BILL ANALYSIS Ó
SB 1091
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Date of Hearing: June 22, 2016
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
SB
1091 (Liu) - As Amended June 15, 2016
SENATE VOTE: 37-0
SUBJECT: Long-term care insurance
SUMMARY: Establishes a statutory framework for "alternate plan
of care" provisions in long-term care (LTC) insurance policies.
Specifically, this bill:
1)Defines "alternate plan of care" as a provision that allows
coverage for LTC services that are not specifically listed as
a benefit in an LTC insurance policy.
2)Defines "licensed health care practitioner" as a physician,
nurse, social worker or other professional recognized by U.S.
Treasury Department regulations.
3)Defines "plan of care" as a written description of an
insured's LTC needs that includes the type and frequency of
services required.
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4)Provides that an alternate plan of care may be proposed by
either the insurer or the insured and must be agreed to by the
insurer, insured, and a licensed health care practitioner.
5)Provides that an alternate plan of care shall not result in a
change in the maximum benefit amount provided for by the
policy.
6)Provides that nothing in the bill requires an insurer to agree
to an alternate plan of care.
7)Requires insurers to provide a written explanation of why an
alternate plan of care was rejected.
8)Provides that the bill only applies to policies issued on or
after January 1, 2017.
9)Makes findings and declarations regarding LTC insurance.
EXISTING LAW:
1)Imposes a rigorous regulatory framework for long-term care
insurance policies including rate stabilization and detailed
consumer notice requirements.
2)Provides state and federal tax incentives for the purchase of
qualifying LTC insurance products.
FISCAL EFFECT: The bill was reported out of the Senate
Appropriations Committee pursuant to Senate Rule 28.8.
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COMMENTS:
1)Purpose. According to the author, LTC insurance pays for
services according to a plan of care prepared by a licensed
health care practitioner. The plan describes the kind of care
needed and the frequency of the required services. Some LTC
policies have a built-in "escape valve" provision that permits
the insurer, the insured, and the insured's health care
professional to agree to services not otherwise provided under
the policy. This is commonly referred to as an "alternate
plan of care." For example, some insurers will pay for
durable medical equipment or modifications to the home if that
would allow the insured to stay in their own home even though
the condition might otherwise require care in a facility and
the policy would not normally cover the equipment or home
modification. There are currently no statutory standards for
these provisions. SB 1091 establishes basic statutory
standards for "alternate plan of care" provisions.
2)Troubled Product. Long-term care insurance is a product with
a troubled history that has spawned a rigorous regulatory
regime. Long-term care policies are subject to myriad
regulatory controls including prior approval requirements for
policies and advertisements, rate regulation, mandatory
benefits, and detailed requirements governing the sale of LTC
products to name a few. These elaborate controls have arisen
from problems that prior LTC products have had in both product
design (what services are covered and in what quantity) and
pricing. Many early products suffered from the dual sins of
paying for a large amount of a fairly narrow range of services
(mostly institutional care) with relatively low premiums that
resulted in many policyholders owning policies that didn't
cover a lot of the services they needed (LTC services are
increasingly provided at home and in non-institutional
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settings) and ever increasing premiums that are unaffordable
for retirees with fixed incomes.
LTC insurance is an inherently difficult product for both
consumers and insurers. It requires both the consumer and the
insurer to estimate what LTC services will be needed, how long
they will be needed, and when they will be needed. This is
inherently difficult as it requires the consumer to answer
these questions based on what their physical and financial
condition will be 10, 20, or 30 years from now. That inherent
problem is compounded by the rapid development of medical and
other technologies that are changing the way we age and die in
dramatic ways. Even if the "what" of LTC services doesn't
change over that time span, we can be confident that the "how"
and the cost of LTC services will be very different in 20
years.
3)LTC Needs. 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
LTC and that 52% will require substantial care for chronic
conditions. The ideal scenario is for people to remain
independent and in their homes as long as possible - to "age
in place." However, LTC needs change over time. New
treatments, tools, and resources can make benefits established
in contract years ago obsolete. Alternate plan of care
provisions build flexibility into a product that might
otherwise lock the insurer and insured into a form of benefit
no longer considered best practice due to evolving care
standards.
REGISTERED SUPPORT / OPPOSITION:
SB 1091
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Support
American Association of Long-Term Care Insurance
California Commission on Aging (CCoA)
California Health Advocates
California Long Term Care Insurance Services, Inc.
Opposition
None received
Analysis Prepared by:Paul Riches / INS. / (916)
319-2086
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