BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1384
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|AUTHOR: |Liu |
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|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
SB 1384 (Liu) Page 2 of ?
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
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|Inflation Escalator |Age 57 |Age 67 |
|----------------------+-----------+-----------|
|None |$2,897 |$5,383 |
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|3% Compound |$4,549 |$8,153 |
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|5% Compound |$11,135 |$16,428 |
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Annual Premium: Male
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|Inflation Escalator |Age 57 |Age 67 |
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|None |$2,106 |$3,892 |
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|3% Compound |$3,053 |$5,607 |
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|5% Compound |$7,187 |$11,304 |
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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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