Existing law generally regulates long-term care insurance policies delivered or issued after January 1, 1990. As to these policies, existing law requires a policy or certificate to include a provision that gives the policyholder or certificate holder certain specified rights to reduce coverage and lower premiums.

This bill would provide that, if a premium increases, a policyholder or certificate holder has a right to retain a policy or certificate while reducing coverage and lowering the premium, and specifies options and information that an insurer would be required to provide under those circumstances. The bill would require an insurer offering a policy or certificate with an inflation protection provision to provide specified options if a policyholder or certificate holder opts to reduce coverage. The bill would provide that the premium for a reduced coverage policy or certificate shall be based on the issue age and underwriting class, as specified, and consistent with the approved rate table. The bill would require an insurer to provide specified options to retain a policy or certificate while reducing coverage and lowering the premium, including reducing or eliminating the benefit adjustments provided by an inflation protection provision for a policy issued or delivered on or after January 1, 2020.

Existing law generally regulates long-term care insurance policies delivered or issued after January 1, 1990. As to these policies, existing law requires a policy or certificate to include a provision that gives the policyholder or certificate holder certain specified rights to reduce coverage and lower premiums.

This bill would provide that, if a premium increases, a policyholder or certificate holder has a right to retain a policy or certificate while reducing coverage and lowering the premium, and specifies options and information that an insurer would be required to provide under those circumstances. The bill would require an insurer offering a policy or certificate with an inflation protection provision to provide specified options if a policyholder or certificate holder opts to reduce coverage. The bill would provide that the premium for a reduced coverage policy or certificate shall be based on the issue age and underwriting class, as specified, and consistent with the approved rate table. The bill would require an insurer to provide specified options to retain a policy or certificate while reducing coverage and lowering the premium, including reducing or eliminating the benefit adjustments provided by an inflation protection provision for a policy issued or delivered on or after January 1, 2020.

Existing law generally regulates long-term care insurance policies delivered or issued after January 1, 1990. As to these policies, existing law requires a policy or certificate to include a provision that gives the policyholder or certificate holder certain specified rights to reduce coverage and lower premiums.

This bill would provide that, if a premium increases, a policy holder policyholder or certificate holder has a right to retain a policy or certificate while reducing coverage and lowering the premium, and specifies options and information that an insurer would be required to provide under those circumstances. The bill would require an insurer offering a policy or certificate with an inflation protection provision to provide specified options if a policyholder or certificate holder opts to reduce coverage. The bill would provide that the premium for a reduced coverage policy or certificate shall be based on the issue age and underwriting class, as specified, and consistent with the approved rate table. The bill would require an insurer, for a policy issued or delivered after January 1, 2020, insurer to provide specified options to retain a policy or certificate while reducing coverage and lowering the premium. premium, including reducing or eliminating the benefit adjustments provided by an inflation protection provision for a policy issued or delivered on or after January 1, 2020.

Existing law generally regulates long-term care insurance policies delivered or issued after January 1, 1990. As to these policies, existing law requires a policy or certificate to include a provision that gives the policyholder or certificate holder certain specified rights to reduce coverage and lower premiums . premiums.

This bill would require an insurer, if a reduction in coverage involves the reduction or elimination of an inflation protection provision, to allow the insured to continue the benefit amount in effect at the time of the reduction or elimination. provide that, if a premium increases, a policy holder or certificate holder has a right to retain a policy or certificate while reducing coverage and lowering the premium, and specifies options and information that an insurer would be required to provide under those circumstances. The bill would require an insurer offering a policy or certificate with an inflation protection provision to provide specified options if a policyholder or certificate holder opts to reduce coverage. The bill would provide that the premium for a reduced coverage policy or certificate shall be based on the issue age and underwriting class, as specified, and consistent with the approved rate table. The bill would require an insurer, for a policy issued or delivered after January 1, 2020, to provide specified options to retain a policy or certificate while reducing coverage and lowering the premium.

Existing law generally regulates the business of insurance in the state, including the licensing of surplus line brokers, persons who solicit, negotiate, and effect the undertaking of bail or bail bonds, life and disability insurance analysts, motor clubs, insurance adjusters, and public insurance adjusters. Existing law provides that if any of those licensees, except for an insurance adjuster, enters the military service of the United States at a time prescribed for the filing of a license renewal application that the filing of the application is waived and the license shall remain in force during the period of military service, and for a specified time afterward, during which the licensee may secure a license of the same type without taking an examination or paying a penalty. Existing law provides that the license fees required for an application to be licensed as a surplus line broker, a person who solicits, negotiates, and effects the undertaking of bail or bail bonds, a life and disability insurance analyst, or a public insurance adjuster are filing fees which shall not be refunded whether or not the application is acted upon or a license examination is taken.

This bill would add insurance adjusters to the list of licensees to which these provisions apply.

 UNFINISHED BUSINESS  

Bill No: SB 1046

Author:

:

Vote:

SENATE INSURANCE COMMITTEE: 11-0, 4/25/18

AYES: Glazer, Gaines, Galgiani, Hernandez, Hueso, Lara, Mitchell, Moorlach, Newman, Portantino, Roth

NO VOTE RECORDED: Berryhill, Morrell

SENATE FLOOR: 38-0, 5/3/18 (Consent)

AYES: Allen, Anderson, Atkins, Bates, Beall, Berryhill, Bradford, Cannella, Dodd, Fuller, Gaines, Galgiani, Glazer, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Newman, Nguyen, Nielsen, Pan, Portantino, Roth, Skinner, Stern, Stone, Vidak, Wieckowski, Wiener, Wilk

NO VOTE RECORDED: De León

ASSEMBLY FLOOR: 75-0, 8/23/18 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill enhances the consumer protections that apply to long-term care insurance (LTCI) policies when policyholders reduce their coverage.

Assembly Amendments recast existing provisions and add disclosures to conform California law more closely to the model regulation adopted by the National Association of Insurance Commissioners (NAIC), as well as add consumer protections that apply when an insurer imposes a rate increase.

ANALYSIS:

Existing law:

1. Provides for the regulation of LTCI by the Department of Insurance (CDI) and prescribes various requirements and conditions governing the delivery of individual or group LTCI insurance in the state.
2. Requires LTCI policies to include provisions that give the policyholder several options to reduce coverage in order to lower the premium, including the right to reduce the lifetime maximum benefit or the nursing home per diem benefit.
3. Requires insurers, after implementing a premium increase, to offer an LTCI policyholder the option to reduce coverage with lower premiums.

This bill:

1. Requires that policies issued on or after January 1, 2020, include a provision that allows the policyholder to reduce or eliminate the inflation protection provision in their policy.
2. Requires that policies issued on or after January 1, 2020, include a description of the process required for a policyholder to reduce coverage.
3. Requires insurers, for policies issued prior to January 1, 2020, to notify policyholders of the process required to reduce coverage.
4. Permits policyholders who reduce or eliminate the inflation protection to retain the benefit levels that have accrued at the date of the change.
5. Requires insurers, when imposing a premium increase, to offer specified options (already provided for under the policy) and at least one option that would result in a premium reasonably equivalent to the one in force.
6. Requires insurers, when imposing a premium increase on a policy certified by the Partnership for Long-Term Care Program (“Partnership”), to offer options that would maintain certification and authorizes the insurer to offer other options that might result in the loss of Partnership certification if the insurer explains how the loss of certification may impact policyholder protections.
7. Revises statutory language regarding reductions in LTCI coverage to more closely reflect the model law published by the NAIC.

Background

LTCI covers services required when a person develops a debilitating condition and requires assistance with basic activities such as feeding, dressing, and bathing. It is often purchased decades in advance but sold with fixed daily and lifetime benefit limits set at the time of purchase that may be severely impacted by inflation. Consumers may purchase inflation protection that automatically increases the limits every year, but that option can be very expensive.

Consumers are usually offered options to lower their benefit limits or downgrade their inflation protection when the insurer implements a rate increase. This bill enacts a provision from the NAIC model regulation that gives the policyholder the option to preserve the current value of the policy and apply the reduced inflation protection prospectively.

Assembly amendments added disclosures and other protections that apply when an insurer offers options to downgrade the benefit limits; for example, this bill requires insurers to offer an option that would result in a premium reasonably equivalent to the one in effect prior to the scheduled increase.

Comments

According to the author, SB 1046 conforms California law to national standards in order to protect the value consumers have built up in their LTCI policies.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee, this bill would result in a one-time cost of $25,000 in 2019 to the Insurance Fund to verify policy modifications.

SUPPORT: (Verified 8/23/18)

None received

OPPOSITION: (Verified 8/23/18)

None received

ASSEMBLY FLOOR: 75-0, 8/23/18

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Maienschein, Mathis, Mayes, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rivas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Travis Allen, Cunningham, Low, McCarty, Thurmond

Prepared by:

8/23/18 17:15:57

**** END ****

Date of Hearing: August 15, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 1046

Author:(Roth) – As Amended Ver:August 6, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill permits long-term care (LTC) insurance policyholders to retain their benefit levels when altering the inflation protection provision in the policy.

FISCAL EFFECT:

One-time cost of $25,000 in 2019 to the California Department of Insurance (CDI) to verify policy modifications (Insurance Fund).

COMMENTS:

1. Purpose. This bill enacts a provision from the model regulation adopted by the National Association of Insurance Commissioners that protects the value of a policyholder's benefits when inflation protections are changed.
2. Background. LTC insurance is often purchased decades in advance but sold with fixed limits set at the time of purchase, such as a $100,000 lifetime maximum. By the time the consumer uses the policy, inflation may have eaten away at the value. Consumers can purchase inflation protection that automatically increases the policy limits every year, but it can be expensive.

Consumers are usually offered the option to downgrade or eliminate their inflation protection when the insurer implements a rate increase. But there is a chance the insurer may only offer to adjust the inflation factor against the original, not the current value, of the policy. This could result in an immediate and significant loss in the available lifetime maximum benefits. It may be far more difficult and expensive for the consumer to upgrade their policy as they get older.

California statute does not explicitly address this situation. This bill enacts a provision from the model regulation adopted by the National Association of Insurance Commissioners that gives the policyholder the option to preserve the current value of the policy. For example, if the insured has a policy with a 5% escalator now worth $155,000, the insured would then have the option to downgrade to 3% and maintain the current value (as opposed to applying the new escalator backward and reducing the current value to something like $130,000).

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: June 20, 2018

ASSEMBLY COMMITTEE ON INSURANCE

Tom Daly, Chair

SBPCA Bill Id:SB 1046

Author:(Roth) – As Amended Ver:April 12, 2018

SENATE VOTE: 38-0

SUBJECT: Insurance: long-term care

SUMMARY: Permits long-term care (LTC) insurance policyholders to retain their coverage limit when altering the inflation protection provision in the policy. Specifically, this bill:

1. Requires an LTC policy issued on or after January 1, 2020 to include a provision that allows the policyholder to reduce or eliminate the inflation protection provision in their policy.
2. Requires an LTC policy issued on or after January 1, 2020 to include a description of the process required for a policyholder to reduce coverage.
3. Requires that, for a policy issued prior to January 1, 2020, insurers notify LTC policyholders of the process required to reduce coverage.
4. Permits a policyholder who changes the inflation protection provision in an LTC policy to retain the benefit levels that have accrued at the date of the change.
5. Requires that, after a premium increase, an insurer offer a policyholder at least one alternative policy with a premium reasonably equivalent to the policy in force.
6. Requires that, after a premium increase, an insurer offer a policyholder with a policy offered under the California Partnership for Long-Term Care Program (partnership) an alternative policy that is offered under the partnership.
7. Requires that, after a premium increase, an insurer offering alternative LTC coverage inform the holder of a partnership policy that purchasing alternative coverage would result in losing the Medi-Cal benefits associated with a partnership policy.
8. Revises current law regarding reductions in LTC coverage to more closely reflect the model law published by the National Association of Insurance Commissioners.

EXISTING LAW:

1. Provides for the regulation of LTC insurance by the Department of Insurance (DOI) and prescribes various requirements and conditions governing the delivery of individual or group LTC insurance in the state.
2. Requires every policy to include provisions that give the policyholder several options to reduce coverage in order to lower the premium, including the right to reduce the lifetime maximum benefit or the nursing home per diem benefit.
3. Requires an insurer, after implementing a premium increase, to offer an LTC policyholder the option to reduce coverage with lower premiums.
   

FISCAL EFFECT: Undetermined.

COMMENTS:

1) Purpose. According to the author, SB 1046 conforms California law to national standards in order to protect the value consumers have built up in their LTC policies when they choose to downgrade their inflation protection.

2) Long Term Care. LTC services provide individuals who, because of illness or disability, are generally unable to perform activities of daily living, such as bathing, dressing, toileting, and getting around the house, or suffer from cognitive impairments. LTC services are provided in a variety of settings, such as nursing homes, assisted living facilities, and private residences. Only about 20 percent of the elderly who need LTC services live in an institutional setting. The roughly 80 percent living in the community primarily live in private homes, but a small number live in residential communities catering to the needs of elderly people. For those living at home, most receive assistance from unpaid family members and friends (referred to as informal care) while some pay for assistance (referred to as formal care) from home health aides. Elderly people with severe functional and cognitive limitations who require around-the clock assistance often live in institutional settings. According to data from the Medicare Current Beneficiary Survey, the elderly nursing home population has declined over the past 10 years as more elderly people are living in residential care facilities, community-based housing with supportive services, and in their homes.

1. How is LTC Paid For? More than half of LTC services are provided as informal care. The Congressional Budget Office estimates that the value of informal care provided in 2011 was approximately $234 billion. Of the $192 billion spent on formal LTC services in 2011 roughly two-thirds is paid by Medicare and Medicaid (with the remainder paid out-of-pocket by consumers or by private insurance). Medi-Cal (sometimes with a little Medicare added in) is the de facto LTC insurance policy for those who aren't wealthy enough to afford LTC insurance premiums or to pay LTC costs out-of-pocket.
2. LTC Benefits. LTC insurance is often purchased decades in advance but sold with fixed limits set at the time of purchase, such as a $100,000 lifetime maximum. By the time the consumer uses the policy, inflation may have eaten away at the value. Consumers can purchase inflation protection that automatically increases the policy limits every year, but that option can be very expensive.

Consumers are usually offered the option to downgrade or eliminate their inflation protection when the insurer implements a rate increase. But there is a chance that the insurer may only offer to adjust the inflation factor against the original, not the current value, of the policy. This could result in an immediate and significant loss in the available lifetime maximum benefits. It may be far more difficult and expensive for the consumer to upgrade their policy as they get older.

California statute does not explicitly address this situation. This bill enacts a provision from the model regulation adopted by the National Association of Insurance Commissioners that gives the policyholder the option to preserve the current value of the policy. For example, if the insured has a policy with a 5% escalator now worth $155,000, the insured would then have the option to downgrade to 3% and maintain the current value (as opposed to applying the new escalator backward and reducing the current value to something like $130,000).

1. Suggested Amendment. The author should amend Page 2, Line 28 to correct an erroneous reference.

REGISTERED SUPPORT / OPPOSITION:

Support

None received.

Opposition

None received.f

Analysis Prepared by: Paul Riches / INS. / (916) 319-2086

 CONSENT  

Bill No: SB 1046

Author:

:

Vote:

SENATE INSURANCE COMMITTEE: 11-0, 4/25/18

AYES: Glazer, Gaines, Galgiani, Hernandez, Hueso, Lara, Mitchell, Moorlach, Newman, Portantino, Roth

NO VOTE RECORDED: Berryhill, Morrell

SUBJECT:

SOURCE: Author

DIGEST:

This bill requires the insurer to allow the owner of a long-term care insurance (LTCI) policy to continue the benefit amount in effect at the time the owner elects to reduce or eliminate the inflation protection in the policy.

ANALYSIS:

Existing law:

1. Requires every policy to include provisions in the policy that give the policyholder several options to reduce coverage in order to lower the premium including the right to reduce the lifetime maximum benefit or the nursing home per diem benefit.
2. Requires an insurer to offer the policyholder the option to reduce coverage and lower premiums if implementing a premium increase.
   

This bill requires the insurer to allow the owner of an LTCI policy to continue the benefit amount in effect at the time the owner elects to reduce or eliminate the inflation protection in the policy.

Background

LTCI covers services required when a person develops a debilitating condition and requires assistance with basic activities such as feeding, dressing, and bathing. It is often purchased decades in advance but sold with fixed limits set at the time of purchase, such as a $100,000 lifetime maximum. By the time the consumer uses the policy, inflation may have eaten away at the value. Consumers can purchase inflation protection that automatically increases the policy limits every year, but that option can be very expensive.

Consumers are usually offered the option to downgrade or eliminate their inflation protection when the insurer implements a rate increase. But there is a chance that the insurer may only offer to adjust the inflation factor against the original, not the current value, of the policy. This could result in an immediate and significant loss in benefits. It may be far more difficult and expensive for the consumer to upgrade their policy as they get older.

California statute does not explicitly address this situation. This bill enacts a provision from the model regulation adopted by the National Association of Insurance Commissioners that gives the policyholder the option to preserve the current value of the policy. For example, if the insured has a policy with a 5% escalator now worth $155,000, the insured would then have the option to downgrade to 3% and maintain the current value (as opposed to applying the new escalator backward and reducing the current value to something like $130,000).

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/1/18)

None received

OPPOSITION: (Verified 5/1/18)

None received

Prepared by:

5/2/18 14:27:16

**** END ****

SENATE COMMITTEE ON INSURANCE

Senator Steven Glazer, Chair

2017 - 2018 Regular

Bill No: SB 1046 Hearing Date: April 25, 2018

Subject: Insurance: long-term care

SUMMARY

Requires the insurer to allow the owner of a long-term care insurance (LTCI) policy to continue the benefit amount in effect at the time the owner elects to reduce or eliminate the inflation protection in the policy.

DIGEST

Existing law

1. Provides for the regulation of LTCI by California Department of Insurance (CDI) and prescribes various requirements and conditions governing the delivery of individual or group policies in the state.
2. Requires every policy to include provisions in the policy that give the policyholder several options to reduce coverage in order to lower the premium including the right to reduce the lifetime maximum benefit or the nursing home per diem benefit.
3. Requires an insurer to offer the policyholder the option to reduce coverage and lower premiums if implementing a premium increase.
   

This bill

Requires the insurer to include a provision in LTCI policies that would allow the insured to continue the benefit amount in effect at the time of the reduction or elimination when the policyholder elects to reduce or eliminate the inflation protection in an LTCI policy.

COMMENTS

1. Purpose of the bill According to the author, SB 1046 conforms California law to national standards in order to protect the value consumers have built up in their LTCI policies when they choose to downgrade their inflation protection.
   
2. Background LTCI covers services required when a person is unable to take care of themselves. Coverage is triggered when an insured develops a “chronic illness” typically defined as an inability to perform a set number of "activities of daily living" such as feeding, dressing, and bathing themselves, or develop a severe cognitive impairment (such as Alzheimer’s Disease). A policy may cover facility care or home care or both. LTCI covered almost 636,000 lives in California by the end of 2015. (For more information on LTCI, please see the Senate Insurance Committee analysis for SB 1248 (Gaines, 2018).)

LTCI is often purchased decades in advance but sold with fixed limits set at the time of purchase, such a $100,000 lifetime maximum. By the time the consumer uses the policy, inflation may have eaten away at the value. Consumers can purchase inflation protection that automatically increases the policy limits every year. California law requires insurers to offer a 5% compound escalator, but does not require the applicant to purchase it. A 5% compound escalator can be expensive and even double the premium over a lower escalator, such as 3%.

Consumers are usually offered the option to downgrade or eliminate their inflation protection when the insurer implements a rate increase. This option may allow the policyholder to avoid some or all of the increase by reducing policy benefits. But there is a danger that the consumer may unwarily, or may be forced to, roll the policy back to its original limits. Once a policy is downgraded, it may be more difficult and expensive for someone to upgrade their policy as they get older.

California statute does not explicitly address this situation. The model regulation adopted by the National Association of Insurance Commissioners (NAIC) addresses this issue by requiring that any consumer that downgrades the inflation escalator must also be able to preserve the value of the policy up to the time of the change. This bill follows the NAIC model.

Why Now? The Partnership for Long-term Care (“Partnership”) certifies special policies that have features that coordinate with the eligibility criteria for Medi-Cal’s long-term care benefits. Prior to 2017, all Partnership policies had to have a 5% inflation escalator which makes them far too expensive for middle-income consumers. SB 1384 (Liu, 2016) required participating insurers to offer applicants a lower-cost escalator and opened up the possibility to downgrade the inflation protection, but did not address the potential retroactive downgrade of inflation protection. The Partnership is updating its regulations, but there is no timetable when, or if, those changes will take effect; when they do, they will only apply Partnership policies. This bill applies the consumer protection to all LTCI policies.

POSITIONS

Support

None received

Oppose

None received

-- END --