BILL ANALYSIS Ó
SB 475
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SENATE THIRD READING
SB
475 (Monning)
As Amended September 4, 2015
Majority vote
SENATE VOTE: 31-4
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Human Services |5-2 |Chu, Calderon, Lopez, |Mayes, Maienschein |
| | | | |
| | | | |
| | |Mark Stone, Thurmond | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Aging |5-2 |Brown, Gipson, Gray, |Hadley, Mathis |
| | |Levine, Lopez | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Appropriations |12-5 |Gomez, Bloom, Bonta, |Bigelow, Chang, |
| | |Calderon, Gordon, |Gallagher, Jones, |
| | |Eggman, |Wagner |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Holden, Quirk, Rendon, | |
SB 475
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| | |Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Imposes additional repayment and other requirements on
certain continuing care contracts once a unit has been vacated.
Specifically, this bill:
1)Prohibits a continuing care retirement community (CCRC)
provider from charging a resident or his or her descendants a
monthly fee once a unit has been permanently vacated by the
resident, unless the fee is part of an equity interest
contract. Further requires a continuing care contract to
contain, among other things, a statement regarding this
prohibition.
2)Requires a continuing care contract to contain the policy or
terms for repaying a lump sum of any portion of the entrance
fee, and further requires every continuing care contract that
provides for a refund or repaying a lump sum of all or part of
the entrance fee to, among other things, do the following:
a) State that the provider shall make a good faith effort
to reoccupy or resell a unit for which a lump-sum payment
is conditioned upon resale of the unit and, by July 1,
2016, notice current residents, as specified, regarding
this statement as clarification of the resident's existing
contract; and
b) State, for all contracts with a repayment of all or a
portion of the entrance fee conditioned upon the resale of
the unit, the average and longest amount of time that it
has taken to resell a unit within the last five calendar
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years.
3)Requires, for contracts signed after January 1, 2016, if the
unit remains vacant for 120 days after the resident's
termination, a repayment of at least 10% of the full lump-sum
payment if termination is the result of a resident's death,
and 20% if termination occurs for any other reason. Further
specifies that this repayment shall not cause the contract to
be deemed a refundable contract requiring a refund reserve, as
specified.
4)Requires, for continuing care contracts entered into on or
after January 1, 2016, that any payment balance that has not
been paid to a resident within 180 days shall accrue simple
interest, to be compounded annually, at a rate of 4%. Further
requires that any payment balance that has not been paid
within 240 days shall accrue simple interest, to be compounded
annually, at a rate of 6% and that interest shall continue to
accrue until the date the full lump-sum payment is paid to the
resident.
5)Exempts, until January 1, 2017, projects in development prior
to January 1, 2016, for which contracts were entered into on
or before January 1, 2017, from certain requirements regarding
refunds, lump-sum charges and repayment, and interest
payments, as specified.
6)Clarifies that, after the death of a resident, repayment and
interest requirements apply to a lump-sum payment that is
conditioned upon the resale of a unit and that any payment and
interest shall be payable to the resident's estate.
7)States that these repayment and other requirements shall not
be construed to limit or alter any legal remedies otherwise
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available to the resident or his or her estate.
8)Establishes a process for a resident to file a complaint with
the Department of Social Services (DSS) if his or her unit has
not been resold for more than 12 months after the unit was
made available to the provider, as specified. Further
establishes processes for residents and providers to request a
review of DSS's resulting determination and stipulates that if
a provider is found to not have made a sufficient good faith
effort to reoccupy or resell a unit, that provider shall repay
the full lump-sum payment due the resident within 20 business
days, as specified.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, this bill may contain minor and absorbable costs,
likely less than $50,000 (General Fund) per year to DSS to
investigate complaints.
COMMENTS:
Continuing Care Retirement Communities: CCRCs offer individuals
60 years or older a housing option that includes long-term care
services that are typically provided for the lifetime of the
resident. 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 can vary widely across CCRCs, with
differing provisions on costs, payment methods, services
provided, and other elements. Continuing care contracts
typically require an individual to pay an entrance fee and
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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. CCRC
contracts are sometimes referred to by three "types": Type A
contracts (also known as life care contracts), are the most
expensive and are all-inclusive agreements wherein all housing,
services and healthcare are covered by the entrance fee and
monthly fees; Type B contracts typically offer discounted
healthcare services for limited amounts of time, after which
services can be purchased; and Type C contracts offer the lowest
entrance and monthly fees, but require residents to be
responsible for paying for healthcare services at market rates.
Also, 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 currently nearly 100 CCRCs in California, with over
20,000 units. Roughly 65% of CCRC providers are non-profit.
The Community Care Licensing Division of DSS oversees CCRCs by:
a) ensuring that licensing laws and regulations are followed
(CCRCs are required to obtain a certificate of authority and an
RCFE license; they must also obtain a SNF license through the
Department of Public Health (DPH) if offering skilled nursing
services), and b) reviewing and approving CCRC applications and
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monitoring CCRCs' financial condition and their ability to
uphold their contractual obligations to residents.
Need for this bill: According to the author, "Under current
law, 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. For example, a CCRC in Pacific
Grove had not paid $530,600 to the estate of a resident who died
more than 3 years ago because the refund was conditioned upon
resale of the unit. [This bill] levels the playing field for
the CCRC resident in a manner that will result in more timely
repayments and adds an incentive for a CCRC to resale a unit in
the form of interest on the unpaid remaining balance. The
resident safeguards in the bill balance the need for steadfast
repayment while ensuring the CCRC can remain fiscally solvent so
the current residents are not adversely impacted."
Analysis Prepared by:
Daphne Hunt / HUM. S. / (916) 319-2089 FN:
0002166
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