BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 1384             
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          |AUTHOR:        |Liu                                            |
          |---------------+-----------------------------------------------|
          |VERSION:       |March 29, 2016                                 |
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          |HEARING DATE:  |April 20, 2016 |               |               |
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          |CONSULTANT:    |Scott Bain                                     |
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           SUBJECT  :  California Partnership for Long-Term Care Program

           SUMMARY  : Shifts administration of the California Partnership for  
          Long-Term Care from the Department of Health Care Services  
          (DHCS) to the Department of Aging (CDA). Requires CDA to adopt  
          regulations requiring that a Partnership long-term care  
          insurance policy or health care service plan offer a policy or  
          contract that includes home care and community-based care  
          coverage only. Requires that DHCS certify a Partnership  
          long-term care insurance policy authorized under federal law  
          that has a lower inflation protection requirement than existing  
          Partnership policies.

          Existing law:
          1)Establishes the California Partnership for Long-Term Care  
            Program (Partnership), administered by DHCS. 

          2)Establishes, as the purpose of the Partnership program, is to  
            link private long-term care (LTC) insurance and health care  
            service plan contracts that cover LTC with the In-Home  
            Supportive Services (IHSS) program and Medi-Cal, and to  
            provide specified IHSS benefits and specified Medi-Cal  
            benefits to the purchasers of Partnership-approved and  
            certified insurance policies and health care service plan  
            contracts.

          3)Requires DHCS, through the Partnership, to only certify a LTC  
            insurance policy or a health care service plan contract that  
            meets the Medi-Cal asset protection requirements. Requires  
            only policies and contracts that provide all of the following  
            items to be certified by DHCS:

               a)     Individual assessment and case management by a  







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                 coordinating entity designated and approved by DHCS;
               b)     Levels and durations of benefits that meet minimum  
                 standards set by the DHCS through regulation; and,
               c)     Protection against loss of benefits due to  
                 inflation.

          1)Requires DHCS to adopt regulations to implement the  
            Partnership body of law, including, but not limited to,  
            regulations that establish:

               a)     The population and age groups who are eligible to  
                 participate in the Partnership;
               b)     The minimum level of LTC insurance or LTC care  
                 coverage included in health care service plan contracts  
                 that must be purchased to meet Partnership requirements;  
                 and,
               c)     The amount and types of services that a LTC  
                 insurance policy or health care service plan contract  
                 that includes LTC services must cover to meet Partnership  
                 requirements.
               d)     Establishes, pursuant to Partnership regulation,  
                 inflation protection for Partnership Comprehensive and  
                 Nursing Facility and Residential Care Facility Only  
                 policies. 

          1)Requires DHCS, in determining eligibility for Medi-Cal and  
            IHSS, resources to be excluded up to, or equal to, the amount  
            of insurance payments or benefits paid by Partnership-approved  
            and certified LTC insurance policies or health care service  
            plan contracts which cover LTC services to the extent that the  
            benefits paid are for all of the following:

             a)   IHSS benefits specified in regulations, or those  
               services that Medi-Cal approves or benefits that Medi-Cal  
               provides as specified in regulations adopted by DHCS;
             b)   Services delivered to insured individuals in a community  
               setting as part of an individual assessment and case  
               management program provided by coordinating entities  
               designated and approved by DHCS; and,
             c)   Services the insured individual receives after meeting  
               the disability criteria for eligibility for long-term care  
               benefits established by DHCS.
             d)   Requires DHCS to claim against the estate of a deceased  
               Medi-Cal beneficiary, or against any recipient of the  
               property of that beneficiary by distribution or survival,  








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               by an amount equal to the payments for the health care  
               services received or the value of the property received by  
               any recipient from the deceased Medi-Cal beneficiary by  
               distribution or survival, whichever is less. This is  
               referred to as "Medi-Cal estate recovery." Medi-Cal estate  
               recovery applies to individuals receiving services from  
               Medi-Cal who are age 55 and over or who are permanently  
               institutionalized (of any age).

          1)Provides, through regulation, an exemption from Medi-Cal  
            estate recovery up to the amount of benefits that have been  
            paid for LTC services under a Partnership-certified LTC care  
            insurance policy.

          This bill:
          1)Changes program administration of the Partnership from DHCS to  
            the California Department of Aging (CDA).

          2)Requires the Partnership, as part of its existing requirement  
            to offer inflation protection, to offer the following  
            policies:

               a)     One option no less favorable than that required  
                 under a specified provision of the Insurance Code which  
                 mandates an offer of inflation protection; and, 
               b)     One lower cost option, consistent with the  
                 requirements of the federal Deficit Reduction Act (DRA)  
                 of 2005 (Public Law 109-171). The DRA permits lower  
                 inflation protection options than current California  
                 regulations for individuals age 61 and over.

          1)Requires a Partnership insurer or producer, at the time of  
            application, to provide to the consumer an illustration  
            comparing the premium rate and benefits of each policy option  
            over time.

          2)Requires the adoption of a regulation to establish which  
            coordinating entities are designated and approved to deliver  
            individual assessment and case management services to  
            individuals at  home  (current law requires the adoption of  
            regulations to establish which coordinating entities are  
            designated and approved to deliver individual assessment and  
            case management services to individuals in a  community  
            setting  ). 









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          3)Requires the adoption of regulations for a Partnership LTC  
            insurance policy or health care service plan contract that  
            includes the LTC services must cover to include: 

                 a)       Nursing and residential care facility coverage  
                   only; 
                 b)       Home care and community-based care coverage  
                   only; and 
                 c)       Comprehensive coverage. Because the Partnership  
                   currently requires insurers to provide a comprehensive  
                   policy and allows insurers to offer policies that  
                   include nursing and residential care facility coverage  
                   only, the requirement in this bill effectively requires  
                   an additional home and community-based care coverage  
                   policy must be offered. 

          1)Requires policies that provide only home care benefits to  
            include coverage for electronic or other devices intended to  
            assist in monitoring the health and safety of an insured.

           FISCAL  
          EFFECT  :  This bill has not been analyzed by a fiscal committee.

           COMMENTS  :
          1)Author's statement.  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 LTC services and  
            supports, yet 67% underestimate their future needs.  Only 8%  
            of seniors have purchased LTC insurance. The Partnership was  
            created to provide LTC insurance options for middle class  
            consumers who cannot afford LTCI or to pay directly for LTC  
            services that allow them to age in their homes. Without  
            affordable LTC insurance, these consumers' a) impoverish  
            themselves to qualify for Medi-Cal services, b) rely on family  
            members for care, or c) 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, 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). This bill will enable the Partnership to make  








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            affordable, practical LTC insurance available for middle-class  
            consumers.
          
          2)LTC insurance, the Partnership and Medi-Cal. LTC insurance  
            primarily pays for supervision or assistance with activities  
            of daily living (ADLs are such as bathing, dressing,  
            transferring, eating, toileting and continence) whether at  
            home, in a community program, in an assisted living facility  
            or in a nursing home. LTC policies require that a person's  
            physical or mental condition meet certain standards before  
            benefits will be paid. These standards are often called  
            "benefit triggers." For example, a person must have either an  
            impairment in cognitive ability or an impairment in two of six  
            ADLs before nursing home, residential care for the facility or  
            home care will be paid. Most LTC services do not require a  
            licensed health care professional to provide care. Some LTC  
            policies only pay benefits for care in institutional settings  
            such as nursing homes and assisted living facilities, while  
            others only pay for home and community-based care such as  
            adult day care facilities. Comprehensive policies include  
            benefits for all of the places listed above. 

          The Partnership is administered by DHCS and is a partnership  
            between consumers, the state, and participating insurance  
            companies. Since the Partnership began in 1994, 159,000  
            policies have been purchased. Partnership policies have two  
            unique Medi-Cal asset protection and Medi-Cal estate recovery  
            protection features.

          The Partnership policy asset protection feature allows a  
            policyholder to keep a dollar's worth of assets for each  
            dollar the Partnership insurance policy pays out for LTC  
            services. If an individual with a Partnership policy exhausts  
            his or her LTC insurance coverage and still needs LTC, he or  
            she can apply for Medi-Cal. When qualifying for Medi-Cal, he  
            or she is entitled to keep assets above the limits Medi-Cal  
            normally disallows for an individual age 65 and over (the  
            asset test limit is $2,000 for an individual, $3,000 for a  
            couple). An individual with a Partnership policy can retain  
            the regular Medi-Cal asset limit amounts, plus any assets  
            equal to the amount the Partnership policy has paid out in  
            benefits. 

          To illustrate how asset protection feature works, a person who  
            buys a Partnership policy with $100,000 in benefits can apply  








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            to Medi-Cal after his or her Partnership LTC benefit is  
            exhausted. When the individual applies for Medi-Cal, he or she  
            can keep the $100,000 in assets (the amount the Partnership  
            policy paid out), plus the regular asset exemption amount  
            ($2,000 for a single person). A person over age 65 with  
            identical assets without a Partnership policy would have to  
            "spend down" $98,000 in assets to quality for Medi-Cal  
            ($100,000 minus the existing asset cap of $2,000). 

            An additional benefit provided to Partnership policyholders  
            deals with an exemption from Medi-Cal estate recovery for  
            amounts paid by the Partnership policy. In the example above,  
            a person with $200,000 in assets upon his or her death would  
            have $100,000 exempt (the amount paid out by the Partnership  
            policy) from recovery by DHCS when it makes a claim through  
            Medi-Cal Estate Recovery. Under Medi-Cal estate recovery, DHCS  
            recovers for medical expenses paid by Medi-Cal for services  
            received on and after the age of 55 upon the death of the  
            policyholder.

          3)Additional Partnership policy option required by bill.  
            Insurers participating in the Partnership policies must offer  
            Comprehensive coverage and have the option of offering Nursing  
            Home and Residential Care Facility Only policies. In addition  
            to these policies, this bill would require the Partnership to  
            offer a blended Home and Community-Based Care option. Under  
            existing law, LTC policies that provide home care or  
            community-based services benefits have to include the  
            following benefits: home care, adult day care, personal care,  
            homemaker services, hospice services, respite care. 

          4)Inflation protection and the 2005 Deficit Reduction Act. The  
            Partnership inflation protection provisions are in regulation.  
            Partnership regulations inflation protection provisions vary  
            depending upon whether the policy is an expense reimbursable  
            policy or an expense incurred policy. Policies issued on an  
            expense reimbursable basis must have automatic increases of 5%  
            each year over the previous year (compound inflation) for all  
            covered benefits and for the lifetime maximum benefit.  
            Policies issued on an expense incurred basis must have a  
            maximum lifetime benefit that increases by 5% each year over  
            the previous year (simple inflation) for each year the  
            contract is in force.

          Compound inflation protection provides greater protection over  








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            time than simple inflation. For example, a person who chooses  
            a policy with a $160 daily maximum with inflation protection  
            of 5% simple, the daily maximum will be $240 after 10 years  
            ($160 x 5% = $8 increase year). By contrast, a policy with the  
            same daily maximum but with compound inflation protection of  
            5% yearly would increase to $260 after 10 years. 

            The 2005 federal Deficit Reduction Act (DRA) allows  
            Partnership policies with lower inflation protection that  
            varies by age of purchase as compared to current California  
            Partnership regulations. To be a federal Partnership-qualified  
            policy, the DRA includes the following age-specific inflation  
            protection requirements: 

                a)      Individuals age 60 or younger must have "annual  
                  compound inflation protection;"
                b)      Individuals at least 61 but younger than 76 must  
                  have some type of inflation protection; and,
                c)      Individuals age 76 or older are not required to  
                  purchase any inflation protection    option. 
          
          1)Double referral. This bill was heard in the Senate Insurance  
            Committee on April 13, 2016 and passed on an 8-0 vote.

          2)Support.  This bill is supported by California Long Term Care  
            Insurances Services, Inc. (CLTCI). CLTCI argues the  
            Partnership needs to be revived by changing existing  
            regulations to make Partnership policies more affordable to  
            the middle class, including by allowing lower inflation rates,  
            and by increasing public education. CLTCI also argues for  
            moving the Partnership out of the gigantic DHCS to increase  
            oversight. CLTCI 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 three year benefit limit, a 90-day  
            elimination period, and $190 day benefit.

              Annual Premium: Female

               ---------------------------------------------- 
              |Inflation Escalator   |Age 57     |Age 67     |
              |----------------------+-----------+-----------|
              |None                  |$2,897     |$5,383     |
              |----------------------+-----------+-----------|
              |3% Compound           |$4,549     |$8,153     |








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              |----------------------+-----------+-----------|
              |5% Compound           |$11,135    |$16,428    |
              |                      |           |           |
               ---------------------------------------------- 
              
              Annual Premium: Male

               ---------------------------------------------- 
              |Inflation Escalator   |Age 57     |Age 67     |
              |----------------------+-----------+-----------|
              |None                  |$2,106     |$3,892     |
              |----------------------+-----------+-----------|
              |3% Compound           |$3,053     |$5,607     |
              |----------------------+-----------+-----------|
              |5% Compound           |$7,187     |$11,304    |
              |                      |           |           |
               ---------------------------------------------- 
          
          3)Request for amendment. California Health Advocates (CHA),  
            which represents Health Insurance Counseling and Advocacy  
            Program (HICAP) counselors, writes that it is not taking a  
            position on this bill but it is has long been concerned that  
            the Partnership program has not had the administrative  
            attention to allow it to adapt its products to the changing  
            environment for LTC services and benefits. CHA recommends that  
            the advisory committee that designed the original Partnership  
            program be reconstituted to consider changes to existing  
            policies that may result in benefits more attuned to the  
            current use of LTC services and result in more affordable  
            coverage to consumers.

          4)Policy issues.
               a)     Inflation protection v. premium price trade-off.  
                 According to an 2009 issue brief by the Center for Health  
                 Care Strategies, inflation protection is one of the most  
                 significant and controversial features in Partnership  
                 insurance. The four original Partnership states  
                 (California, Connecticut, Indiana, and New York) all  
                 required compound 5% inflation protection and viewed that  
                 requirement as the single most important feature that  
                 distinguished Partnership from non-Partnership insurance.  
                 Without this feature they felt that both the consumer and  
                 the state were at much greater risk of not having  
                 adequate protection when long-term care was eventually  
                 needed. However, inflation protection adds significantly  








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                 to the cost of the premium, and insurers and agents have  
                 argued that the resulting higher cost reduces consumer  
                 demand for Partnership insurance.

               b)     Should Partnership program administration shift from  
                 DHCS to CDA? This bill moves the administration of the  
                 Partnership from DHCS to CDA. DHCS currently has one  
                 manager and three analyst staff who work on the  
                 Partnership. The author states this provision was  
                 included in the interest of consolidating programs of  
                 particular concern to the aging population within a  
                 department that has a particular focus on and gives  
                 priority to their needs.

               c)      Partnership LTC insurance and benefit to Medi-Cal  
                 beneficiaries. This bill would require a lower inflation  
                 protection option to be offered by the Partnership, which  
                 would be a lower-cost option for consumers. However, the  
                 Medi-Cal estate recovery and asset protection benefit of  
                 purchasing a Partnership LTC insurance policy seems  
                 unlikely to be attractive to the population who would be  
                 potentially eligible for Medi-Cal because of their low  
                 income. The primary Medi-Cal program income eligibility  
                 threshold is people with incomes at or below 138% of the  
                 federal poverty level (monthly income of $1,366 for a  
                 single person or $1,842 for a couple in 2016), and people  
                 with income at this level are unlikely to be able to  
                 afford LTC insurance. A 2007 Governmental Accounting  
                 Office review of the Partnership programs found that in  
                 two of the four states (California and Connecticut), more  
                 than half of Partnership policyholders over 55 had a  
                 monthly income of at least $5,000 and more than half of  
                 households have assets of at least $350,000 at the time  
                 they purchased a Partnership policy.

          1)Amendments. This bill is intended to continue to offer the  
            existing Partnership policy with the current inflation  
            protection, but the provision cross references a mandate to  
            offer inflation protection and not a requirement that the  
            inflation protection actually be included in the policy.  
            Amendments are needed to clarify the intent to continue to  
            require the current LTC insurance with the currently required  
            inflation protection provisions. In addition, a technical  
            amendment is needed to shift the disclosure requirement  
            comparing the current inflation protection policies against  








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            the new DRA option policies to a stand-alone subdivision.

           SUPPORT AND OPPOSITION  :
          Support:  American Association for Long-Term Care Insurance
                    California Long Term Care Insurances Services, Inc. 
          
          Oppose:   None received


          
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