BILL ANALYSIS                                                                                                                                                                                                    



                                                                    SB 1384


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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