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 --