BILL ANALYSIS Ó
SB 475
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Date of Hearing: August 26, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 475
(Monning) - As Amended August 20, 2015
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|Policy |Human Services |Vote:|5 - 2 |
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| |Aging and Long Term Care | |5 - 2 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill forbids a continuing care retirement community (CCRC)
from assessing a resident or his or her estate a monthly fee
once a unit has been permanently vacated by the resident under
certain conditions, and alters refund or repayment requirements
of a lump sum entrance fee, under certain conditions. Recent
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amendments clarify accrued interest requirements and recast the
Department of Social Services' (DSS) complaint investigation
process.
FISCAL EFFECT:
Minor and absorbable costs, likely less than $50,000 (GF) per
year to the DSS to investigate complaints.
COMMENTS.
1)Purpose. According to the author, "Continuing Care Retirement
Community (CCRC) contracts that base the repayment of a
resident's entrance fee upon the resale of the unit and not
upon vacancy are unfair arrangements for consumers and there
is little incentive to resale those units in a timely manner.
In many cases the CCRC provider is able to take advantage of
this type of contract, which can lead to seniors or their
estates experiencing significant delays in the repayment of
entrance fees. SB 475 levels the playing field for the CCRC
resident in a manner that will result in more timely
repayments."
2)Background. CCRCs offer a long-term continuing care contract,
which is an agreement between a provider and a resident
promising that a range of services will be provided to the
resident at the CCRC (sometimes at an additional cost,
depending on the type of contract). These services include
housing, residential services, and nursing care.
Continuing care contracts vary widely across CCRCs, with
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differing provisions on costs, payment methods, services
provided, and other elements. Continuing care contracts
typically require an individual to pay an entrance fee and
monthly fees. Entrance fees can range widely, typically from
$100,000 to $1 million, and monthly fees vary depending in
part on the level of services included in the contract
Continuing care contracts may be refundable or non-refundable.
Refundable contracts refund a portion of the entrance fees,
sometimes on a scale that decreases over time the percentage
of the entrance fee that is refunded. These types of
contracts require a CCRC to maintain a reserve for refunds (in
addition to other reserves required for the operation of a
CCRC). Alternatively, many CCRC providers choose instead to
offer a repayment of a designated portion of the entrance fee
- a "lump-sum payment" - that is conditioned upon resale of
the unit. A reserve is not required in this case, as it is
assumed that the resale of the unit will result in the new
resident's entrance fee covering the cost of repaying a
portion of the former resident's entrance fee. In California,
there are currently no requirements that resale and/or
repayment of entrance fees take place within a certain period
of time.
There are over 100 CCRCs in California, with over 20,000
units. Approximately 65% of CCRC providers are non-profit.
The Community Care Licensing Division of DSS reviews and
approves CCRC applications and otherwise regulates their
operation.
3)Arguments in Support. Senior and long term care advocates
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assert that when seniors move into a CCRC it comes with a
substantial entrance fee and additional monthly fees in
exchange for lifetime care and residency. These entrance fees
represent significant investments. Many seniors sell their
homes to pay the fee, and find security in a contract to
return it, if necessary. Supporters argue that when the fee
is "conditioned upon the resale of the unit," the obligation
for the CCRC to return the fee is diminished - refunds can be
delayed for years, or indefinitely, and with no corresponding
interest rate to compensate for the slow process to refund the
fee. Sometimes, providers charge monthly maintenance and
upkeep against the balance of the fee while the refund awaits
issuance to the former resident, or the estate. Thus, there
is little or no incentive to sell the unit. Former residents
have waited years, and sometimes engaged in disheartening
legal battles to obtain their refund. Current law leaves
families with little or no leverage or recourse to demand fair
return of entrance fees. SB 475 changes that and helps
seniors protect their investments.
4)Arguments in Opposition. CCRC providers are concerned that the
interest rate charged against outstanding entry fee refund
balances could unintentionally restrict access to CCRCs and
create potential expenses for remaining residents of CCRCs.
They also argue that the bill could reduce a provider's
willingness to offer refundable contracts, (currently the most
favored model), and the bill does not offer protections
against a so-called "run" on a community, where a domino-like
effect of one resident exiting may cause others to seek to
exit, thereby de-stabilizing the entire community.
They also would prefer that DSS use objective criteria when
determining whether a provider has made a sufficient "good
faith effort" to resell or reoccupy a vacated unit, rather
than the subjective approach currently in the bill.
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5)Prior Legislation.
a) AB 1433 (Eng) Chapter 443, Statutes of 2010, defined
"residential temporary relocations" in continuing care
contracts of residents who live in CCRCs, and established
related rights, requirements, and procedures.
b) AB 407 (Beall) Chapter 442, Statutes of 2009, imposed
patient protection requirements on CCRCs in the event of
their closure.
c) SB 489 (Steinberg, 2007) would have established
procedures and protections for both permanent and temporary
closures of CCRCs. That bill was vetoed by the Governor.
Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081