higher
premiums.
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Genworth is the largest issuer of private LTC insurance and it
has suffered massive financial losses on the product in the past
year. It has added nearly $1 billion to the loss reserves for
its LTC policies and has had its bonds reduced to junk status by
multiple rating agencies. These losses are occurring despite
Genworth having significantly increased the premiums charged for
its existing policies. Losses in LTC insurance previously
caused both MetLife and Prudential to exit the market.
6)Previous Legislation. A very similar bill was introduced in
2002 (SB 1438 (Alquist)) and was held on the Senate
Appropriations Committee suspense file.
7)CLASS Act. The federal Patient Protection and Affordable Care
Act (also known as Obamacare) 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 announced that the CLASS Act was not financially
viable. The CLASS Act was subsequently repealed.
Analysis Prepared by:
Paul Riches / INS. / (916) 319-2086 FN: 0000338
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