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SB-1342 Long-term care insurance: protection against inflation.(2019-2020)

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Date Published: 02/21/2020 09:00 PM
SB1342:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1342

Introduced by Senator Roth

February 21, 2020

An act to amend Section 10235.50 of the Insurance Code, and to amend Section 22005.1 of the Welfare and Institutions Code, relating to insurance, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 1342, as introduced, Roth. Long-term care insurance: protection against inflation.
Existing law establishes the California Partnership for Long-Term Care Program administered by the State Department of Health Care Services. The purpose of the program is to link private long-term care insurance and health care service plan contracts that cover long-term care with the In-Home Supportive Services Program and the Medi-Cal program and to provide Medi-Cal program benefits to certain individuals who have income and resources above the eligibility levels for receipt of medical assistance, but who have purchased certified private long-term care insurance policies. Existing law requires a long-term care insurance policy or a health care service plan contract, in order to be certified by the department, to contain certain provisions, including protection again loss of benefits due to inflation. Existing law requires an applicant to be offered one option that provides, at a minimum, protection against inflation that automatically increases benefit levels by 5% each year over the previous year, as specified, and at least one lower cost option.
This bill would require that lower cost option to provide, at a minimum, protection against inflation that automatically increases benefit levels by 3% each year over the previous year. The bill would make related conforming changes.
Existing law also authorizes the department to certify a policy with a per diem benefit of at least $100 per day for a nursing facility, residential care facility, and home care and community-based services, if the policy provides a lifetime maximum benefit of not less than $73,000.
This bill would require a policy or certificate qualified for certification under these provisions to provide, at a minimum, protection against inflation that automatically increases benefit levels by 3 percent each year over the previous year.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 10235.50 of the Insurance Code is amended to read:

10235.50.
 (a) A policy or certificate shall include a provision that gives the policyholder or certificate holder the right, exercisable any time after the first year, to retain the policy or certificate while reducing coverage and lowering the premium.
(1) The policyholder or certificate holder shall have the option to reduce coverage and lower the premium in the following ways:
(A) Reducing the lifetime maximum benefit.
(B) Reducing the daily, weekly, or monthly benefit amounts.
(C) Converting a “comprehensive long-term care” policy or certificate to a “Nursing Facility and Residential Care Facility Only” or a “Home Care Only” policy or certificate, if the insurer issues those policies or certificates for sale in the state.
(D) Reducing or eliminating the benefit adjustments provided by an inflation protection provision.
(2) Subparagraph (D) of paragraph (1) shall apply to a policy issued or delivered on or after January 1, 2020.
(3) The insurer may offer other reduction options in addition to those required by paragraph (1).
(4) For a policy issued or delivered on or after January 1, 2020, the provision shall include a description of the process for requesting and implementing a reduction in coverage. For a policy issued or delivered before January 1, 2020, an insurer shall notify the policyholder or certificate holder of the process to request and implement a reduction in coverage.
(b) (1) The premium for a policy or certificate that is reduced in coverage shall be both of the following:
(A) Based on the issue age and underwriting class used to determine the premium for the coverage currently in force.
(B) Consistent with the policy’s approved rate table.
(2) This subdivision shall apply to any reduction in coverage, regardless of the original policy issue date.
(c) (1) If a policy or certificate contains an inflation protection provision, both of the following shall apply to a reduction in coverage:
(A) If a policyholder or certificate holder chooses to reduce a daily, weekly, monthly, or lifetime benefit amount, then he or she the policyholder shall be given the option to continue inflation protection benefit adjustments in the same manner and in the same amount as the contract in force before the reduction in coverage.
(B) If a policyholder or certificate holder chooses to reduce or eliminate the benefit adjustments provided by an inflation protection provision, then he or she the policyholder shall be given the option to continue the daily, weekly, monthly, and lifetime benefit amounts in effect at the time of the reduction.
(2) This subdivision shall apply to any reduction in coverage, regardless of the original policy issue date.
(d) If a policy or certificate is about to lapse, the insurer shall provide written notice to the insured of the options in subdivision (a) to lower the premium by reducing coverage and of the premiums applicable to the reduced coverage options. The insurer may include in the notice additional options to those required in subdivision (a). The notice shall provide the insured at least 30 days in which to elect to reduce coverage and the policy shall be reinstated without underwriting if the insured elects the reduced coverage.
(e) If a premium increases, the policyholder or certificate holder shall have the right to retain the policy or certificate while reducing coverage and lowering the premium.
(1) The policyholder or certificate holder shall be offered the option to reduce coverage as provided in subparagraphs (A), (B), and (D) of paragraph (1) of subdivision (a).
(A) At least one option to reduce coverage shall allow the policyholder or certificate holder to retain the policy for a premium reasonably equivalent to the one that was in effect before the rate increase.
(B) An insurer may offer other reduction options in addition to the option required by paragraph (1).
(C) An insurer’s offer shall include a disclosure stating that all of the reduction options may not be of equal value.
(D) (i) The policyholder or certificate holder of a policy or certificate offered under the California Partnership for Long-Term Care Program shall be offered options to reduce coverage that would maintain certification under the program. The insurer options shall include the option to lower the protection against inflation to a level that automatically increases benefit levels by 3 percent each year over the previous year.
(ii) The insurer may also offer other reduction options that may result in a loss of partnership status, but the offer shall include a disclosure that identifies the benefit reduction options that may result in a loss of partnership status and explains that loss of partnership status may reduce or eliminate policyholder protections.
(2) This subdivision shall apply applies to any premium rate increase, regardless of the original policy issue date.

SEC. 2.

 Section 22005.1 of the Welfare and Institutions Code is amended to read:

22005.1.
 (a) The State Department of Health Care Services shall only certify a long-term care insurance policy that substantially meets the requirements of Chapter 2.6 (commencing with Section 10231) of Part 2 of Division 2 of the Insurance Code, except the requirements of Sections 10232.1, 10232.2, 10232.8, 10232.9, and 10232.92 of the Insurance Code, and that provides all of the items specified in subdivision (b). The State Department of Health Care Services shall only certify a health care service plan contract that has been approved by the Department of Managed Health Care pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code as providing substantially equivalent coverage to that required by Chapter 2.6 (commencing with Section 10231) of Part 2 of Division 2 of the Insurance Code, and that provides all of the items specified in subdivision (b). Policies issued by organizations subject to the Insurance Code and regulated by the Department of Insurance shall also be approved by the Department of Insurance.
(b) Only policies and contracts that provide all of the following items shall be certified by the department:
(1) Individual assessment and case management by a coordinating entity designated and approved by the department.
(2) Levels and durations of benefits that meet minimum standards set by the department pursuant to Section 22009.
(3) Protection against loss of benefits due to inflation. An applicant shall be offered, at the time of purchase, the following options:
(A) One option that provides, at a minimum, protection against inflation that automatically increases benefit levels by 5 percent each year over the previous year, up to an age specified by the program.
(B) At least one lower cost option. option that provides, at a minimum, protection against inflation that automatically increases benefit levels by 3 percent each year over the previous year.
(4) A periodic record issued to the insured including an explanation of insurance payments or benefits paid that count toward Medi-Cal asset protection under this division.
(5) Compliance with any other requirements imposed by regulations adopted by the State Department of Health Care Services or the State Department of Social Services and consistent with the purposes of this division.
(c) (1) The State Department of Health Care Services may also certify a policy or certificate, or maintain certification of a previously issued policy or certificate, with a per diem benefit of at least one hundred dollars ($100) per day for a nursing facility, residential care facility, and home care and community-based services, if the policy provides a lifetime maximum benefit of not less than seventy-three thousand dollars ($73,000). A policy or certificate certified pursuant to this subdivision shall provide, at a minimum, protection against inflation that automatically increases benefit levels by 3 percent each year over the previous year.
(2) An insurer may offer a policy with the benefits described in paragraph (1) only if the insurer also offers the applicant policy benefits that provide at least a lifetime maximum benefit that, at the time of purchase, is equivalent in dollars to at least 365 times 70 percent of the average daily private pay rate for a nursing facility and a nursing facility per diem benefit of no less than 70 percent of the average daily private pay rate for a nursing facility.
(3) Except for the lifetime maximum benefit and the nursing facility per diem benefit levels required by paragraphs (1) and (2), policies authorized by this subdivision shall comply with the standards described in paragraph (2) of subdivision (b).

SEC. 3.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to provide more flexibility to financially vulnerable consumers facing rate increases as soon as possible, it is necessary that this act take effect immediately.