BILL ANALYSIS Ó
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Date of Hearing: June 21, 2016
ASSEMBLY COMMITTEE ON AGING AND LONG-TERM CARE
Cheryl Brown, Chair
SB
1384 (Liu) - As Amended June 14, 2016
SENATE VOTE: 39-0
SUBJECT: California Partnership for Long-Term Care Program.
SUMMARY: This bill requires the California Partnership for
Long-Term Care to allow insurers to offer long-term care
policies at a lower-priced option in addition to the 5%
inflation escalator policy currently issued, permits
participating insurers to offer home care coverage only
policies, and creates a task force to provide advice and
assistance in implementing reforms to the California Partnership
for Long-Term Care. Specifically, this bill:
1)Requires the California Partnership for Long-Term Care
(Partnership) to allow insures to offer long-term care
insurance policies at a lower-priced option in addition to the
5% inflation escalator policy currently required to be issued.
2)Requires the insurer, at the time a person is applying for a
policy, to provide a graph that illustrates the difference in
premium rates and policy benefits payable in accordance with
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the inflation protection provisions.
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.
4)Creates an executive and legislative task force to provide
advice and assistance in implementing reforms to the
California Partnership for Long-Term Care Program and to
consider other means to assist consumers in paying for
long-term care services and supports.
5)Requires the task force to consist of representatives
designated by the Department of Health Care Services (DHCS),
The State Department of Social Services, The California
Department of Aging, The Department of Insurance, The
Department of Managed Health Care, The Senate Committee on
Rules and The Speaker of the Assembly.
6)Requires the task force to consult with persons knowledgeable
with long-term care issues, including, but not limited to,
consumers, health care providers, representatives of long-term
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care insurance companies and administrators of health care
service plans which cover long-term care, private employers,
academic specialists in long-term care and aging, and
representatives of the Public Employees' Retirement System and
the State Teachers' Retirement System.
EXISTING LAW:
1)Provides for the regulation of Long Term Care Insurance (LTCI)
by the California Department of Insurance and prescribes
various requirements and conditions governing the delivery of
individual or group LTCI in the state.
2)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.
3)Establishes the Medi-Cal program, administered by the
Department of Health Care Services, under which low income
individuals are eligible for long-term care services.
4)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").
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FISCAL EFFECT: The Senate Appropriations analysis no longer
applies.
COMMENTS:
Author's Statement: According to the author "California created
the Long Term Care Partnership as allowed and in accordance with
federal law to fill the LTCI gap, but by all accounts this
program has failed. Of the three remaining participating
insurers, one no longer issues new policies and CalPERS may only
offer coverage to active CalPERS members, retirees, and their
eligible family members. In comparison, Washington advertises
12 participating issuers of Partnership policies; Oregon, 19;
New York, 3, and North Dakota, 21.
"Although sales of regular individual LTCI and Partnership
policies have declined nationally, California has been hit
particularly hard. The sale of Partnership policies has slowed
to a trickle. In 2004, 13,369 consumers applied for Partnership
policies (8,425 were approved), but only 858 applied in 2014 (of
those, only 611 were approved).
"SB 1384 addresses the major concerns with the California
Partnership that are repeatedly articulated by LTC stakeholders
and policy providers:
It takes too long for policies to be approved
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The requirements for designing a product are not flexible
enough to meet consumer needs.
The requirements for what benefits policies must provide make
the policies too expensive for the target market they are
intended to serve."
Background: Early in the 1990s, four states joined with the
federal government to establish a program called the Partnership
for Long-Term Care ("Partnership") that would make LTCI coverage
more attractive and affordable to the middle class consumers.
The Partnership brings together private insurers and state
government to offer Californians a product with benefits that
coordinate with Medi-Cal's long-term care eligibility and asset
recovery program.
The California Partnership for Long-Term Care is overseen by the
Department of Health Care Services. Through the Partnership,
individuals can purchase long-term care insurance that provides
certain benefits with respect to the state's Medi-Cal program.
Insurance policies are issued by participating private insurance
companies, not the state.
Partnership policies provide two kinds of protection for policy
holders that subsequently require Medi-Cal coverage for
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long-term care services. First, Partnership beneficiaries are
allowed to withhold assets from Medi-Cal's 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
$100,000 in benefits, the state would only seek to recover
$100,000 from his or her estate.)
In principle, Partnership long-term care insurance policies
provide useful financial protections for individuals who may
eventually need Medi-Cal long-term care services. In practice,
however, premium rates for Partnership policies are generally
too high for most people who will ever qualify for Medi-Cal to
afford. Few consumers purchase adequate long-term care
insurance, and those who do are likely to need substantial
services at some point. This creates a poor risk pool for
insurers, which leads to high premiums, and a disincentive for
healthy individuals to purchase coverage.
Because LTCI is a long-term planning product, inflation
protection is critical to maintaining the value of the benefit.
The Partnership requires that all certified policies include a
5% compound inflation escalator. (An inflation escalator
automatically increases the policy's daily and lifetime maximum
benefit limit.) In contrast the inflation rate for home and
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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.)
Coverage for Nursing Home Care: Nursing home care is the most
expensive form of long-term care coverage. The Partnership
requires that all certified policies include nursing home
coverage even though of the people age 65 or older receiving
chronic illness care, 80% live in private homes. Many people
simply prefer to be at home when they are not well. For those
who require nursing home services, it is unknown whether there
will be enough beds to satisfy demand. Fortunately, new
technology is making home care far more viable for many types of
serious and expensive illnesses. For example, the availability
of sensors and tracking devices are enabling people with severe
cognitive impairments, such as Alzheimer's disease and dementia,
to stay at home longer. Providing home care coverage only
policies will help make long term care policies more affordable.
Under California law, the DHCS has the authority to adopt
emergency regulations to make Partnership policies more
affordable. DHCS is currently in the process of adopting
emergency regulations that should make the policies more
affordable, but it has not released the details.
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Support: In support, the California Health Advocates recognize
that long-term care insurance alone cannot address the needs of
every Californian. But for those moderate income people who are
most likely to spend all their assets if they need long-term
care, the Partnership can offer them some limited protection
against the depletion of all of their assets.
Opposition: The California Advocates for Nursing Home Reform
oppose the bill because it has concerns about the marketing
practices of the Partnership program as administered by DHCS and
believes that the California Department of Insurance (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.
REGISTERED SUPPORT / OPPOSITION:
Support
Association of California Life and Health Insurance Companies
California Association for Health Services at Home (CAHSAH)
California Health Advocates - Support with Amendments
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California Long Term Care Insurance Services, Inc.
Opposition
California Advocates for Nursing Home Reform (CANHR)
Analysis Prepared by:Barry Brewer / AGING & L.T.C. / (916)
319-3990