BILL ANALYSIS                                                                                                                                                                                                    




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          |SENATE RULES COMMITTEE            |                       SB 1384|
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                                   THIRD READING 


          Bill No:  SB 1384
          Author:   Liu (D) 
          Amended:  4/26/16  
          Vote:     21 

           SENATE INSURANCE COMMITTEE:  8-0, 4/13/16
           AYES:  Roth, Gaines, Berryhill, Glazer, Hall, Liu, Mitchell,  
            Wieckowski
           NO VOTE RECORDED:  Hernandez

           SENATE HEALTH COMMITTEE:  8-0, 4/20/16
           AYES:  Hernandez, Nguyen, Hall, Mitchell, Monning, Pan, Roth,  
            Wolk
           NO VOTE RECORDED:  Nielsen

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/27/16
           AYES:  Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

           SUBJECT:   California Partnership for Long-Term Care Program


          SOURCE:    Author


          DIGEST:  This bill moves the California Partnership for  
          Long-term Care Program (Partnership) from the Department of  
          Health Care Services (DHCS) to the Department of Aging, requires  
          long-term care insurance (LTCI) policies certified by the  
          Partnership to offer a lower-priced inflation protection option  
          at the time of application, and requires the Partnership to  
          permit participating insurers to offer home care-only policies  
          through the Partnership.


          ANALYSIS:  








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          Existing law:


          1)Provides for the regulation of 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.  


           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 DHCS to link private LTCI  
            with Medi-Cal and In-Home Supportive Services (IHSS) program  
            eligibility requirements and Medi-Cal estate recovery.  


           5)Disregards an equivalent value of qualified benefits 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").


          6)Requires that policies and plans certified by the Partnership  
            contain several benefits and features in addition to those  
            provided in standard long-term care policies including  
            individual assessment and case management by a coordinating  
            entity designated and approved by DHCS.


          7)Authorizes DHCS to establish, by adopting emergency  








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            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 and a minimum 5%  
            annual compound inflation escalator.


          This bill:


           1)  Moves the Partnership program from DHCS to the Department  
              of Aging.


           2)  Requires Partnership policies to offer a lower-cost  
              inflation protection at the time of application in addition  
              to the 5% inflation escalator currently required and  
              requires that applicants be provided a graph that  
              illustrates the impact on premium and benefits for each  
              option.


           3)  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.


          





          Background


          According to the author, almost 20% of California's population  
          will be age 65 and older by 2030. 70% of those will require some  
          form of long term care services and supports, yet 67%  
          underestimate their future needs.  Only 8% of seniors have  
          purchased LTCI.  








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          An aging population and along with increasing rates of  
          disability may drive up the costs and availability of care.   
          These trends will have a severe impact on consumers who lack the  
          assets to pay for their own care and the Medi-Cal program that  
          will likely pick up those costs.




          In order to qualify for Medi-Cal, individuals must meet strict  
          income thresholds and an asset test (individuals must have  
          assets less than $2,000 in non-exempt assets).  Also, with some  
          exceptions, federal law requires the Medi-Cal program to recover  
          funds from the estate of a deceased Medi-Cal beneficiary for  
          medical and long-term care services received after age 55 or for  
          the costs of institutional care provided at any age).  These  
          assets were likely exempted from the asset test, such as the  
          family home.  Without additional options, many middle-class  
          consumers may be forced "spend down" their assets to qualify for  
          Medi-Cal.  The Partnership was intended to offer those consumers  
          a high-quality private LTCI option that would also protect some  
          of their assets should they exhaust policy benefits and enroll  
          in Medi-Cal.


          LTCI policies, certified by the Partnership and issued by  
          participating insurers, provide two kinds of protection related  
          to Medi-Cal.  First, Partnership beneficiaries are allowed to  
          withhold assets from Medi-Cal asset tests equal to the benefits  
          paid from their policy. (For example, if a Partnership policy  
          holder has a policy that pays out $100,000 in benefits and is  
          then exhausted, that individual could qualify for Medi-Cal even  
          if he or she had up to $102,000 in assets.) Second, the amount  
          of asset recovery sought by the state upon a Medi-Cal  
          beneficiary's death is reduced by the amount of benefits paid  
          from their policy. (For example, if a beneficiary incurred  
          Medi-Cal expenses over $200,000, the beneficiary has a home  
          worth $200,000, and his or her Partnership policy paid out  








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          $100,000 in benefits, the state would only seek to recover  
          $100,000 from his or her estate.)




          In practice, however, premium rates for Partnership policies are  
          generally unaffordable for most people in the target market.   
          This trend is reflected in the LTCI market generally, but hits  
          Partnership policies particularly hard because of the additional  
          benefits and high standards required by the program.  The number  
          of Partnership policies sold declined from 8,425 in 2004 to 611  
          in 2014.  This bill partially addresses the affordability  
          problem by requiring the Partnership to offer more affordable  
          options in two ways.  


          Existing regulations require Partnership policies to include a  
          5% inflation escalator that is compounded annually for most  
          applicants.  (An inflation escalator automatically increases the  
          policy's daily and lifetime maximum benefit limit.)  Inflation  
          protection is critical to maintaining the value of the benefit  
          over the long-term, but the actual inflation rate for home and  
          community based care has been at 2% and nursing home care at 4%  
          over the last 5 years.   Some experts estimate that the required  
          inflation protection feature can more than double the premium  
          when compared to an equivalent 3% option.  This bill requires  
          the California Partnership to offer a lower-cost inflation  
          protection option.

          Existing regulations also require policies to cover nursing home  
          care.  Institutional care represents only a fraction of  
          long-term care services and most consumers prefer to stay at  
          home.  Moreover, new techniques and technology are making it  
          possible to keep more people with severe disabilities at home.   
          SB 1384 permits insurers to offer Partnership policies that  
          provide home care-only policies, but also requires those  
          policies to cover electronic and other monitoring devices that  
          enable family members and caregivers to monitor the insured  
          remotely.  Cameras, sensors, and other monitoring devices may be  
          particularly important when caring for people who suffer from a  
          severe cognitive impairment such as Alzheimer's disease and  








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          dementia.


          Additionally, the bill moves the Partnership from DHCS to the  
          Department of Aging which provides counseling to seniors and  
          other consumers on the purchase of Medicare and LTCI through the  
          Health Insurance Counseling and Advocacy Program and assists in  
          the identification of available services for seniors and  
          caregivers through the Family Caregiver Support Program,  
          Multipurpose Senior Service Program, Senior Information and  
          Assistance Program, and other programs.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee, this bill  
          shifts $360,000 per year in staff costs to manage the  
          Partnership from DHCS to the Department of Aging (General Fund)  
          and imposes additional one-time costs of about $120,000 for the  
          adoption of regulations, review of contracts with insurers, and  
          program support by the Department of Aging (General Fund).


          SUPPORT:   (Verified5/27/16)


          American Association for Long-term Care Insurance


          California Long-Term Care Insurance Services




          OPPOSITION:   (Verified5/27/16)


          California Advocates for Nursing Home Reform


          ARGUMENTS IN SUPPORT:     CLTCI supports this bill because the  








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          5% compound inflation escalator has become impractical for  
          existing rates and makes these policies completely unaffordable  
          to the middle class.


          ARGUMENTS IN OPPOSITION:     California Advocates for Nursing  
          Home Reform opposes the bill because it has concerns about the  
          marketing practices of the Partnership program as administered  
          by DHCS and believes that CDI is the most suitable candidate to  
          take over administration of the Partnership because of CDI's  
          expertise in LTCI and its understanding of insurance marketing  
          scams.



          Prepared by:Hugh Slayden / INS. / (916) 651-4110
          5/28/16 17:12:01


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