BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        SB 939|
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                                UNFINISHED BUSINESS 


          Bill No:  SB 939
          Author:   Monning (D) 
          Amended:  6/16/16  
          Vote:     21 

           SENATE HUMAN SERVICES COMMITTEE:  3-0, 4/12/16
           AYES:  McGuire, Hancock, Liu
           NO VOTE RECORDED:  Berryhill, Nguyen

           SENATE FLOOR:  34-0, 4/18/16
           AYES:  Allen, Anderson, Bates, Beall, Block, Cannella, De León,  
            Gaines, Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg,  
            Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire,  
            Mendoza, Mitchell, Monning, Moorlach, Nguyen, Pan, Pavley,  
            Roth, Stone, Vidak, Wieckowski, Wolk
           NO VOTE RECORDED:  Berryhill, Fuller, Huff, Morrell, Nielsen,  
            Runner

           ASSEMBLY FLOOR:  50-23, 6/27/16 - 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 that  
          contain lump sum contract termination payments conditioned on  
          resale of the unit must meet a series of requirements and  
          timelines, must pay interest after a specified period of  
          vacancy, and must meet other requirements. 


          Assembly Amendments:









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          1)Delete requirement that a continuing care retirement facility  
            pay the full lump-sum payment that is conditioned upon resale  
            of a unit to a resident, including any interest accrued,  
            within 14 days after resale of a unit. 




          2)Delete the requirement that a continuing care retirement  
            facility, for contracts signed after January 1, 2017, pay a  
            resident or his or her estate a specified portion of the full  
            lump sum owed, notwithstanding a provider's documented  
            good-faith effort to resell the unit, if the unit remains  
            vacant 120 days after the resident's termination. 




          3)Define a repayable contract as a continuing care contract that  
            includes a promise to repay all or a portion of an entrance  
            fee that is conditioned upon re-occupancy or resale of the  
            unit previously occupied by the resident. 




          4)Require any amount owed that is not paid to a resident or the  
            resident's estate within specified period of time after  
            termination of a repayable contract to accrue simple interest,  
            as defined, until the full amount owed is paid. 


          ANALYSIS:   


          Existing law:

           1) Provides for the licensure and regulation of Continuing Care  
             Retirement Communities (CCRCs) by the California Department  








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             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 (RCFE), 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) 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)

           4) Provides that the components of care provided by the  
             facility must be separately licensed as otherwise required by  
             state law, including Residential Care Facilities for the  
             Elderly and Skilled Nursing care. (HSC 1771.5)

           5) Requires a CCRC to pay refunds owed 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))

           6) 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)Clarifies the definition of "repayable contract" by explicitly  
            defining it to mean a continuing care contract that includes a  
            promise to repay all or a portion of an entrance fee that is  
            conditioned upon re-occupancy or resale of the unit previously  
            occupied by the resident.  Further, specifies within this  
            definition that a provider may repay all or a portion of an  
            entrance fee before the resale of the unit, as specified.









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          2)Prohibits a provider from charging a resident or his or her  
            estate a monthly fee once a unit has been permanently vacated  
            by the resident, unless that fee is part of an equity interest  
            contract.  Further requires providers to supply statements  
            that describe this prohibition, as specified.


          3)Requires a continuing care contract to contain the policy or  
            terms for repaying a lump sum of any portion of the entrance  
            fee, alongside other information, as specified.  Further,  
            requires, for all contracts with a repayment of all or a  
            portion of the entrance fee conditioned upon resale of the  
            unit, to do the following:


             a)   State that the provider shall make a good-faith effort  
               to reoccupy or resell the unit; and 


             b)   State the average and longest amount of time that a  
               provider has taken to resell a unit within the last five  
               calendar years.


          1)Requires, by July 1, 2017, a provider to supply notice to all  
            current residents who have contracts with a repayment of all  
            or a portion of the entrance fee conditioned upon resale of  
            the unit with clarification of the resident's existing  
            contract that specifies that the provider shall make a  
            good-faith effort to reoccupy or resell a unit, as specified.


          2)Requires any balance of the lump sum due a resident or  
            resident's estate per a repayable contract entered into on or  
            after January 1, 2017, to accrue interest as follows:


             a)   Any amount owed a resident or resident's estate that is  
               not paid within 180 days after the termination of the  
               repayable contract shall accrue simple interest at a rate  
               of 4% of the amount owed; 








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             b)   Any amount owed a resident or resident's estate that is  
               not paid within 240 days after the termination of the  
               repayable contract shall accrue simple interest at a rate  
               of 6% of the amount owed; and


             c)   Any amount owed a resident or resident's estate that is  
               not paid within one year after the initial 240-day period  
               after the termination of the repayable contract shall  
               accrue interest at a rate of 6%, compounded annually.


          3)Requires any interest accrued to be paid to the resident or  
            the resident's estate within 14 calendar days after resale of  
            the unit, as part of the currently-required repayment of the  
            lump sum within that same time period.


          4)Provides for a one-year delay in application of lump-sum  
            interest requirements to projects in development prior to  
            January 1, 2017, as specified.


          5)Prohibits a provider from making any further charges to a  
            resident or his/her estate or charges against the lump sum  
            owed to the resident or the resident's estate, as specified,  
            except as otherwise obligated by an equity interest contract.


          6)States that nothing in this bill shall be construed to limit  
            or alter any legal remedies otherwise available to a resident  
            or his/her estate.


          Background
          
          Continuing Care Retirement Communities (CCRCs).  CCRCs offer  
          people 60 years old and up a long-term continuing care option  
          that pairs their current health and resources with an  
          individualized contract that provides community life and a range  








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          of levels-of-care. Typically this is offered in a campus-like  
          community setting, and usually for a resident's lifetime, and  
          always for at least one year.  Most CCRCs require substantial  
          entrance fees, along with monthly fees.  Entrance fees can range  
          from $50,000 to more than $2 million.

          A CCRC is defined in statute (HSC 1771) as a facility where  
          services promised in a "continuing care contract" are provided.   
          A continuing care contract includes a continuing care promise  
          made, in exchange for an entrance fee, the payment of periodic  
          charges, or both.  A continuing care contract may consist of one  
          agreement for continuous care, or a series of agreements  
          describing care, conditions for that care, and payment of it, if  
          and when it becomes necessary.   

          Continuing care contracts vary.  Each potential consumer has  
          different health and long-term care risks and needs, financial  
          risks and needs, and other factors that require contract  
          flexibility, and each CCRC offers 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 vary  
          significantly from one community to the next, and monthly fees  
          vary depending on the level of services included in the contract  
          and other factors associated with location, exclusivity,  
          business plan variations, and more.  

          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.  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), and generally, this is not the contract type which SB 939  
          is focused upon.  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.  








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          Prior Legislation 

          SB 475 (Monning, 2015) was similar to this bill but contained  
          additional provisions, including imposing early repayment of a  
          portion of the lump-sum payment and requiring complaint  
          investigation duties of DSS.  SB 475 was vetoed by Governor.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified 6/27/16)


          California Continuing Care Residents Associations (source)
          AARP
          California Advocates for Nursing Home Reform
          California Commission on Aging
          Consumer Federation of California
          National association of Social Workers           
          Office of the State Long-Term Care Ombudsmam
          249 individuals


          OPPOSITION:   (Verified6/27/16)


          Erickson Living
          ARGUMENTS IN SUPPORT:  According to the author, there have been  
          documented cases where CCRC residents, and/or their heirs, have  
          experienced significant delays in receiving their lump-sum  
          payments from entrance fees that are conditioned upon resale of  
          their CCRC unit.  The author states that this popular contract  
          model conditions repayment -- which is typically 70 to 90  
          percent of the resident's entrance fee -- upon resale of the  
          unit only works when the unit is resold quickly.  According to  
          the author, if the CCRC provider has a disincentive to resell in  
          a timely manner or the unit is unable to sell, then the resident  
          or their estate is forced to wait with no definitive timeline  
          for when repayment must be made.   








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          The author additionally states that these conditional refunds  
          can create an incentive for CCRC providers to fill empty units  
          prior to filling units that have repayment requirements.  In  
          some cases, a unit might go unsold until a neighboring unit is  
          unoccupied because the provider wants to make renovations.  The  
          problem of delayed repayment can prevent an elder resident from  
          moving or tie up an estate.  Ironically, one reason why this  
          contract model is popular is it provides the resident assurance  
          that this lump-sum payment will be available to them should  
          something happen or they pass away, the author states.  In  
          addition, some contract provisions allow the provider to  
          continue to charge a monthly maintenance fee that is deducted  
          from the resident's entrance fee months after the CCRC is  
          vacated.  


          ARGUMENTS IN OPPOSITION:  Erickson Living (a CCRC provider that  
          currently does not operate in the state of California) opposes  
          SB 939 unless it is amended to give CCRCs greater flexibility in  
          providing seniors a retirement housing option that better suits  
          their needs and ensures timely repayment of a portion of the  
          entrance fee to estates. According to Erickson Living, the  
          mechanics of SB 939 require that repayments to estates take  
          precedence over ensuring the financial stability for more than  
          2100 communities and tens-of-thousands of senior living in  
          CCRCs.  Per the opposition, this requirement has more potential  
          to harm frail, elderly consumers in California than it does to  
          help estates expedite asset recovery and that it will slow down  
          investment in CCRCs at a time when there is clear need for more  
          investment in senior housing and care options.  

           ASSEMBLY FLOOR:  50-23, 6/27/16
           AYES: Alejo, Arambula, 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, Grove, Roger  
            Hernández, Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez,  
            Low, McCarty, Mullin, Nazarian, O'Donnell, Quirk,  
            Ridley-Thomas, Rodriguez, Salas, Mark Stone, Ting, Weber,  
            Wilk, Williams, Wood
           NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  








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            Chávez, Dahle, Beth Gaines, Gallagher, Hadley, Harper, Jones,  
            Kim, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte,  
            Olsen, Steinorth, Wagner
           NO VOTE RECORDED: Atkins, Medina, Patterson, Santiago,  
            Thurmond, Waldron, Rendon


          Prepared by:Taryn Smith / HUMAN S. / (916) 651-1524
          6/29/16 15:56:18


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