STAND. COM. REP. NO 584

Honolulu, Hawaii

RE:    S.B. No. 722

       S.D. 2

Honorable Donna Mercado Kim

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2015

State of Hawaii

Madam:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 722, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO LONG-TERM CARE INSURANCE,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Require the thirty-day lapse or termination notices for long-term care policies or certificates to be sent by certified mail or commercial delivery service instead of first-class mail; and

     (2)  Prohibit a long-term care policy or certificate from lapsing or being terminated earlier than sixty days after the date of mailing of the notice.

     Your Committee received testimony in support of this measure from AARP Hawaii and two individuals.  Your Committee received testimony in opposition to this measure from America's Health Insurance Plans and American Council of Life Insurers.

     Your Committee finds that long-term care insurance plays an important role in financing long-term care in Hawaii and individuals may faithfully maintain a long-term care insurance policy for many years before an unintentional lapse in payment occurs.  It is therefore important to have strong consumer protection standards in this area, including the requirement for lapse or termination notices to be sent by certified mail or commercial delivery service as proposed by this measure.

     Your Committee has heard the concerns that this measure proposes to prohibit the lapse or termination of a policy no earlier than sixty days after the date of mailing of the lapse or termination notice.  Your Committee notes that under existing Hawaii law, the earliest date an insurer may terminate a policy is sixty-five days, which is consistent with the requirements under the National Association of Insurance Commissioners' long-term care insurance model.  According to testimony received by your Committee, the language proposed in this measure requires an insured to provide the insured an additional twenty-five days of coverage without premium payment, which would essentially result in a ninety-day grace period of coverage.  Your Committee concludes that amendments to this measure are necessary to keep the lapsing or termination of a policy consistent with the National Association of Insurance Commissioners' requirement of sixty-five days.

     Accordingly, your Committee has amended this measure by:

     (1)  Deleting language that would have prohibited a long-term care policy or certificate from lapsing or being terminated earlier than sixty days after the date of mailing of the notice; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 722, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 722, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

________________________________

ROSALYN H. BAKER, Chair