BILL ANALYSIS Ó
SB 1384
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Date of Hearing: June 22, 2016
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
SB
1384 (Liu) - As Amended June 14, 2016
SENATE VOTE: 39-0
SUBJECT: California Partnership for Long-Term Care Program
SUMMARY: Establishes a task force to advise the Department of
Health Care Services (DHCS) on the operation of the California
Partnership for Long-Term Care (partnership) and revises the
requirements for partnership policies. Specifically, this bill:
1)Requires that partnership policies provide the consumer with
at least two inflation protection options (5% annual compound
inflation protection or a less expensive inflation protection
option).
2)Requires insurers offering partnership policies to provide the
consumer with a graph illustrating the difference in premium
expense and benefit levels associated with each inflation
protection option.
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3)Requires DHCS to adopt regulations allowing the partnership to
certify policies covering:
a. Only nursing and residential care facility benefits
b. Only home based and community care benefits
c. Comprehensive long-term care (LTC) benefits
4)Establishes a task force to advise DHCS on the partnership
that is composed of the following (or their designated
representative):
a. Director of DHCS
b. Director of the Department of Social Services (DSS)
c. Director of the Department of Aging
d. Director of the Department of Managed Health Care
e. Department of Insurance (DOI)
f. Senate Rules Committee
g. Speaker of the State Assembly
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5)Requires the task force to consult with experts in long-term
care representing the following groups:
a. Consumers
b. Health care providers
c. Insurers and health care service plans
d. Private employers
e. Academics
f. CalPERS
g. CalSTRS
EXISTING LAW:
1) Provides for the regulation of LTC insurance by the DOI and
prescribes various requirements and conditions governing the
delivery of individual or group LTC insurance 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.
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3) Requires DHCS to claim against the estate of a deceased
Medi-Cal beneficiary an amount equal to the payments for
medical and LTC services received up to the value of the
estate (estate recovery).
4) Establishes the partnership within the DHCS to link private
LTC insurance with Medi-Cal and In-Home Supportive Services
(IHSS) program eligibility requirements and Medi-Cal estate
recovery.
5) Requires that policies certified by the Partnership program
be approved by DOI as compliant with most, but not all,
provisions the Insurance Code applicable to LTC insurance.
6) Requires that policies and plans certified by the
partnership also contain the following benefits or features:
a. Individual assessment and case management by a
coordinating entity designated and approved by DHCS.
b. Inflation protection (existing regulations
require a minimum 5% annual compound inflation
escalator).
c. A periodic explanation of insurance payments or
benefits paid that count toward Medi-Cal asset
protection.
d. Compliance with applicable regulations adopted
by DHCS or DSS.
1) 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 to estate
recovery (the benefit is referred to as "asset protection").
FISCAL EFFECT: Undetermined.
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COMMENTS:
1)Purpose. 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, 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
to pay directly for LTC that allow them to age in their homes.
Without affordable LTC insurance, these consumers' 1)
impoverish themselves to qualify for Medi-Cal services, 2)
rely on family members for care, or 3) go without. Of the
three insurers remaining in the partnership, 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, 2; 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). SB 1384 will enable the
California partnership to make affordable, practical LTC
insurance available for middle-class consumers.
2)Partnership. Early in the 1990s, four states joined with the
federal government to establish the four original Partnership
programs. The federal Deficit Reduction Act of 2005 (DRA)
opened the door for more states to establish their own
programs and some 40 states operate partnership programs. In
California, the program is jointly administered by DOI and
DHCS. DOI reviews and approves policies in accordance with
the Insurance Code, and DHCS establishes minimum standards and
certifies that the policies meet program requirements in the
Welfare and Institutions Code.
Partnership policies were intended to target middle-class
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consumers whose pension and savings are adequate for
retirement so long as they do not experience a serious chronic
disability. This approach was intended to encourage financial
planning and gave consumers a way to preserve some assets if
their LTC insurance coverage runs out and the consumer becomes
impoverished and qualifies for Medi-Cal. Unfortunately, the
middle class consumers that the program was intended to help
can't afford the policies. The inflation protection standards
required by DHCS regulations make partnership policies
unaffordable to all but the most affluent retirees. In 2007,
the US Government Accountability Office released a study of
the original partnership states and concluded that many of the
consumers who could afford to purchase a partnership policy
would never qualify for or use Medi-Cal, which undermines the
purpose of the partnership.
3)Pricing. California Long Term Care Insurance Service (CLTCI),
an LTC insurance brokerage firm, has provided examples to
illustrate the impact different inflation escalator options
have on premium. The following example is based on a policy
issued by major carrier with a 3-year benefit limit, a 90-day
elimination period, and $190 day benefit purchased at age 57:
Annual Premium: Female
No Inflation Protection: $2,897
3% Compound Inflation Protection: $4,549
5% Compound Inflation Protection: $11,135
Annual Premium: Male
No Inflation Protection: $2,106
3% Compound Inflation Protection: $3,053
5% Compound Inflation Protection: $7,187
Originally, the first four partnership states required 5%
compound escalator, but now there are a variety of options in
other states. For example, the New York State partnership
program, one of the original partnership states, offers a 3.5%
inflation escalator. In 2014, New York consumers purchased
2,184 partnership policies; over 72% of those chose the 3.5%
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inflation option instead of the 5%.
4)Coverage Choices. Most consumers prefer to be at home,
rather than in an institution, when they suffer from a
disability. Eighty percent of those age 65 or older receiving
chronic illness care, receive that care in their home. New
techniques and technology are making it easier to keep people
with severe disabilities at home longer. SB 1384 would permit
insurers to offer partnership policies that provide home
care-only policies (a lower cost option).
REGISTERED SUPPORT / OPPOSITION:
Support
Association of California Health and Life Insurance Companies
California Health Advocates
National Association of Insurance and Financial Advisors,
California
Opposition
California Advocates for Nursing Home Reform
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Analysis Prepared by:Paul Riches / INS. / (916)
319-2086