BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 475|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 475
Author: Monning (D)
Amended: 9/4/15
Vote: 21
SENATE HUMAN SERVICES COMMITTEE: 4-0, 4/28/15
AYES: McGuire, Hancock, Liu, Nguyen
NO VOTE RECORDED: Berryhill
SENATE FLOOR: 31-4, 5/14/15
AYES: Allen, Anderson, Bates, Beall, Block, Cannella, De León,
Gaines, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill,
Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mitchell,
Monning, Moorlach, Nguyen, Pan, Pavley, Runner, Stone,
Wieckowski, Wolk
NOES: Fuller, Morrell, Roth, Vidak
NO VOTE RECORDED: Berryhill, Huff, Mendoza, Nielsen
ASSEMBLY FLOOR: 53-26, 9/08/15 - See last page for vote
SUBJECT: Continuing care contracts: cancellation: payments
SOURCE: California Continuing Care Residents Association
DIGEST: This bill requires that continuing care contracts which
condition lump sum contract termination payments on resale of
the unit to meet a series of requirements and timelines, to pay
interest after a specified period of vacancy, and to meet other
requirements. Additionally, this bill creates a complaint
process, as specified, for residents if the repayment has not
been made within 12 months.
SB 475
Page 2
Assembly Amendments add a section of definitions, clarify the
conditions under which repayment of fees is required, clarify
that specified provisions of this bill do not apply to equity
interest contracts, require providers to disclose the length of
time for sale of a unit for contracts in which refunds are
conditioned upon resale, exempt projects in development, as
specified, from repayment provisions, add a complaint process,
and make other technical changes.
ANALYSIS:
Existing law:
1)Provides for the licensure and regulation of Continuing Care
Retirement Communities (CCRCs) by the California Department of
Social Services (CDSS) to enact minimum requirements to
protect the wellbeing and financial security of residents of
CCRCs. (HSC 1770 et seq.)
2)Establishes the Residential Care Facilities for the Elderly
Act, which requires CDSS to license and regulate RCFEs as a
separate category within the existing community care licensing
structure of CDSS. (HSC 1569 et seq.)
3)Provides for the regulation and licensure of skilled nursing
facilities by the California Department of Public Health
(CDPH). (HSC 1250 et seq.)
4)Requires a CCRC provider to hold a certificate of authority
from CDSS permitting the provider to contract for the
provision of continuing care, including medical care, in which
a resident over the age of 60 has paid in advance for more
than one year for that care. (HSC 1771.2)
5)Provides that the components of care provided by the facility
SB 475
Page 3
must be separately licensed as otherwise required by state
law, including Residential Care Facilities for the Elderly and
Skilled Nursing care. (HSC 1771.5)
6)Requires a CCRC to pay refunds owned to a resident within 14
calendar days after a resident makes possession of the living
unit available to the provider or 90 calendar days after death
or receipt of notice of termination, whichever is later. (HSC
1788.4 (a))
7)Prohibits characterizing as a refund, a lump sum payment
following termination of a continuing care contract that is
conditioned upon resale of the unit, and requires the payment
to be made within 90 days following resale of the unit. (HSC
1788.4 (e))
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
SB 475
Page 4
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
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 percent of the full
lump-sum payment if termination is the result of a resident's
death, and 20 percent 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 percent.
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 percent, 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
available to the resident or his or her estate.
8)Establishes a process for a resident to file a complaint with
the California Department of Social Services (CDSS) if his or
SB 475
Page 5
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 CDSS'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.
Background
Continuing Care Retirement Contract Model (CCRCs). CCRCs have
been likened to long-term care insurance, with seniors paying
large entry fees ranging from $50,000 to more than $2 million,
in exchange for access to a range of levels of care services,
including independent living, assisted living and skilled
nursing care intended to meet the care needs of residents over a
specified period of time as they age. There are a wide variety
of contractual models available across the state. Some provide
for a lump-sum termination of contract payment, based on a
portion of the entrance fees (typically ranging from 90 and 50
percent) upon the death of the resident. If the resident opts to
leave the community, repayment is conditioned upon the resale of
the unit. Other models provide for a refund of a portion of the
entrance fees, regardless of resale, at percentage rates that
decrease the longer the resident remains in the community. Some
facilities offer life care contracts through which a facility
agrees to care for the resident for the remainder of the
resident's life, regardless of whether the resident outlives his
or her financial resources.
In addition to entrance fees, residents pay monthly fees, which
may be held constant as the resident ages and needs increase, or
may increase as the resident needs increasing levels of care.
Such monthly fees range widely from $500 to $9,000 a month for
independent living, between $3,000 and $7,000 for assisted
living, and upwards from $7,000 to $17,000 per month for skilled
nursing.
There are currently 105 facilities certified as CCRCs in
SB 475
Page 6
California, 75 of which are nonprofit, and frequently operated
by religious or philanthropic organizations. Thirty CCRCs are
for-profit. There are eight nonprofit multiple-facility
providers and one for-profit multiple-facility provider.
According to Leading Age, there are more than 20,000 residents
of CCRCs in California.
Regulatory Structure. The bulk of regulatory oversight pertains
to the financial solvency of the facilities, in consideration of
the substantial investments made by residents. In addition,
CCRCs that operate an independent or assisted living level of
care are required to have those facilities licensed by CDSS as
Residential Care Facilities for the Elderly (RCFEs). Facilities
operating a skilled nursing level of care must have those
facilities licensed by the Department of Public Health.
Furthermore, CDSS is required to review and approve the overall
resident contract used by a facility with each resident, however
there are few statutory requirements placed on the content of
those contracts.
Required Annual Reports. Providers are required to submit an
annual report to CDSS describing the facility's financial
condition within four months after their fiscal year end. The
reports are required to consist of audited financial statements
and required reserve calculations, evidence of fidelity bonds
(insuring against dishonest employee conduct) as well as
additional information. Additionally, CCRCs that have contracts
promising to provide care without substantially increasing
monthly fees as needs increase must submit an actuarial study to
CDSS every five years regarding the actuarial financial position
of the facility.
Required Reserves. CCRC providers are required to maintain a
liquid reserve for long-term debt obligations that must be equal
to the sum of the prior fiscal year payments for the specific
items including interest on debt, rental or lease payments,
insurance. Additionally, CCRCs are required to maintain a liquid
reserve for operating expenses in an amount that equals or
exceeds 75 days net operating expenses, as defined.
SB 475
Page 7
CCRCs offering a "refundable contract" are required to maintain
a reserve for refunds, held in a trust fund. Providers are
permitted to invest up 70 percent of the refund reserves in the
real estate that is used to provide care and housing for the
residents where they reside. The required amount of the reserve
is calculated using a statutorily established formula based on
life expectancy of the residents and the portion of the entry
fee that is refundable. Importantly, many providers opt against
a refundable contract that requires reserves instead offering a
"lump sum payment" that is conditioned upon resale of the unit.
The latter model does not require the facility to maintain a
reserve, since it is assumed that the financial liability is
only incurred once the unit has been resold - it is this model
which the author cites as having led to long delays in returning
entrance fees.
Disclosure Statements. California statute requires CDSS to issue
a disclosure statement form that facilities provide to
residents, which includes general information such as the
provider's and owner's name, address, and telephone number,
names of any affiliated facilities, any accreditation of the
provider, distance to the nearest shopping center, number of
units and other detailed information.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Assembly Appropriations Committee, this bill
may contain minor and absorbable costs, likely less than $50,000
(General Fund) per year for CDSS to investigate complaints.
SUPPORT: (Verified9/8/15)
California Continuing Care Residents Association (Source)
California Commission on Aging
California Long Term Care Ombudsman Association
Cardinal Point Residents Association
SB 475
Page 8
Consumer Federation of California
National Association of Social Workers, California Chapter
Residents of Eskaton Village Carmichael of CALCRA
162 individuals
OPPOSITION: (Verified 9/8/15)
None received
ARGUMENTS IN SUPPORT: The bill's sponsor, the California
Continuing Care Residents Association, writes that "the CCRC
model of care is different than that of other residential care
facilities around the state. When seniors make a decision to
move into a CCRC, they pay a substantial entrance fee and
additional monthly fees in exchange for a lifetime of residency
and care that meets the ongoing and advancing needs of aging ?
Current law leaves families without recourse to demand the
return of an entrance fee within a reasonable time, and there is
no way to ensure that CCRC providers are making a good faith
effort to re-sell these vacant units. SB 475 helps the
investments the seniors make in their long-term care and ensures
that CCRC providers remain accountable for returning payments
and refunds to seniors and their families within a reasonable
time."
According to the author, 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."
ASSEMBLY FLOOR: 53-26, 9/08/15
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd,
Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,
Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low,
McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk,
Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
SB 475
Page 9
Thurmond, Ting, Weber, Williams, Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones,
Kim, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte,
Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk
NO VOTE RECORDED: Chávez
Prepared by:Mareva Brown / HUMAN S. / (916) 651-1524
9/9/15 9:49:58
**** END ****