BILL ANALYSIS Ó
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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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