BILL ANALYSIS Ó
SENATE COMMITTEE ON INSURANCE
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: AB 332 Hearing Date: June 24,
2015
-----------------------------------------------------------------
|Author: |Calderon |
|-----------+-----------------------------------------------------|
|Version: |June 15, 2015 Amended |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Urgency: |No |Fiscal: |Yes |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Consultant:|Hugh Slayden |
| | |
-----------------------------------------------------------------
Subject: Long-term care insurance.
SUMMARY Would create a task force within the California Department of
Insurance (CDI) to study the components necessary to design a
statewide long-term care insurance program and submit a report
to the Insurance Commissioner (IC), the Governor, and the
Legislature by July 1, 2017.
DIGEST
Existing law
1. Provides for the regulation of long-term care insurance by
the IC 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 within the Department of Health Care Services (DHCS)
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.
AB 332 (Calderon) Page 2
of ?
This bill
1. Creates a task force within the California Department of
Insurance (CDI) to be led by the Insurance Commissioner (IC)
for the purpose of examining the components necessary to
design and implement a statewide long-term care insurance
program.
2. Provides that the task force has nine members, including
the IC, Director of the Department of Health Care Services;
Director of the Department of Aging; four appointed by the
Governor including a certified actuary, a non-government
health policy expert, a representative of a long-term care
provider association, and a representative of a senior or
consumer organization; one appointed by the Speaker of the
Assembly from an employee representative organization; and
one appointed by the President pro Tempore of the Senate
from the long-term care insurance industry.
3. Prohibits task force members from receiving per diem or
similar compensation for serving on the task force.
4. Subjects the task force to the Bagley-Keene Open Meeting
Act.
5. Makes findings and declarations related to the public
perception of the anticipated need for long-term care
services and challenges in financing those services.
6. Requires the task force to consider specified factors when
making a recommendation.
7. Requires CDI and any participating state agency to operate
within its existing budgetary resources for purposes of
implementing this section.
AB 332 (Calderon) Page 3
of ?
8. Requires the task force to recommend options regarding the
program, comment on the program flexibility, and make
recommendations on key regulatory provisions regarding
existing insurance programs in a report submitted to the IC,
Governor, and Legislature on or before January 1, 2017.
9. Permits the IC to seek private funds for purposes of
implementing this section.
10. Sunsets on January 1, 2019.
COMMENTS
1. Purpose of the bill According to the author, California
does not have an option for middle class seniors and persons
with disabilities to obtain affordable long-term care.
Currently, there are two options for the elderly to receive
the care and personal assistance they need to remain in
their home. First, a person must meet the federal income
requirements, proving they earn wages 100% below poverty
level to qualify for Medi-Cal and/or Medicaid. 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 (IHSS).
Secondly, the author points out that a person must earn
and/or save enough disposable income to hire a private home
care aide - at times paying an average of $30 per hour, to
receive long-term care services. Without an alternative(s)
to obtain long-term care, the aging middle class must decide
whether to spend down their assets in order to qualify for
Medi-Cal and safety net services or to exhaust their
personal assets paying for private care services.
The author further notes that California's senior
population, aged 60 or older, is projected to grow to 12
million residents by 2030. Recent public opinion research
shows over 60 percent of working adults fear they will not
be able to afford long-term care and health care costs
AB 332 (Calderon) Page 4
of ?
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 percent of participants indicated they could
not afford a single month of care in a nursing home. Among
the Latino population, 88 percent 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. Background Long-term care support and services are the
nonmedical services required when a person is unable to take
care of themselves. The services are covered by long-term
care insurance (LTCI).
But LTCI has had a volatile history due, in major part, to
the challenges of designing and pricing products that
accurately anticipate potential losses decades into the
future. As a means of financing long-term care services,
LTCI is looking less and less viable, particularly for
middle and lower-income people. 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
LTCI premiums either before or, especially, during
retirement.
In January of this year, the Senate Select Committee on
Aging and Long Term Care ("Senate Select Committee") chaired
by Senator Liu released a report, A Shattered System:
Reforming Long-Term Care in California that discusses
California's fragmented system of providing long-term care
and makes several recommendations related to the
organization and improvement of existing programs. AB 332
is only one bill of a package of over 30 proposals
implementing the report's recommendations.
According to the Senate Select Committee report, in
California, the number of individuals age 65 and older is
projected to increase almost 100% in the next 20 years. The
burgeoning need for long-term care services for both the
elderly and dependent adults and children remains a pressing
public policy concern. Demographic trends starkly
demonstrate the need for access to services, but only a
AB 332 (Calderon) Page 5
of ?
small portion of the population purchase LTCI policies.
These challenges are no surprise to LTCI carriers; every
year fewer carriers are actively issuing new policies. Some
insurers are exploring options to traditional LTCI that may
make coverage more affordable. Some life and disability
insurers offer alternative products that provide cash
benefits while the insured suffers from a qualifying
disability. At least one LTCI carrier has publicly
expressed interest in developing a public-private
partnership that would coordinate an affordable private
policy that offers coverage for the first years of need with
a public program that provides long-term support once the
private benefits are exhausted.
California has a similar program through the California
Partnership for Long-Term Care ("Partnership") in DHCS.
These policies coordinate LTCI benefits with Medi-Cal
eligibility by offering "lifetime asset protection" meaning
that for every dollar the policy pays in benefits the
insured has one less dollar to "spend down" to qualify for
Medi-Cal. These companies have agreed to offer policies
that meet stringent requirements set by the Partnership.
But better benefits means higher costs. The Partnership
program is not viewed as solution to finance services for
middle class consumers who cannot afford the underlying
policy. Reflecting trends in LTCI generally, there are
fewer insurers participating and sales have dropped
significantly over the last several years.
Recent Collaborative Efforts. 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 cover long-term care services
and support. However, the federal government determined
that the national program established under the CLASS Act
would not be viable. Without a federal solution, the states
will have to address this pressing need.
Along with the efforts by the Senate Select Committee,
several formal and informal working-groups have developed
recently to address the issue of financing long-term care
services and grown increasingly active.
AB 332 (Calderon) Page 6
of ?
Last fall, an informal group that included
representatives from the LTCI industry, DHCS, consumer
advocates legislative staff, and others met several times
to discuss LTCI reform proposals, including those related
to the standards applicable Partnership policies.
Last April, the Assembly Committee on Aging and
Long-term Care, the Senate Select Committee, and the
Senate Human Services Committee held a joint hearing to
examine long-term care financing options. (Both the
Assembly and Senate Insurance Committees participated by
contributing background material related to LTCI.)
LeadingAge, a nonprofit organization representing
not-for-profit organizations that provide aging services,
has been holding stakeholder meetings that have included
consumer groups, legislative staff, industry and public
representative, nonprofit service providers, and others,
in order to develop state and federal proposals.
A consistent theme running through all of these discussions
has been focused on the middle class. When LTCI was
underpriced, LTCI appeared to be a viable option. Since
rates have increased to more realistic levels, it has become
increasingly clear that it will likely be beyond the reach
of many in the middle class, even those who will not qualify
for Medi-Cal/Medicaid.
Recognizing the challenges of expanding existing entitlement
programs, discussions have explored ways for people with
low- to middle-incomes to take advantage of existing
resources (without spending themselves to poverty-level),
provide necessary, but affordable benefits (particularly
in-home care), and encourage lower-cost options to
traditional LTCI. At this time, however, these discussions
lack a forum where proposals may be vetted by all necessary
stakeholders and prepared as a proposal to the Legislature.
AB 332 (Calderon) Page 7
of ?
Long-term Care Task Force. This bill would create a task
force within CDI to consider the feasibility and components
of a statewide long-term care insurance program. The
membership includes stakeholders from state government, the
insurance industry, caregivers, and others.
The author pursues a statewide program funded by participant
contributions and related proposals as vehicles to address
the long-term care financing options for the middle-class.
While the framework of the proposal is posed as a public
program in addition to or similar to State Disability
Insurance, it is also intended to maximize the potential for
private solutions, as well as consider potential reforms to
existing regulations that may increase availability of fully
private options. For that reason, the participants have
been chosen to reflect critical issue areas: the IC and
insurance industry to address LTCI standards and the
potential for public/private proposals; the directors of
DHCS and Department of Aging to consider the potential
interaction with existing public programs; caregiver
representatives to provide input relative to the
availability of affordable services; an actuary to offer
considerations as to feasibility; and others.
1. Support
California Health Advocates (CHA) states that neither
privately purchased insurance nor the state's Medi-Cal
program can solve the financing dilemma for this kind of
care alone. Commercial insurance is medically underwritten,
expensive, subject to huge premium increases, and
discriminates in pricing against women, while Medi-Cal is
faced with growing numbers of people who are or will become
poor. Neither of these constitutes a way for the majority
of people to plan and pay for long term care. CHA supports
this bill because it would create a forum to explore the
potential for a groundbreaking, fiscally sound options that
combine and integrate multiple payments sources to finance
long term care.
LeadingAge California believes that AB 332 will provide a
platform for expanding long-term care insurance options in
AB 332 (Calderon) Page 8
of ?
California, which is an essential part of the solution to
solving long-term care financing.
2. Opposition
None received
3. Prior and Related Legislation
SB 1438 (Alquist, 2012), proposed a task force similar to
that proposed by AB 332. Held in the Senate Appropriations
Committee.
AB 999 (Yamada), Chapter 627, Statutes of 2012, revised LTCI
oversight to enhance consumer information and revise rate
calculation requirements.
AB 1553 (Yamada, 2014) would have prohibited the use of
gender as a factor to determine the premium for LTC
insurance. Held in the Assembly Insurance Committee.
POSITIONS
Support
California State Council of the Service Employees International
Union (Co-sponsor)
United Long-Term Care Workers (Co-sponsor)
California Commission on Aging
California Health Advocates
California State Retirees
LeadingAge California
Marin County Board of Supervisors
Older Women's League (OWL)
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
United Domestic Workers of America-UDW/AFSCME Local 3930
AB 332 (Calderon) Page 9
of ?
Oppose
None received
-- END --