BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2366|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 2366
Author: Dababneh (D), et al.
Amended: 6/13/16 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez,
Mitchell, Wieckowski
NO VOTE RECORDED: Liu
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 78-0, 5/12/16 (Consent) - See last page for
vote
SUBJECT: Long-term care insurance
SOURCE: Association of California Life and Health Insurance
Companies
DIGEST: This bill exempts life insurance policies that also
provide coverage for long-term care services from a provision
that requires insurers to offer new benefits to holders of
existing long-term care insurance (LTCI) policies.
ANALYSIS:
Existing law:
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1)Provides for the regulation of LTCI and life insurance by the
California Department of Insurance (CDI) and prescribes various
requirements and conditions governing those products.
2)Requires LTCI carriers to offer new policies, benefits, or benefit
eligibility criteria to existing policyholders as either a
replacement policy or a rider on the existing policy ("mandatory
offer").
3)Authorizes the Insurance Commissioner to waive the requirement
under certain conditions.
This bill:
1)Clarifies that the mandatory offer must be made within 12
months from when the new policy series is made available in
this state.
2)Limits the mandatory offer to only those changes that are
material in nature and would exempt "minor" revisions such as
changes to elimination periods, benefit periods, and benefit
amounts.
3)Exempts from the mandatory offer those life insurance policies
or riders that contain "accelerated long-term care benefits"
i.e. policies that pay for long-term care services out of a
life insurance benefit.
Background
LTCI policies are sold with the expectation that they will not
be needed until decades later. However, the rapid evolution of
care options makes it difficult for insurers and consumers to
predict what services will be offered and available that far in
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the future. For example, many early products only covered
nursing home care and those policies did not cover home care and
assisted living facilities when those services became available.
Now, insurers must make a mandatory offer of new benefits to
existing policyholders as a replacement policy or rider. This
provides the insured an opportunity to update the policy.
Some life insurance products, often referred to as "hybrid" or
"combination" products, pay for long-term care services out of
the death benefit when the insured develops a qualifying
disability. The mandatory offer applies whether or not the
policy is standard LTCI or a hybrid.
Both standard and hybrid life insurance products come in a
variety of forms that interact with LTCI benefits differently.
Whole life policies offer a fixed death benefit, level premium,
and a steadily increasing cash value. Universal life policies
allow the policyholder to change the death benefit, change or
skip premium payments, and have a less predictable cash value.
According to the Association of California Life and Health
Insurance Companies (ACLHIC), new LTCI benefits might not
integrate or graft well onto an existing life policy. This bill
conforms California law to the standards adopted by the National
Association of Insurance Commissioners by exempting "minor"
changes to covered services or providers for all LTCI policies,
as well as all hybrid products.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified 8/1/16)
Association of California Life and Health Insurance Companies
(source)
American Council of Life Insurers
National Association of Insurance and Financial Advisors -
California
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OPPOSITION: (Verified 8/1/16)
California Department of Insurance
ARGUMENTS IN SUPPORT: ACLHIC argues that existing law
impedes the development of innovative products and confuses
consumers. ACLHIC suggests that it would not be appropriate to
force an insurer that develops a new whole life hybrid product
to offer the new LTCI features to consumers with an existing
universal life hybrid product. For example, an LTCI feature
designed for whole life insurance that funds additional LTCI
benefits with dividends paid to the policyholder would be
meaningless when attached to a universal life policy that does
not pay dividends.
ARGUMENTS IN OPPOSITION: CDI argues that an exemption for
LTCI attached to life insurance is not necessary given recent
amendments that limit the obligation to offer new benefits that
are material only. CDI further emphasizes that this exemption
may be more significant since industry representatives suggest
that more consumers will obtain LTCI through combination
policies than through standalone policies.
ASSEMBLY FLOOR: 78-0, 5/12/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Burke, Jones-Sawyer
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Prepared by:Hugh Slayden / INS. / (916) 651-4110
8/3/16 19:33:36
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