REPORT TITLE:
Long-Term Care


DESCRIPTION:
Requires long-term care insurance policies to meet specified
standards; requires employers to offer LTC policies to employees;
conforms LTC statutes to the model act; makes appropriation for
LTC actuarial study; makes appropriation to insurance division to
hire LTC actuary; extends sunset date and makes appropriation for
JLC.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO LONG-TERM CARE. 


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1                              PART I
 
 2      SECTION 1.  This Act is a recommendation of the joint
 
 3 legislative committee on long-term care, as contained in its
 
 4 report to the legislature dated December 1, 1998.  This Act is a
 
 5 companion to a separate bill that amends the income tax law to
 
 6 allow an income tax deduction for individuals who purchase long-
 
 7 term care insurance policies.
 
 8      Long-term care is an issue of immense importance.  Providing
 
 9 adequate care for the aged and disabled is an economic burden for
 
10 many people.  The legislature finds that long-term care insurance
 
11 policies offer a means of alleviating that burden.  The
 
12 legislature believes that the ideal setting to provide long-term
 
13 care insurance is through the employment workplace and that the
 
14 State should encourage the offering of long-term care insurance
 
15 in order to provide a modicum of financial security.
 
16      The purpose of this Act is to increase the number of long-
 
17 term care insurance policies in effect in Hawaii by requiring
 
18 employers to offer long-term care coverage, and to increase state
 
19 regulation over long-term care insurance.
 

 
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 1                              PART II
 
 2      SECTION 2.  Chapter 431:10A, Hawaii Revised Statutes, is
 
 3 amended by adding nine new sections to Part V to be appropriately
 
 4 designated and to read as follows:
 
 5      "§431:10A-     Minimum coverages.  (a)  A group long-term
 
 6 care insurance policy shall provide coverage, at a minimum, for:
 
 7      (1)  Home- and community-based care;
 
 8      (2)  Adult residential homes; and
 
 9      (3)  Respite care.
 
10 A group long-term care insurance policy may offer optional
 
11 coverages, including but not limited to, nursing home care,
 
12 hospice care, and assisted living facility care.
 
13      (b)  An individual long-term care insurance policy shall
 
14 provide coverage for any one or more, or a combination of, the
 
15 following care:
 
16      (1)  Home- and community-based care;
 
17      (2)  Adult residential homes;
 
18      (3)  Nursing home care;
 
19      (4)  Hospice care; or
 
20      (5)  Assisted living facilities.
 
21      (c)  The commissioner may adopt rules to define the terms,
 
22 specify the services, and limit the duration of services under
 
23 subsection (a) or (b).
 

 
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 1      (d)  An individual or group long-term care insurance policy
 
 2 may be issued before the effective date of the rules under
 
 3 subsection (c); provided that the coverages shall be amended in
 
 4 accordance with the rules, if necessary.  All policies shall be
 
 5 issued with a written explanation that the coverage may be
 
 6 subject to modification pending the adoption of rules.
 
 7      (e)  This section shall be liberally construed to allow an
 
 8 insurer to provide coverages that satisfy the needs of persons in
 
 9 this State for long-term care.
 
10      §431:10A-     Employers and others to offer long-term care
 
11 insurance policies; no employer contributions.  (a)  No later
 
12 than January 1, 2000, every employer, labor organization, retiree
 
13 organization, or other entity specified under the definition of
 
14 "group long-term care insurance", shall offer a group long-term
 
15 care insurance policy with at least the minimum coverages
 
16 specified under section 431:10A-   (a) that has been approved by
 
17 the insurance commissioner under section 431:10A-526, to its
 
18 employees or members, as appropriate; provided that employees or
 
19 members shall not be required to purchase a policy.
 
20      (b)  In the absence of an agreement between an employer and
 
21 an employee or member, an employer, labor organization, retiree
 
22 organization, or other entity described in subsection (a) shall
 
23 not be required to contribute to the payment of premiums for a
 

 
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 1 policy purchased under subsection (a).  Any agreement shall
 
 2 specify a percentage of the premium to be contributed.
 
 3      (c)  If an employee purchases a policy under subsection (a),
 
 4 the employer shall not be required to withhold the employee's
 
 5 premium from wages, unless the employer agrees to contribute to
 
 6 paying the premiums under subsection (b).
 
 7      (d)  A policy purchased under this section shall be
 
 8 portable, so that a person who purchases a policy and who
 
 9 terminates employment or terminates membership in a labor
 
10 organization or other entity described in subsection (a) for any
 
11 reason, including but not limited to retirement, may take that
 
12 policy with the person in one form or another.
 
13      (e)  For purposes of subsection (a), if the insurance
 
14 commissioner has not approved the policy pursuant to section
 
15 431:10A-526 by January 1, 2000, a policy may be issued; provided
 
16 that all policies shall be issued with a written explanation that
 
17 the policy may be subject to modification pending approval of the
 
18 insurance commissioner.
 
19      §431:10A-    Availability of policies.   All insurers that
 
20 are subject to this part shall make available upon request a
 
21 group long-term care insurance policy to every employer, labor
 
22 organization, retiree organization, or other entity specified
 
23 under the definition of "group long-term care insurance";
 

 
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 1 provided that an individual long-term care insurance policy may
 
 2 be substituted for a group long-term care insurance policy if a
 
 3 group policy is not available to the particular group by a
 
 4 particular insurer solely for the reason of the number of
 
 5 employees or members in that particular group.  This section
 
 6 shall not be construed to affect the applicability of the Health
 
 7 Insurance Portability and Accountability Act of 1996, P.L. 104-
 
 8 191, as amended, nor Internal Revenue Code provisions relating to
 
 9 tax benefits for long-term care insurance.
 
10      §431:10A-     Purchase of policy and payment of premiums on
 
11 an individual's behalf.  An individual or group long-term care
 
12 insurance policy shall allow a person to purchase a policy and
 
13 pay the premiums for an individual or group long-term care
 
14 insurance policy that covers the person, the person's spouse or
 
15 reciprocal beneficiary, as well as their parents and
 
16 grandparents, including in-laws.
 
17      §431:10A-     Policy lapse for nonpayment of premium.  (a)
 
18 An individual or group long-term care insurance policy shall not
 
19 lapse for a period of not less than one hundred fifty days for
 
20 the nonpayment of premium for any reason, including if nonpayment
 
21 is a result of an impairment of the cognitive ability of the
 
22 insured.  Reinstatement of the policy following a lapse shall be
 
23 in accordance with the terms of the policy.
 

 
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 1      (b)  If a policy has been in effect for not less than ten
 
 2 years before a lapse under this section, the policy shall provide
 
 3 for paid-up benefits in an equitable amount that is calculated
 
 4 actuarially.
 
 5      §431:10A-     Alzheimer's, brain disorders covered.  An
 
 6 individual or group long-term care insurance policy shall provide
 
 7 coverage for long-term care resulting from Alzheimer's or other
 
 8 brain disorders.
 
 9      §431:10A-     Inflation protection.  For all individual or
 
10 group long-term care insurance policies, each policyholder, at
 
11 the time of purchase, shall be offered the option to purchase an
 
12 inflation protection feature that provides for automatic
 
13 increases in benefit levels to account for reasonable anticipated
 
14 increases in the cost of long-term care services covered by the
 
15 policy, as follows:
 
16      (1)  Annual increases in benefit levels;
 
17      (2)  A guarantee to the insured individual of the right to
 
18           periodically increase the benefit levels without
 
19           providing evidence of insurability or health status; or
 
20      (3)  Coverage for a specified percentage of actual or
 
21           reasonable charges.
 
22      §431:10A-     Age-graded premiums.  (a)  Premiums for an
 
23 individual or group long-term care insurance policy shall be
 

 
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 1 graded by age, along with other underwriting criteria as
 
 2 determined by the insurance commissioner, of the applicant at the
 
 3 time of purchase of the policy.  Premiums shall be fixed over the
 
 4 life of the policy; provided that the commissioner may allow an
 
 5 adjustment in premiums if the commissioner finds that an
 
 6 adjustment is necessary for the addition of benefits, solvency of
 
 7 the insurer in the line of long-term care insurance, or loss
 
 8 ratio purposes.
 
 9      (b)  Reasonable underwriting criteria other than age may be
 
10 utilized with the approval of the insurance commissioner;
 
11 provided that the criteria shall not result to average risks as a
 
12 whole in denying long-term care insurance or in assessing
 
13 unreasonable premiums.
 
14      §431:10A-     Conflict with federal law.  If a conflict
 
15 occurs between a provision of part V of chapter 431:10A and the
 
16 Health Insurance Portability and Accountability Act of 1996, P.L.
 
17 104-191, as amended, the provision shall be deemed amended to
 
18 comply with that federal law.
 
19      §431:10A-    Federal tax benefits.  If a purchaser of a
 
20 long-term care insurance policy issued under this part files for
 
21 federal income tax benefits, and if that policy does not qualify
 
22 for federal tax benefits for long-term care under the Internal
 
23 Revenue Code or does not conform to any references in the
 

 
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 1 Internal Revenue Code to other laws or regulations, the policy
 
 2 shall be deemed amended to comply with the Internal Revenue Code
 
 3 or to any references therein.  A policy deemed amended under this
 
 4 section shall provide the same benefits as a policy qualifying
 
 5 for federal tax benefits.
 
 6      §431:10A-    Terminology interchangeable.  For purposes of
 
 7 this part, the term "group long-term care insurance" refers to a
 
 8 means of marketing or method of issuance of a long-term care
 
 9 insurance policy, without regard to substantive differences in
 
10 the policy."
 
11      SECTION 3.  Section 87-23.5, Hawaii Revised Statutes, is
 
12 amended by amending subsections (a) and (b) to read as follows:
 
13      "(a)  The board [of trustees] shall determine the benefits
 
14 of a long-term care benefits plan for employee-beneficiaries,
 
15 their spouses or reciprocal beneficiaries, as well as their
 
16 parents and grandparents, including in-laws, and qualified-
 
17 beneficiaries.  The plan shall comply with [the provisions of]
 
18 article 10A, part V, of chapter 431[, upon initial plan
 
19 implementation only].
 
20      (b)  Notwithstanding any other law to the contrary, [such]
 
21 the benefits shall be available only to employee-beneficiaries,
 
22 their spouses or reciprocal beneficiaries, as well as their
 
23 parents and grandparents, including in-laws, and qualified-
 

 
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 1 beneficiaries who enroll between the ages of twenty and eighty-
 
 2 five.  Eligible persons must comply with the plan's age,
 
 3 enrollment, medical underwriting, and contribution requirements."
 
 4      SECTION 4.  Section 431:10A-523, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "[[]§431:10A-523[]]  Disclosure standards[.]; other rules.
 
 7 The commissioner [may] shall adopt rules under chapter 91 no
 
 8 later than September 1, 1999, that include standards for full and
 
 9 fair disclosure setting forth the manner, content, and required
 
10 disclosures for the sale of long-term care insurance policies,
 
11 terms of renewability, initial and subsequent conditions of
 
12 eligibility, nonduplication of coverage provisions, coverage of
 
13 dependents, preexisting conditions, termination of insurance,
 
14 probationary periods, limitations, exceptions, reductions,
 
15 elimination periods, requirements for replacement, recurrent
 
16 conditions, and definitions of terms."
 
17      SECTION 5.  Section 431:10A-526, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "[[]§431:10A-526[]]  Loss ratio standards[.]; factors;
 
20 commissioner approval.  (a)  The commissioner [may] shall adopt
 
21 rules no later than September 1, 1999, establishing loss ratio
 
22 standards for long-term care insurance policies [provided that a
 
23 specific reference to long-term care insurance policies is
 

 
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 1 contained in the rules].  The loss ratio standards shall provide
 
 2 for reasonable benefits in relation to premiums.  Benefits shall
 
 3 be deemed reasonable in relation to premiums if the expected loss
 
 4 ratio is at least sixty per cent, calculated in a manner that
 
 5 provides for adequate reserving of the long-term care insurance
 
 6 risk.  In evaluating the expected loss ratio, the commissioner
 
 7 shall consider all relevant factors, including but not limited
 
 8 to:
 
 9      (1)  Statistical credibility of incurred claims experience
 
10           and earned premiums;
 
11      (2)  The period for which rates are computed to provide
 
12           coverage;
 
13      (3)  Experienced and projected trends;
 
14      (4)  Concentration of experience within early policy
 
15           duration;
 
16      (5)  Expected claim fluctuation;
 
17      (6)  Experience regarding refunds, adjustments, or
 
18           dividends;
 
19      (7)  Renewability features;
 
20      (8)  All appropriate expense factors;
 
21      (9)  Interest;
 
22     (10)  Experimental nature of the coverage, if applicable;
 
23     (11)  Policy reserves;
 

 
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 1     (12)  Mix of business by risk classification, if applicable;
 
 2     (13)  Use rates and lapse rates; and
 
 3     (14)  Product features, including but not limited to,
 
 4           elimination periods, co-payments, high deductibles, and
 
 5           high maximum limits.
 
 6      (b)  As a condition precedent to issuing a long-term care
 
 7 insurance policy, the commissioner shall require an insurer to
 
 8 submit specific information to the commissioner to allow the
 
 9 commissioner to determine if the insurer is in compliance with
 
10 subsection (a).  If the commissioner finds that the insurer is
 
11 not in compliance, the commissioner may disallow the premiums or
 
12 benefits, or both, whereupon the insurer shall amend its premiums
 
13 or benefits, or both, to the satisfaction of the commissioner."
 
14      SECTION 6.  Section 431:16-205, Hawaii Revised Statutes, is
 
15 amended by amending subsection (g) to read as follows:
 
16       "(g)  Member insurer means any insurer licensed or who
 
17 holds a certificate of authority to transact in this State any
 
18 kind of insurance for which coverage is provided under section
 
19 431:16-203, and includes any insurer whose license or certificate
 
20 of authority in this State may have been suspended, revoked, not
 
21 renewed, or voluntarily withdrawn, but does not include:
 
22           (1)  A nonprofit hospital or medical service
 
23                organization; provided that the organization is
 

 
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 1                not offering long-term care insurance;
 
 2           (2)  A health maintenance organization;
 
 3           (3)  A fraternal benefit society;
 
 4           (4)  A mandatory state pooling plan;
 
 5           (5)  A mutual assessment company or any entity that
 
 6                operates on an assessment basis;
 
 7           (6)  An insurance exchange; or
 
 8           (7)  Any entity similar to any of the above."
 
 9      SECTION 7.  Section 432:1-102, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§432:1-102  Applicability of other laws.(a)  Part III and
 
12 part V of article 10A of chapter 431 shall apply to nonprofit
 
13 medical indemnity or hospital service associations.  Such
 
14 associations shall be exempt from the provisions of part I of
 
15 article 10A; provided that such exemption is in compliance with
 
16 applicable federal statutes and regulations.
 
17      (b)  Article 2 and article 13 of chapter 431, and the powers
 
18 there granted to the commissioner, shall apply to managed care
 
19 plans, health maintenance organizations, or medical indemnity or
 
20 hospital service associations, which are owned or controlled by
 
21 mutual benefit societies, so long as such application in any
 
22 particular case is in compliance with and is not preempted by
 
23 applicable federal statutes and regulations.
 

 
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 1      (c)  Part II of article 16 of chapter 431 shall apply to
 
 2 nonprofit medical indemnity associations, hospital service
 
 3 associations, and mutual benefit societies if the association or
 
 4 society offers long-term care insurance under part V of article
 
 5 10A; provided that this subsection shall apply only to that
 
 6 portion of the association's or society's business in long-term
 
 7 care insurance."
 
 8      SECTION 8.  Act 339, Session Laws of Hawaii 1997, is amended
 
 9 by amending section 4 to read as follows:
 
10      "SECTION 4.  The joint legislative committee shall submit
 
11 [a] an interim report of its findings and recommendations to the
 
12 legislature by December 1, 1998[.], and a final report by
 
13 December 30, 1999.  The joint legislative committee shall cease
 
14 to exist on June 30, [1999.] 2000."
 
15                             PART III
 
16      SECTION 9.  There is appropriated out of the general
 
17 revenues of the State of Hawaii the sum of $         , or so much
 
18 thereof as may be necessary for fiscal year 1999-2000, for the
 
19 insurance division to hire a qualified long-term care insurance
 
20 actuary and to increase its staff to enable it to adequately
 
21 review long-term care insurance filings.
 
22      SECTION 10.  The sum appropriated under section 8 shall be
 
23 expended by the department of commerce and consumer affairs for
 

 
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 1 the purposes of this Part.
 
 2                              PART IV
 
 3      SECTION 11.  The legislature finds that comprehensive
 
 4 information and analysis is needed by the State to determine an
 
 5 appropriate, adequate, and affordable universal long-term care
 
 6 financing program, including but not limited to:
 
 7      (1)  Reliance upon private insurance, creation of a public
 
 8           trust fund, or creation of a quasi-public state entity,
 
 9           or a combination of these; and
 
10      (2)  Funding mechanisms, such as taxes or insurance
 
11           premiums, and the amounts thereof.
 
12      The legislature believes that a comprehensive actuarial
 
13 study and analysis should, include marketing data and mechanisms,
 
14 of the entire population of the State, including private sector
 
15 employees, government employees, all age groups, and the
 
16 disabled, for purposes of making recommendations to structure
 
17 such a program.  The actuarial study and analysis also should
 
18 consider the report of the joint legislative committee on long-
 
19 term care, dated December 1, 1998, and the report "Financing Long
 
20 Term Care, A Report to the Hawaii State Legislature" of the
 
21 Executive Office on Aging dated January 1991, and its related
 
22 actuarial report, in making the actuaries' findings and
 
23 recommendations.
 

 
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 1      The legislature further believes that the governor shall
 
 2 expend $150,000 to commission the actuarial study from funds
 
 3 appropriated to the Hawaii Public Employees Health Fund for
 
 4 fiscal year 1998-1999 (Act 116, Session Laws of Hawaii 1998,
 
 5 BUF 142) and other available funds under the jurisdiction of the
 
 6 insurance division.  If the governor does not expend those funds
 
 7 or does not initiate the actuarial study, the legislature
 
 8 recommends that the actuarial study be commissioned by the joint
 
 9 legislative committee on long-term care.
 
10      SECTION 12.  The actuarial report under section 10 shall be
 
11 submitted not later than November 1, 1999, to the office of the
 
12 governor, the senate, and the house of representatives.  The
 
13 joint legislative committee on long-term care, established by Act
 
14 339, Session Laws of Hawaii 1997, shall conduct hearings on the
 
15 actuarial report in time for a legislative package of proposals
 
16 to be submitted in the 2000 session.
 
17      SECTION 13.  There is appropriated out of the general
 
18 revenues of the State of Hawaii the sum of $300,000, or so much
 
19 there of as may be necessary for fiscal year 1999-2000, to hire
 
20 or contract with a qualified long-term care actuarial firm for
 
21 the purposes of commissioning a comprehensive actuarial study and
 
22 analysis.
 
23      SECTION 14.  The sum appropriated under section 12 shall be
 

 
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 1 expended by the joint legislative committee on long-term care,
 
 2 established by Act 339, Session Laws of Hawaii 1997, if the
 
 3 office of the governor does not expend those funds described
 
 4 under section 10, or so much thereof as necessary, or if the
 
 5 governor does not initiate a comprehensive actuarial study and
 
 6 analysis on long-term care, by June 30, 1999.
 
 7                              PART V
 
 8      SECTION 15.  There is appropriated out of the general
 
 9 revenues of the State of Hawaii the following sums, or so much
 
10 thereof as may be necessary, for fiscal year 1999-2000, for
 
11 expenses related to the joint legislative committee on long-term
 
12 care:
 
13      House of Representatives          $30,000
 
14      Senate                            $30,000
 
15      The sums appropriated shall be expended by the house of
 
16 representatives and the senate respectively, for the purposes of
 
17 conducting statewide public briefings on the findings and
 
18 recommendations of the comprehensive actuarial study undertaken
 
19 pursuant to this Act.
 
20      SECTION 16.  If any provision of this Act, or the
 
21 application thereof to any person or circumstance is held
 
22 invalid, the invalidity does not affect other provisions or
 
23 applications of the Act which can be given effect without the
 

 
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 1 invalid provision or application, and to this end the provisions
 
 2 of this Act are severable.
 
 3      SECTION 17.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5      SECTION 18.  This Act shall take effect upon its approval;
 
 6 provided that sections 9, 13, and 15 shall take effect on
 
 7  July 1, 1999