BILL ANALYSIS �
SENATE HUMAN
SERVICES COMMITTEE
Senator Jim Beall, Chair
BILL NO: AB 1523
A
AUTHOR: Atkins
B
VERSION: June 3, 2014
HEARING DATE: June 10, 2014
1
FISCAL: Yes
5
2
CONSULTANT: Sara Rogers
3
SUBJECT
Residential Care Facilities for the Elderly: Liability
Insurance
SUMMARY
This bill requires Residential Care Facilities for the
Elderly (RCFEs), by July 1, 2015, to maintain either
liability insurance in an amount of at least $1 million
dollars per occurrence and $3 million in the annual
aggregate for the purpose of covering injury to residents
and guests caused by the negligence of the licensee or its
employees.
ABSTRACT
Existing Law:
1.Establishes the Residential Care Facilities for the
Elderly Act which provides for the licensure and
regulation of RCFEs by the California Department of
Social Services (CDSS) as a separate category within the
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 1523 (Atkins)
PageB
existing residential care licensing structure of CDSS.
(HSC 1569 et seq.)
2.Requires RCFE licensees who are entrusted to safeguard
resident cash resources to file or have on file with CDSS
a copy of a bond issued by a surety company admitted to
do business in this state in an amount set by the
department. (HSC 1569.60)
3.Through regulation, provides that any applicable facility
shall have at least $1,000 on the bond and establishes a
schedule for safeguarded amounts under $3,000.
Additionally provides that for every $1,000 safeguarded
above $3,000, the facility shall have an additional
$1,000 on the bond. (Title 22 CCR 87216)
4.Through regulation, provides that CDSS may require the
licensee to file an additional bond in such amount as the
licensing agency determines to be necessary to adequately
protect the residents' money. (Title 22 CCR 87216)
5.Requires continuing care retirement communities (CCRCs)
to maintain a fidelity bond for each agent or employee,
who, in the course of his or her agency or employment,
has access to any substantial amount of funds. (HSC
1789.8)
This bill:
1.Provides that on and after July 1 2015, RCFEs shall
maintain at least $1 million per occurrence and $3
million in the total annual aggregate of liability
insurance coverage against negligent acts or omissions to
act of, or neglect by, the licensee or its employees.
2.Exempts RCFEs that are an integral part of a continuing
care retirement community from the above requirement.
STAFF ANALYSIS OF ASSEMBLY BILL 1523 (Atkins)
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FISCAL IMPACT
An Assembly Appropriations Committee analysis stated there
are minor costs to CDSS in the range of $32,000 to ensure
each facility complies with the requirement.
BACKGROUND AND DISCUSSION
Purpose of the bill:
According to the author, RCFEs are not required to carry
liability insurance as condition of licensure under
California statute or regulation. As a result, the author
states that many facilities lack even the minimum liability
insurance coverage, exposing both them and residents to
great financial risk. The author further states that
without an RCFE licensee maintaining liability insurance,
it would be difficult for a harmed resident to find an
attorney willing to litigate a wrongful death or neglect
case and that should the case be successfully litigated, an
uninsured facility may be forced to consider bankruptcy.
The author additionally notes that California law requires
family day care homes for children to either maintain
liability insurance or inform their residents (or
resident's guardians) if they don't and that California
drivers are required to maintain liability insurance.
Residential Care Facilities for the Elderly
Within California's continuum of long term care, situated
between in-home care and skilled nursing facilities, is the
RCFE, also commonly called Assisted Living, Board and Care,
or Residential Care. There are approximately 8,000 Assisted
Living, Board and Care, and Continuing Care Retirement
homes that are licensed as RCFEs in California. These
residences are designed to provide homelike housing options
to seniors and other adults who need some help with
activities of daily living, such as cooking, bathing, or
getting dressed, but otherwise do not need continuous,
STAFF ANALYSIS OF ASSEMBLY BILL 1523 (Atkins)
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24-hour assistance or nursing care. Increasingly residents
are entering RCFEs with significant health needs including
diabetes, bedsores, or require the use of oxygen tanks,
catheters, colostomies or ileostomies.
The RCFE licensure category includes facilities with as few
as six beds to those with hundreds of residents, whose
needs may vary widely. Typically, smaller facilities are
homes in residential neighborhoods while larger facilities
resemble hotels or apartment complexes with structured
activities for their residents. Residents may reside in
their own apartment or bedroom, or may share a bedroom.
Generally, residents are free to leave the facility if they
choose, and may entertain guests, and otherwise maintain a
level of independence. Facilities licensed to serve
residents with dementia or Alzheimer's disease, also known
as "memory care units" may maintain a secure perimeter.
Financial Structure
More than 90 percent of RCFEs in California are for-profit
homes, the majority of which are small facilities.<1> Most
residents pay privately or with long-term care insurance
since there is very little public funding available through
Medi-Cal, Supplemental Security Income (SSI/SSP) or
Medicare, and fees can range from $1,500 to more than
$8,000 per month. A very few beds are available to seniors
who pay their entire SSI/SSP checks in rent. In 2013 the
maximum SSI/SSP grant was $866.40. Residents who rely on
Social Security Income have a maximum payment of $2,642 per
month in 2014,<2> although that amount varies widely based
on the recipient's prior income while working.
-------------------------
<1> "Residential Care in California: Unsafe, Unregulated &
Unaccountable," California Advocates for Nursing Home
Reform, 2013
<2>
http://www.ssa.gov/pressoffice/factsheets/colafacts2014.pdf
STAFF ANALYSIS OF ASSEMBLY BILL 1523 (Atkins)
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As a result, low-income and middle-income seniors who do
not have long-term-care insurance are largely unable to
afford to reside in an RCFE. Many low-income seniors
receive services through the In Home Supportive Services
program (IHSS), or in a skilled nursing facility if they
are Medi-Cal eligible. Increasingly, complex corporate
mergers and acquisitions have meant that many RCFEs are
owned by national corporate chains that control numerous
facilities. Administrators employed by these chains may
also oversee multiple facilities. This development has led
to regulatory challenges since CCL citations and other
licensing reports are facility specific, and management
problems common to multiple RCFEs with the same owner may
easily go unnoticed.
Current Surety Bond Requirements
Under current law, RCFEs (as well as other community care
facilities) that are entrusted to safeguard money or
property of residents are required to provide to the
department a copy of a surety bond issued by a California
company in specified amounts to adequately protect
resident's money or property. CDSS establishes the required
amount of the bond through regulation in accordance with
the following schedule:<3>
Total Safeguarded Per Month Bond Required
$750 or less
.................................................. $1,000
$751 to $1,500.
............................................ $2,000
$1,501 to $2,500 ..........................................
$3,000
Every further increment of $1,000 or fraction thereof shall
require an additional $1,000 on the bond.
Additionally, regulation provides that whenever CDSS
determines that the amount of the bond is insufficient to
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<3> Title 22 CCR 87216
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adequately protect the money of residents, or whenever the
amount of any bond is impaired by any recovery against the
bond, the department may require the licensee to file an
additional bond in such amount as the licensing agency
determines to be necessary to adequately protect the
residents' money.
Continuing Care Retirement Communities are required to
maintain in effect insurance or a fidelity bond for each
employee who has access to a significant amount of funds in
addition to the above bond requirements on any RCFEs they
may operate. Residents of CCRCs frequently pay substantial
entrance fees in the hundreds of thousands to millions of
dollars, of which a portion may be refundable depending on
the terms of the contract with the resident. In exchange,
the facility agrees to take a certain amount of financial
risk in meeting the long-term-care needs of the resident.
Such fidelity bonds protect the resident against dishonest
acts of facility employees pertaining to the management of
the refundable monies and of the financial stability of the
facility which has accepted a future service obligation to
the resident. The bonds however do not provide general
liability coverage although many CCRCs maintain such
coverage voluntarily.
This bill additionally requires RCFEs to maintain liability
insurance or a surety bond for coverage of injury to
residents or guests caused by the negligent acts or
omissions to act of, or neglect by, the licensee or is
employees. An important distinction between surety bonds
and liability insurance is that surety bonds represent a
promise to indemnify the injured party only if the bond
holder is unable or unwilling to make full payment; the
bond company is then free to recover the costs from the
bond holder. Additionally, a bond includes no requirement
to defend the bond holder in court, as is the case in
liability insurance.
Recent events
A series of recent events has drawn attention to questions
about the adequacy of CDSS oversight and the state's
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ability to protect people who receive services within
CDSS-licensed facilities.
In July 2013, ProPublica and Frontline reporters wrote
and produced a series of stories on Emeritus, the
nation's largest RCFE provider.<4> Featured in the
article was a woman who died after receiving poor care at
in a facility in Auburn, California. The series
documented chronic understaffing and a lack of required
assessments and substandard care.
Reports in September 2013, prompted by a consumer
watchdog group that had hand-culled through stacks of
documents in San Diego, revealed that more than two dozen
seniors had died in recent years in RCFEs under
questionable circumstances that went ignored or
unpunished by CCL.<5>
In late October 2013, 19 frail seniors were abandoned at
Valley Springs Manor in Castro Valley by the licensee and
all but two staff after the state began license
revocation proceedings for the facility. CDSS inspectors,
noting the facility had been abandoned, left the two
unpaid service staff to care for the abandoned residents
with insufficient food and medication, handing them a
$3,800 citation before leaving for the weekend. The next
day sheriff's deputies and paramedics sent the patients
to local hospitals.
COMMENTS
1.Staff recommends the following technical amendment:
-------------------------
<4>
http://www.propublica.org/article/life-and-death-in-assisted
-living-single
<5> "Care Home Deaths Show System Failures," San Diego
Union Tribune, Sept.7, 2013
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On Page 2, line 6, strike "either" as follows:
On and after July 1, 2015, all residential care
facilities for the elderly, except those facilities that
are an integral part of a continuing care retirement
community, shall maintain either liability insurance
covering injury to residents and guests in the amount of
at least one million dollars ($1,000,000) per occurrence
and three million dollars ($3,000,000) in the total
annual aggregate, caused by the negligent acts or
omissions to act of, or neglect by, the licensee or
employees.
2.Given the wide variation in size of facility and in the
nature of the care provided to residents, the required
level of coverage may be inadequate to provide the
intended level of protection for residents in some
facilities. Existing law provides that the existing bond
coverage required of RCFEs that safeguard resident's
money may be increased by the department as necessary to
adequately protect residents. The author may wish to
consider amending the bill to permit the department to
increase the level of coverage required if it is
determined that the level of risk to residents is
inadequately covered.
3.Concerns have similarly been raised that facilities that
provide care primarily to low income residents, including
residents who rely solely on their SSI/SSP payments, may
be unable to afford the coverage required under this bill
absent an increase in the SSI/SSP payments. Currently
very few facilities accept SSI/SSP recipients, and this
bill may lead to the closure of those facilities or a
reduction in the number of SSI/SSP recipients that are
accepted. Existing regulation permits the department to
vary the bonding requirements if a facility documents
that the cost may lead to closure of the facility. The
author may wish to consider amending the bill to permit
the department to approve variances in such instances.
PRIOR VOTES
STAFF ANALYSIS OF ASSEMBLY BILL 1523 (Atkins)
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Assembly Floor 77 - 0
Assembly Appropriations 16 - 0
Assembly Human Services 6 - 0
POSITIONS
Support: California School Employees Association
California Long-Term Ombudsman Association
Consumer Advocates for RCFE Reform
County of San Diego
Donner & Donner Attorneys at Law
Green Bryant & French, LLP, Attorneys at Law
National Senior Citizens Law Center
Progressive Law Group
Retired Public Employees Association
San Diego State University School of Social
Work
Selik Law Services
Stand Up for Rosie
12 individuals
Oppose: None received.
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