BILL ANALYSIS Ó
SENATE COMMITTEE ON INSURANCE
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: SB 1384 Hearing Date: April 13,
2016
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|Author: |Liu |
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|Version: |March 29, 2016 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Hugh Slayden |
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Subject: California Partnership for Long-Term Care Program
SUMMARY Moves the California Partnership for Long-term Care Program
("Partnership") from the Department of Health Care Services
(DHCS) to the Department of Aging, requires the program to offer
a lower-priced inflation protection option, and requires the
program to permit insurers to offer home care-only policies.
DIGEST
Existing law
1. Provides for the regulation of long-term care insurance
(LTCI) by the California Department of Insurance (CDI) and
prescribes various requirements and conditions governing the
delivery of individual or group LTCI in the state.
2. Establishes the Medi-Cal program, administered by the DHCS,
under which low income individuals are eligible for
long-term care services.
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3. Requires DHCS to claim against the estate of a deceased
Medi-Cal beneficiary an amount equal to the payments for
medical and long-term care services received up to the value
of the estate ("estate recovery").
4. Establishes the Partnership within the DHCS to link private
LTCI with Medi-Cal and In-Home Supportive Services (IHSS)
program eligibility requirements and Medi-Cal estate
recovery.
5. Requires that policies certified by the Partnership program
be approved by CDI as compliant with most, but not all,
provisions the Insurance Code applicable to LTCI.
6. Requires that policies and plans certified by the
Partnership also contain the following benefits or features:
a. Individual assessment and case management by a
coordinating entity designated and approved by DHCS.
b. Inflation protection (existing regulations require a
minimum 5% annual compound inflation escalator).
c. A periodic explanation of insurance payments or
benefits paid that count toward Medi-Cal asset protection.
d. Compliance with applicable regulations adopted by DHCS
or the Department of Social Services (DSS).
1. Authorizes DHCS to establish, by adopting emergency
regulations, the minimum level of coverage required for
certification including the amount and types of services
that a policy must cover. Existing regulations require all
policies to include nursing home coverage.
2. Disregards an equivalent value of qualified benefits
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received under a certified Partnership policy for the
purposes of determining eligibility in the Medi-Cal or IHSS
programs and in determining the amount subject estate
recovery (the benefit is referred to as "asset protection").
This bill
1. Updates references from the "Department of Health Services"
to the "Department of Health Care Services."
2. Moves the Partnership program from DHCS to the Department
of Aging.
3. Requires Partnership policies to offer lower-cost inflation
protection, as permitted under federal law, in addition to
the 5% annually compounded currently required.
4. Requires the Partnership to certify home-care only
policies, without nursing home coverage, but requires those
policies to cover electronic or other devices used for
remote monitoring of the insured.
COMMENTS
1. Purpose of the bill According to the author, almost 20% of
California's population will be age 65+ by 2030. Seventy
percent of those will require some form of long term care
services and supports (LTSS), yet 67% underestimate their
future needs. Only 8% of seniors have purchased LTCI.
The California Long Term Care Partnership was created to
provide LTCI options for middle class consumers who cannot
afford to pay directly for LTSS that allow them to age in
their homes. Without affordable LTCI, these consumers' 1)
impoverish themselves to qualify for MediCal services, 2)
rely on family members for care, or 3) go without. Of the
three remaining participating insurers, one no longer issues
new policies, another's credit worthiness has been
downgraded, and CalPERS can only offer coverage to CalPERS
members and their eligible family members. In comparison,
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Washington advertises 12 participating issuers of
Partnership policies; Oregon, 19; New York, 3, and North
Dakota, 21.
Partnership policy sales have declined nationally, but most
significantly in California. In 2004, 13,369 consumers
applied for Partnership policies (8,425 were granted), but
only 858 applied in 2014 (611 were granted).
SB 1384 will enable the California Partnership to make
affordable, practical LTCI available for middle-class
consumers.
2. Background Early in the 1990s, four states joined with the
federal government to establish the four original
Partnership programs. However, subsequent changes in
federal law discouraged new states from establishing their
own programs. The federal Deficit Reduction Act of 2005
(DRA) opened the door for more states to establish their own
programs. About 40 states now operate Partnership programs.
In California, the program is jointly administered by CDI
and DHCS. CDI reviews and approves policies in accordance
with the Insurance Code and DHCS establishes minimum
standards and certifies that the policies meet program
requirements pursuant to the Welfare and Institutions Code.
Partnership policies were intended to target middle-class
consumers whose pension and savings are adequate for
retirement so long as they do not experience a serious
chronic disability. This approach encouraged responsible
financial planning and gave those consumers a way to
preserve some of assets if their LTCI coverage runs out.
For every dollar of benefit received under a Partnership
policy, a dollar is disregarded for the purposes of
determining Medi-Cal eligibility (for applicants subject to
an asset test) and Medi-Cal's estate recovery action.
Additionally, DHCS regulations require other features and
consumer protections including the following:
Agents that sell Partnership policies must receive 8
hours of special training every two years in addition to
the normal 8 hours of LTCI training.
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Premiums are waived when the insured is receiving
qualified institutional care.
Insurers are subject to additional limitations on rate
increases.
Care Coordination and Management. Partnership policies also
provide another consumer-friendly feature, care coordination
and management by an agency that is independent of the
insurer. According to the Partnership program, care
coordinators assess the needs of the insured and recommend
alternatives for meeting those needs. Care coordinators must
consider how the policy benefits can help meet the insured's
needs, and how the needs might also be met through other
sources, such as community services, or the insured's health
coverage, etc. These other sources can help reduce the
out-of-pocket expenses and make the policy benefits last as
long as possible. Care coordinators live in and must be
familiar with the community in which the insured resides so
that he or she can locate quality providers. Care
coordinators also implement and monitor care by contacting
caregivers and arranging for them to be in the home to
provide care at the required times, negotiate rates of
payment, and monitor the quality of the services.
Affordability Problems. Unfortunately, the consumers that
the program is intended to help can't afford the policies.
Some of the standards required by DHCS regulations make the
costs of these policies unaffordable or unattractive to the
target market. In 2007, the US Government Accountability
Office released a study of the original Partnership states
and concluded that many of the consumers who could afford to
purchase a Partnership policy would never use the asset
protection benefit or qualify for Medicaid/Medi-Cal.
The problem is that consumers with some assets that might
enroll in Medi-Cal would not likely be able to afford the
policy. Because LTCI is a long-term planning product,
inflation protection is critical to maintaining the value of
the benefit. However, the Partnership requires that all
certified policies include a 5% inflation escalator that is
compounded annually. (An inflation escalator automatically
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increases the policy's daily and lifetime maximum benefit
limit.) In contrast, the inflation rate for home and
community based care has been at 2% and nursing home care at
4% over the last 5 years.
California Long Term Care Insurance Service (CLTCI), an LTCI
brokerage firm, submitted examples of the potential impact
that different inflation escalator options may have on
premium. The following example is based on a policy issued
by major carrier with a 3-year benefit limit, a 90-day
elimination period, and $190 day benefit.
Annual Premium: Female
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|Inflation Escalator |Age 57 |Age 67 |
|----------------------+-----------+-----------|
|None |$2,897 |$5,383 |
|----------------------+-----------+-----------|
|3% Compound |$4,549 |$8,153 |
|----------------------+-----------+-----------|
|5% Compound |$11,135 |$16,428 |
| | | |
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Annual Premium: Male
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|Inflation Escalator |Age 57 |Age 67 |
|----------------------+-----------+-----------|
|None |$2,106 |$3,892 |
|----------------------+-----------+-----------|
|3% Compound |$3,053 |$5,607 |
|----------------------+-----------+-----------|
|5% Compound |$7,187 |$11,304 |
| | | |
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Notably, the impact becomes more pronounced as the insured
ages, especially for females, but the need for inflation
protection also decreases. Originally, the first four
Partnership states required 5% compound escalator, but now
there are a variety of options in other states. The DRA
only requires inflation protection based on the consumers
age at date of purchase:
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Age 60 or younger must have annual compound inflation
protection;
Age 61 but younger than 76 must have some type of
inflation protection; and
Age 76 or older are not required to purchase any
inflation protection option.
Other states offer more affordable options based on the DRA.
For example, the New York State Partnership program, one
of the original Partnership states, offers a 3.5% inflation
escalator. In 2014, New York consumers purchased 2,184
Partnership policies; over 72% of those chose the 3.5%
inflation option instead of the 5%.
This bill would require the California Partnership to also
offer a lower-cost inflation protection option, along with
the 5% compound escalator. But since inflation protection
is so important, the bill would also require that consumers
be presented with an illustration of the potential impact
for each option at the point of sale.
Coverage Choices. Most consumers prefer to be at home,
rather than in an institution, when they suffer from a
disability. Of those age 65 or older receiving chronic
illness care, 80% live in private homes. New techniques and
technology are making it easier to keep people with severe
disabilities at home longer.
SB 1384 would permit insurers to offer Partnership policies
that provide home care-only policies, but would also require
those policies to cover electronic and other monitoring
devices that would enable family members and caregivers to
monitor the insured remotely.
Double-referral. This bill is double-referred and will be
heard in Health Committee next week.
1. Support CLTCI supports the bill because the 5% compound
inflation escalator has become impractical for existing
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rates and makes these policies completely unaffordable to
the middle class.
2. Opposition None received
3. Questions California Health Advocates (CHA) recommends
reconstituting the advisory committee that designed the
original Partnership program. Would an ongoing advisory
committee be more responsive to current market trends then
the task force proposed in AB 332 (Calderon, 2015) last
year? The Partnership already has an advisory committee for
agents and brokers that meets periodically. Could that
infrastructure be modified to accommodate the CHA proposal
without significant additional cost?
4. Prior and Related Legislation
a. SB 1091 (Liu, 2016) would establish definitions and
standards for new forms of LTCI.
b. AB 4212 (Connelly), Chapter 1290, Statutes of 1990,
established the Partnership as pilot program; set a period
in which qualified policies may be issued between July 1,
1991, and June 30, 1996, and created a task force to
provide advice and assistance in designing and
implementing the program. The task force consisted of
several administrative agencies and legislative staff and
consulted with consumer advocates, insurers, providers,
employers, academic specialists in long-term care and
aging, and others.
c. AB 2039 (Connelly) Chapter 1147, Statutes of 1991,
revised the criteria for qualified policies and extended
the period in which qualified policies may be issued to
June 30, 2000.
d. SB 738 (Senate Insurance Committee), Chapter 802,
Statutes of 1999, extended the period in which qualified
policies may be issued to January 1, 2005, and required
CDI approval of policies prior to certification by the
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program.
e. SB 1103 (Senate Budget and Fiscal Review Committee),
Chapter 228, Statutes of 2004, required
Partnership-certified insurance issuers to reimburse the
state $20,000 annually to the state for common educational
and outreach activities and eliminated the closing date
for the period in which qualified policies may be issued.
POSITIONS
Support
American Association for Long-term Care Insurance
California Long-Term Care Insurance Services/NorthStar Network
Insurance Agency
Oppose
None received
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