BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1091|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 1091
Author: Liu (D)
Amended: 4/19/16
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 4/13/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Liu, Mitchell,
Wieckowski
NO VOTE RECORDED: Hernandez
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Long-term care insurance
SOURCE: Author
DIGEST: This bill defines new classes of long-term care
insurance (LTCI) based on the benefits provided. This bill also
requires insurers to provide written notice when they deny a
request for treatment for an alternate plan of care and to
annually report the number and reasons for denial to the
California Department of Insurance (CDI).
ANALYSIS:
Existing law:
1)Provides for the regulation of LTCI by CDI and prescribes
various requirements and conditions governing the delivery of
individual or group policies in the state.
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2)Requires approval of policy forms and rate schedules by CDI
before the insurer may begin issuing policies based on that
form.
3)Requires insurers to provide a copy of any advertisement
intended for use in California to CDI for review at least 30
days before dissemination.
This bill:
1)Makes findings and declarations regarding LTCI coverage.
2)Defines "alternate plan of care" to mean a plan of care
authorized by a provision in a policy, rider, endorsement, or
amendment that allows benefits for long-term care services
that are not specifically defined as covered benefits under
the policy.
3)Requires insurers to provide written notice to the insured
within 40 days if they deny a request for treatment for an
alternate plan of care.
4)Requires insurers to report to CDI, by June 30 of each year,
the number of denied requests for an alternate plan of care,
any reason used to deny a request, and the number of requests
denied for each reason, and requires CDI to make that
information available to the public upon request.
5)Prohibits insurers from marketing a policy as "family friendly"
unless it contains certain benefits as specified.
6)Prohibits insurers from marketing a policy as "catastrophic"
unless the insured retains substantial risk before the insured
becomes eligible to receive benefits.
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7)Prohibits insurers from marketing a policy as "short-term"
unless the policy benefits are designed to last for less than
one year.
8)Prohibits insurers from selling policies as "standardized"
unless the policy provides benefits and other criteria as
determined by the Insurance Commissioner.
Background
According to the author, adults 65 years old and over comprise
the fastest growing segment of California's population. By 2030,
this age group will make up almost 20% of the state population.
Projections are that 70% of those will require some form of
long-term supports and services and that 52% will require
substantial services and supports for chronic conditions.
LTCI typically pays for services required when insureds suffer a
covered impairment, expected to last longer than 90 days, and
are unable to perform a number of "activities of daily living"
such as feeding, bathing, and dressing themselves. It also
covers services when insureds require substantial supervision
due to a cognitive impairment such as Alzheimer's disease or
dementia. A policy may cover facility care or home care or
both.
As the costs of care and periods of disability have increased,
so has the cost of insurance. Initially, insurers did not
accurately predict relevant cost factors and underpriced the
product. The product has experience dramatic premium increases.
Although insurers may not increase rates based on an
individual's claim history, they may seek approval from CDI to
increase rates on an entire block of policies due to aggregate
costs. Attempts to stabilize rates have had limited impact.
As a means of financing care, traditional LTCI is looking less
and less viable, particularly for middle and lower-income
people, and the market is approaching a critical juncture.
Fewer carriers are actively issuing new policies and fewer
individuals are buying. Middle and low-income consumers that
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experience a severe, chronic disability and are without
insurance are likely to enroll in Medi-Cal long-term care
programs subject to stringent asset and income restrictions.
Industry groups, public policy think tanks, and other interested
stakeholders are engaged in a national conversation about more
affordable policy designs. This bill establishes definitions
for some of the options being discussed and prohibits the use of
specified labels unless the policies meet certain criteria.
In particular, this bill defines "catastrophic" and "short-term"
policies that represent two ways of lowering benefits and costs.
Similar to a high-deductible health insurance policy,
catastrophic policies cover back-end costs after the insured has
covered significant initial costs. Short-term policies would
pick up the front end costs, but for less than one year. This
bill does not revise or waive existing consumer protections, but
rather limits the marketing of these policies to those that meet
certain specifications.
SB 1091 also establishes standards for identifying those
policies that offer benefits to insureds who are likely to rely
on some informal care from family members or friends. These
policies would offer a special care management benefit that
helps the insured identify and use available community resources
and services.
This bill also addresses an existing mechanism that may provide
care outside of covered benefits. LTCI covers a list of
services prescribed by an authorized licensed professional, such
as a medical doctor, known as a "plan of care." This bill
defines an "alternate plan of care" as a plan of care that
includes benefits not otherwise covered under the policy as
authorized under a special provision in the policy. These
contract provisions allow alternate plans of care if the
insurer, the insured, and the professional overseeing the care
agree. For example, some insurers will pay for durable medical
equipment or modifications to the home, not otherwise covered,
if the modifications allow the insured to stay in their own home
rather instead of facility care. But there is little available
data relating to their application and use. This bill also
requires the insurer to report specified data related to the
denial of requests for an alternate plan of care.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified 5/10/16)
American Association for Long-term Care Insurance
California Commission on Aging
California Long-term Care Insurance Services/NorthStar Network
Insurance Agency
OPPOSITION: (Verified 5/10/16)
None received
ARGUMENTS IN SUPPORT: The American Association for Long-term
Care Insurance supports this bill because its research indicates
that consumers seek and are willing to buy more affordable
options that enable them to receive long-term care in their own
home as well as in skilled facilities, including policies that
provide shorter-benefit periods. The California Commission on
Aging suggests that a more Californians live longer and require
longer periods of care, alternative plans of care will be a
critical piece of the long-term care regime.
Prepared by:Hugh Slayden / INS. / (916) 651-4110
5/11/16 15:12:40
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