BILL ANALYSIS                                                                                                                                                                                                    Ó




           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       SB 1384|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                UNFINISHED BUSINESS 


          Bill No:  SB 1384
          Author:   Liu (D) 
          Amended:  8/18/16  
          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

           SENATE FLOOR:  39-0, 5/31/16
           AYES:  Allen, Anderson, Bates, Beall, Berryhill, Block,  
            Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,  
            Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,  
            Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Stone,  
            Vidak, Wieckowski, Wolk
           NO VOTE RECORDED:  Runner

           ASSEMBLY FLOOR:  80-0, 8/24/16 - See last page for vote
           
           SUBJECT:   California Partnership for Long-Term Care Program


          SOURCE:    Author










                                                                    SB 1384  
                                                                    Page  2



          DIGEST:  This bill makes changes to the certification standards  
          and policy design options for long-term care insurance (LTCI)  
          policies certified by the California Partnership for Long-term  
          Care Program ("Partnership") and establishes a task force to  
          consider further reforms.


          Assembly Amendments (1) eliminate the provisions that would have  
          moved program to the Department of Aging; (2) add provisions  
          establishing a task force, until January 1, 2019, and  
          authorizing the program to use an existing assessment to  
          administer the task force, implement task force recommendations,  
          and facilitate policy certification and approval; (3) explicitly  
          authorize policies covering home and community-based services  
          only that would be available through the Partnership; and (4)  
          recast the provisions requiring inflation protection.


          ANALYSIS:   




          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  
            Department of Health Care Services (DHCS), under which low  
            income individuals are eligible for long-term care services.  


           3)Requires the 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").  









                                                                    SB 1384
                                                                    Page  3




           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)Authorizes DHCS to establish, by adopting emergency  
            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.


          7)Establishes an annual assessment administered by the  
            Partnership of a minimum of $20,000 per year paid by  
            organizations that issue Partnership-certified policies to be  
            used for common education and marketing expenses for reaching  
            the target population.


          This bill:


          1)Requires Partnership policies to offer a lower-cost inflation  
            protection at the time of application in addition to a minimum  
            5% compound inflation escalator currently required and  
            requires that applicants be provided a graph that illustrates  
            the impact on premium and benefits for each option.


          2)Requires the Partnership to certify home-care only policies  
            and requires those policies to cover electronic or other  
            devices used for remote monitoring of the insured.









                                                                    SB 1384 
                                                                    Page  4




          3)Establishes a new category of LTCI that may be offered through  
            the Partnership called "Home and Community-Based Services  
            Only" polies that cover home care and residential care, but  
            not nursing home care.


          4)Establishes, until January 1, 2019, a task force to provide  
            advice and assistance in implementing reforms to the  
            Partnership.


          5)Authorizes, but does not require, the Partnership to use the  
            funds, until January 1, 2019, to administer the task force,  
            implement task force recommendations, and facilitate policy  
            certification and approval.


          Background


          According to the author, almost 20% of California's population  
          will be age 65 and older by 2030.  Of those, 70% will require  
          some form of long term care services and supports.  Only 8% of  
          seniors have purchased LTCI.  Without private pay options, an  
          increasing number of individuals will rely on public options and  
          may be forced to spend down their assets in order to qualify for  
          nursing home coverage provided by Medi-Cal. 




          The Partnership is the state program designed to help  
          middle-income consumers purchase meaningful private long-term  
          care coverage.  The Partnership certifies LTCI policies that  
          provide special eligibility criteria and asset protection if  
          policyholders must enroll in Medi-Cal for nursing home care.   
          But the Partnership only offers policies with very rich benefits  
          that are unaffordable to the target market.  This bill requires  
          the Partnership to offer a lower-cost inflation protection  
          option and new policy design options.









                                                                    SB 1384  
                                                                    Page  5






          Industry experts and consumer advocates question whether  
          long-term care insurance, including policies offered through the  
          Partnership, need more fundamental reform in addition to the  
          options offered in this bill.  Several public policy think  
          tanks, consumer groups, and other industry-related interest  
          organizations have offered a variety of proposals to reform LTCI  
          policy designs and the market generally.   In order to establish  
          a single, authoritative forum to consider these and other  
          proposals, this bill also establishes a task force until 2019.


          Existing law creates an annual assessment for participating  
          issuers in an amount of $20,000 or more per year for educational  
          and marketing expenses.   SB 1384 authorizes, but not require,  
          the program to also use those funds, for administration of the  
          task force and implementation of task force recommendations  
          until January 2019.  Repurposed funds under this provision would  
          be limited to uses consistent with the statutory purpose of the  
          program and only after satisfying existing legal obligations  
          established by applicable regulations.


          To take advantage of the new standards and options, insurers  
          will have to file new applications for certification by the  
          Partnership and approval by CDI.  The bill permits, but not  
          require, the Partnership to also use the educational/marketing  
          fund to facilitate applications in order to expedite the  
          availability of new products.  


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Assembly Appropriations Committee, this bill  
          results in costs to the DHCS of $110,000 annually for calendar  
          years 2017 and 2018 to staff the task force and coordinate  
          efforts to reform the program and further its goals.  This bill  
          repurposes revenues earmarked from outreach activities for the  
          bill's purposes, and thus the net cost increase is expected to  








                                                                    SB 1384  
                                                                    Page  6



          be $50,000.  The bill also results in costs to the CDI of about  
          $40,000 for the first two years, and $10,000 annually ongoing  
          (Insurance Fund).

          SUPPORT:  (Verified  8/24/16)

          American Association for Long-term Care Insurance
          American Council of Life Insurers
          California Health Advocates
          California Life and Health Insurance Companies
          California Long-Term Care Insurance Services
          California State Retirees
          National Association of Insurance and Financial Advisors


          OPPOSITION:   (Verified8/24/16)


          California Advocates for Nursing Home Reform


          ARGUMENTS IN SUPPORT:     California State Retirees support the  
          bill because it will protect against loss of benefits due to  
          inflation and provide lower-priced policy options for seniors.


          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.

           ASSEMBLY FLOOR:  80-0, 8/24/16
           AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,  
            Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,  
            Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth  
            Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,  
            Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,  
            Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim,  
            Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis,  
            Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,  
            O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,  








                                                                    SB 1384  
                                                                    Page  7



            Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,  
            Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon





          Prepared by:Hugh Slayden / INS. / (916) 651-4110
          8/26/16 16:04:36


                                   ****  END  ****