BILL ANALYSIS Ó SB 475 Page 1 Date of Hearing: August 26, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 475 (Monning) - As Amended August 20, 2015 ----------------------------------------------------------------- |Policy |Human Services |Vote:|5 - 2 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Aging and Long Term Care | |5 - 2 | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 SB 475 Page 2 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 SB 475 Page 3 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 SB 475 Page 4 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. SB 475 Page 5 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