Long-Term Care

Requires long-term care insurance policies to meet specified
standards; requires employers to offer LTC policies to employees;
makes appropriation for LTC actuarial study; makes appropriation
to insurance division to hire LTC actuary; extends sunset date
and makes appropriation for JLC. (HB169 HD1)

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 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 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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                                     H.B. NO.           H.D. 1

 1                              PART II
 2      SECTION 2.  Chapter 431, Hawaii Revised Statutes, is amended
 3 by adding ten new sections to part V of Article 10A to be
 4 appropriately 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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                                     H.B. NO.           H.D. 1

 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; employer contributions.  (a)  No later than
12 January 1, 2000, every employer, labor organization, or other
13 entity specified under the definition of "group long-term care
14 insurance", shall offer a group long-term care insurance policy
15 with at least the minimum coverages specified under section
16 431:10A-   (a) that has been approved by the insurance
17 commissioner under section 431:10A-526, to its employees or
18 members, as appropriate; provided that employees or members shall
19 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, or other
22 entity described in subsection (a) shall not be required to
23 contribute to the payment of premiums for a policy purchased

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                                     H.B. NO.           H.D. 1

 1 under subsection (a).  Any agreement shall specify a percentage
 2 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 by a person who
 8 terminates employment or terminates membership in a labor
 9 organization or other entity described in subsection (a) for any
10 reason, including but not limited to retirement, shall be deemed
11 to be portable, with the same coverages, terms, and premiums.
12      (e)  For purposes of subsection (a), if the insurance
13 commissioner has not approved the policy pursuant to section
14 431:10A-526 by January 1, 2000, a policy may be issued; provided
15 that all policies shall be issued with a written explanation that
16 the policy may be subject to modification pending approval of the
17 insurance commissioner.
18      431:10A-     Availability of policies.  All insurers and
19 others offering long-term care insurance that are subject to this
20 part shall make available a group long-term care insurance policy
21 to every employer, labor organization, or other entity specified
22 under the definition of "group long-term care insurance", without
23 regard to the number of employees or members.

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                                     H.B. NO.           H.D. 1

 1      431:10A-     Purchase of policy and payment of premiums on
 2 an individual's behalf.  An individual or group long-term care
 3 insurance policy shall allow a person to purchase a policy and
 4 pay the premiums for an individual or group long-term care
 5 insurance policy that covers the person, the person's spouse or
 6 reciprocal beneficiary, as well as their parents and
 7 grandparents, including in-laws.
 8      431:10A-     Policy lapse for nonpayment of premium.  (a)
 9 An individual or group long-term care insurance policy shall not
10 lapse for a period of not less than sixty days for the nonpayment
11 of premium if the nonpayment is a result of an impairment of the
12 cognitive ability of the insured.
13      (b)  A policy that has lapsed under subsection (a) may be
14 reinstated by payment of premiums in arrears if all premiums in
15 arrears are paid within sixty days following the date of the
16 lapse.
17      (c)  Except as provided in subsection (a), an individual or
18 group long-term care insurance policy shall lapse if payment of a
19 premium is not made within forty-five days, or a greater time set
20 by the policy, from the payment due date.
21      (d)  If a policy has been in effect for not less than ten
22 years before a lapse under this section, the policy shall provide
23 for paid-up benefits in an equitable amount that is calculated
24 actuarially.

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                                     H.B. NO.           H.D. 1

 1      431:10A-     Alzheimer's, brain disorders covered.  An
 2 individual or group long-term care insurance policy shall provide
 3 coverage for long-term care resulting from Alzheimer's disease or
 4 other brain-related disorders.
 5      431:10A-     Inflation protection.  For all individual or
 6 group long-term care insurance policies, each policyholder, at
 7 the time of purchase, shall be offered the option to purchase an
 8 inflation protection feature that provides for automatic
 9 increases in benefit levels to account for reasonable anticipated
10 increases in the cost of long-term care services covered by the
11 policy, and that provides at a minimum:
12      (1)  Annual increases in benefit levels;
13      (2)  A guarantee to the insured individual of the right to
14           periodically increase the benefit levels without
15           providing evidence of insurability or health status; or
16      (3)  Coverage for a specified percentage of actual or
17           reasonable charges.
18      431:10A-     Age-graded premiums.  (a)  Premiums for an
19 individual or group long-term care insurance policy shall be
20 graded by age of the applicant at the time of purchase of the
21 policy.  Premiums shall be fixed over the life of the policy;
22 provided that the commissioner may allow an adjustment in
23 premiums if the commissioner finds that an adjustment is

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                                     H.B. NO.           H.D. 1

 1 necessary for the addition of benefits or solvency of the insurer
 2 in the line of long-term care insurance.
 3      (b)  Reasonable underwriting criteria other than age may be
 4 utilized with the approval of the insurance commissioner;
 5 provided that the criteria shall not result in denying long-term
 6 care insurance or in assessing unreasonable premiums to average
 7 risks as a whole.
 8      431:10A-     Conflict with federal law.  If a conflict
 9 occurs between a provision of article 10A, part V of chapter 431
10 and the Health Insurance Portability and Accountability Act of
11 1996, P.L. 104-191, as amended, the provision shall be deemed
12 amended to comply with that federal law.
13      431:10A-     Participation in guarantee association.
14 Beginning January 1, 2000, all insurers underwriting long-term
15 care insurance shall participate in the Hawaii life and
16 disability insurance guarantee association under article 16, part
17 II, of chapter."
18      SECTION 3.  Section 87-23.5, Hawaii Revised Statutes, is
19 amended by amending subsections (a) and (b) to read as follows:
20      "(a)  The board [of trustees] shall determine the benefits
21 of a long-term care benefits plan for 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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                                     H.B. NO.           H.D. 1

 1 beneficiaries.  The plan shall comply with [the provisions of]
 2 article 10A, part V, of chapter 431[, upon initial plan
 3 implementation only].
 4      (b)  Notwithstanding any other law to the contrary, [such]
 5 the benefits shall be available only to employee-beneficiaries,
 6 their spouses or reciprocal beneficiaries, as well as their
 7 parents and grandparents, including in-laws, and qualified-
 8 beneficiaries who enroll between the ages of twenty and eighty-
 9 five.  Eligible persons must comply with the plan's age,
10 enrollment, medical underwriting, and contribution requirements."
11      SECTION 4.  Section 431-10A-523, Hawaii Revised Statutes, is
12 amended to read as follows:
13      "[[]431:10A-523[]]  Disclosure standards[.]; other rules.
14 The commissioner [may] shall adopt rules under chapter 91 no
15 later than September 1, 1999, that include standards for full and
16 fair disclosure setting forth the manner, content, and required
17 disclosures for the sale of long-term care insurance policies,
18 terms of renewability, initial and subsequent conditions of
19 eligibility, nonduplication of coverage provisions, coverage of
20 dependents, preexisting conditions, termination of insurance,
21 probationary periods, limitations, exceptions, reductions,
22 elimination periods, requirements for replacement, recurrent
23 conditions, and definitions of terms."

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                                     H.B. NO.           H.D. 1

 1      SECTION 5.  Section 431:10A-526, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "[[]431:10A-526[]]  Loss ratio standards[.]; factors;
 4 commissioner approval.  (a)  The commissioner [may] shall adopt
 5 rules no later than September 1, 1999, establishing loss ratio
 6 standards for long-term care insurance policies [provided that a
 7 specific reference to long-term care insurance policies is
 8 contained in the rules].  The loss ratio standards shall provide
 9 for reasonable benefits in relation to premiums.  Benefits shall
10 be deemed reasonable in relation to premiums if the expected loss
11 ratio is at least sixty per cent, calculated in a manner that
12 provides for adequate reserving of the long-term care insurance
13 risk.  In establishing loss ratio standards, the commissioner
14 shall consider all relevant factors, including but not limited
15 to:
16      (1)  Statistical credibility of incurred claims experience
17           and earned premiums;
18      (2)  The period for which rates are computed to provide
19           coverage;
20      (3)  Experienced and projected trends;
21      (4)  Concentration of experience within early policy
22           duration;
23      (5)  Expected claim fluctuation;

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                                     H.B. NO.           H.D. 1

 1      (6)  Experience regarding refunds, adjustments, or
 2           dividends;
 3      (7)  Renewability features;
 4      (8)  All appropriate expense factors;
 5      (9)  Interest;
 6     (10)  Experimental nature of the coverage, if applicable;
 7     (11)  Policy reserves;
 8     (12)  Mix of business by risk classification, if applicable;
 9     (13)  Use rates and lapse rates; and
10     (14)  Product features, including but not limited to
11           elimination periods, copayments, high deductibles, and
12           high maximum limits.
13      (b)  As a condition precedent to issuing a long-term care
14 insurance policy, the commissioner shall require an insurer to
15 submit specific information to the commissioner to allow the
16 commissioner to determine if the insurer is in compliance with
17 subsection (a).  If the commissioner finds that the insurer is
18 not in compliance, the commissioner may disallow the premiums or
19 benefits, or both, whereupon the insurer shall amend its premiums
20 or benefits, or both, to the satisfaction of the commissioner."
21      SECTION 6.  Section 432:1-102, Hawaii Revised Statutes, is
22 amended by amending subsection (a) to read as follows:

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                                     H.B. NO.           H.D. 1

 1      "(a)  Part III and part V of article 10A of chapter 431
 2 shall apply to nonprofit medical indemnity or hospital service
 3 associations.  Such associations shall be exempt from the
 4 provisions of part I of article 10A; provided that such exemption
 5 is in compliance with applicable federal statutes and
 6 regulations."
 7      SECTION 7.  Act 339, Session Laws of Hawaii 1997, is amended
 8 by amending section 4, to read as follows:
 9      "SECTION 4.  The joint legislative committee shall submit
10 [a] an interim report of its findings and recommendations to the
11 legislature by December 1, 1998[.], and a final report by
12 December 30, 1999.  The joint legislative committee shall cease
13 to exist on June 30, [1999.] 2000."
14      SECTION 8.  There is appropriated out of the general
15 revenues of the State of Hawaii the following sums or so much
16 thereof as may be necessary for fiscal year 1999-2000 for
17 expenses related to the joint legislative committee on long-term
18 care including conducting statewide public briefings on the
19 findings and recommendations of the comprehensive actuarial study
20 undertaken pursuant to this Act as follows:
21      House of representatives          $30,000
22      Senate                            $30,000

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                                     H.B. NO.           H.D. 1

 1      The sums appropriated shall be expended by the house of
 2 representatives and the senate respectively, for the purposes of
 3 this Act.
 4                             PART III
 5      SECTION 9.  There is appropriated out of the general
 6 revenues of the State of Hawaii the sum of $          or so much
 7 thereof as may be necessary for fiscal year 1999-2000 for the
 8 insurance division to hire a qualified long-term care insurance
 9 actuary and to increase its staff to enable it to adequately
10 review long-term care insurance filings.
11      The sum appropriated shall be expended by the department of
12 commerce and consumer affairs for the purposes of this part.
13                              PART IV
14      SECTION 10.  The legislature finds that comprehensive
15 information and analysis is needed by the State to determine an
16 appropriate, adequate, and affordable universal long-term care
17 financing program, including but not limited to:
18      (1)  Reliance upon private insurance, creation of a public
19           trust fund, or creation of a quasi-public state entity,
20           or a combination of these; and
21      (2)  Funding mechanisms, such as tax or insurance premiums,
22           and the amounts thereof.

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                                     H.B. NO.           H.D. 1

 1      The legislature believes that a comprehensive actuarial
 2 study and analysis should include marketing data and mechanisms
 3 of the entire population of the State, including private sector
 4 employees, government employees, all age groups, and the
 5 disabled, for purposes of making recommendations to structure
 6 such a program.  The actuarial study and analysis should also
 7 consider the report of the joint legislative committee on long-
 8 term care, dated December 1, 1998, and the report "Financing Long
 9 Term Care, A Report to the Hawaii State Legislature" of the
10 executive office on aging dated January 1991, and its related
11 actuarial report, in making the actuaries' findings and
12 recommendations.
13      The legislature further believes that the governor shall
14 expend $150,000 to commission the actuarial study from funds
15 appropriated to the Hawaii public employees health fund for
16 fiscal year 1998-1999 (Act 116, Session Laws of Hawaii 1998,
17 BUF 142) and other available funds under the jurisdiction of the
18 insurance division.  If the governor does not expend those funds
19 or does not initiate the actuarial study, the legislature
20 recommends that the actuarial study be commissioned by the joint
21 legislative committee on long-term care.
22      SECTION 11.  The actuarial report under section 10 shall be
23 submitted not later than November 1, 1999, to the office of the

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                                     H.B. NO.           H.D. 1

 1 governor, the senate, and the house of representatives.  The
 2 joint legislative committee on long-term care, established by Act
 3 339, Session Laws of Hawaii 1997, shall conduct hearings on the
 4 actuarial report in time for a legislative package of proposals
 5 to be submitted in the 2000 session.
 6      SECTION 12.  There is appropriated out of the general
 7 revenues of the State of Hawaii the sum of $300,000 or so much
 8 there of as may be necessary for fiscal year 1999-2000 to hire or
 9 contract with a qualified long-term care actuarial firm for the
10 purposes of commissioning a comprehensive actuarial study and
11 analysis.
12      The sum appropriated shall be expended by the joint
13 legislative committee on long-term care, established by Act 339,
14 Session Laws of Hawaii 1997, if the office of the governor does
15 not expend those funds described under section 9, or so much
16 thereof as necessary, or otherwise does not initiate a
17 comprehensive actuarial study and analysis on long-term care, by
18 June 30, 1999.
19                              PART V
20      SECTION 13.  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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                                     H.B. NO.           H.D. 1

 1 invalid provision or application, and to this end the provisions
 2 of this Act are severable.
 3      SECTION 14.  Statutory material to be repealed is bracketed.
 4 New statutory material is underscored.
 5      SECTION 15.  This Act shall take effect upon its approval;
 6 provided that:
 7      (1)  Sections 8, 9, and 12 shall take effect on July 1,
 8           1999; and
 9      (2)  Section 7 shall take effect on June 29, 1999.