BILL ANALYSIS Ó
AB 2366
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Date of Hearing: May 4, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2366 (Dababneh) - As Amended March 16, 2016
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|Policy |Insurance |Vote:|13 - 0 |
|Committee: | | | |
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|-------------+-------------------------------+-----+-------------|
| |Aging and Long Term Care | |6 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill exempts insurers that offer a policy which combines
both life and long-term care (LTC) coverages from the
requirement to offer the new policy to their existing long-term
care policy holders.
FISCAL EFFECT:
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Costs to the California Department of Insurance are negligible.
COMMENTS:
1)Purpose. According to the author, the requirement to offer new
LTC products to existing policyholders hinders the ability of
companies to make new products available for consumers, which
creates a compliance debacle for new hybrid products, and can
be extremely confusing or misleading to existing
policyholders. This bill exempts insurers from the requirement
to offer new LTC products to their existing policyholders when
the products are a combination of LTC and another insurance
product, such as life insurance. This bill is sponsored by
the Association of California Life and Health Insurance
Companies and has no opposition.
2)Background. LTC insurance is an inherently difficult product
for both consumers and insurers. It requires both the
consumer and the insurer to estimate what LTC services will be
needed, how long they will be needed, and when they will be
needed, which requires projections decades into the future.
Because the LTC insurance product can tend to be volatile due
to such uncertainty, strict requirements are in place for
sellers of LTC policies. One such provision of existing law,
which this bill addresses, requires LTC insurance sellers to
provide the policy holder with the right to be notified of any
new LTC benefit or benefit eligibility rule offered by the
insurer, and be offered these same terms. This prevents a
situation where a consumer is locked in to a higher rate for
their LTC policy, when the insurer is offering new clients a
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lower rate or more favorable terms.
Uncertainty, a long time horizon, and relatively high cost
have limited the popularity of LTC policies. To make the LTC
insurance product appealing to a broader range of consumers,
insurers have created products that combine life insurance and
LTC insurance. These products provide a death benefit during
the policyholder's working years and the benefit converts to
an LTC benefit later in life. Since these new products are
technically new LTC products, their creation and marketing
have triggered the requirement that they be offered to
existing LTC insurance policyholders. Insurers believe the
requirement to offer new LTC policies to existing consumers
was created to allow them to benefit from more favorable terms
for their LTC product, but that applying the requirement to
offer combination products to their existing LTC insurance
policyholder sows confusion and is unnecessary. This bill
will remove the requirement to offer-essentially, market- a
combined life/LTC insurance product to their existing LTC
policyholders, for many of whom the combined product may not
be desirable.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081
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