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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          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