BILL ANALYSIS                                                                                                                                                                                                    



                                                                    SB 1384


                                                                    Page  1





          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