REPORT TITLE:
Long-Term Care


DESCRIPTION:
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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           131
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 issued after October 14, 1998, shall
 
 7 provide coverage, at a minimum, for:
 
 8      (1)  Home- and community-based care;
 
 9      (2)  Adult residential care homes; and
 
10      (3)  Respite care.
 
11 A group long-term care insurance policy may offer optional
 
12 coverages, including but not limited to, nursing home care,
 
13 hospice care, and assisted living facility care.
 
14      (b)  An individual long-term care insurance policy issued
 
15 after October 14, 1998, shall provide coverage for any one or
 
16 more of the following care:
 
17      (1)  Home- and community-based care;
 
18      (2)  Adult residential care homes;
 
19      (3)  Nursing home care;
 
20      (4)  Hospice care; or
 
21      (5)  Assisted living facilities.
 
22      (c)  The commissioner may adopt rules to define the terms,
 
23 specify the services, and limit the duration of services under
 
24 subsection (a) or (b).
 

 
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 1      (d)  An individual or group long-term care insurance policy
 
 2 may be issued after October 14, 1998, and before the effective
 
 3 date of the rules under subsection (c); provided that the
 
 4 coverages shall be amended in accordance with the rules, if
 
 5 necessary.  All policies shall be issued with a written
 
 6 explanation that the coverage may be subject to modification
 
 7 pending the adoption of rules.
 
 8      (e)  This section shall be liberally construed to allow an
 
 9 insurer to provide coverages that satisfy the needs of persons in
 
10 this State for long-term care.
 
11      431:10A-     Employers and others to offer long-term care
 
12 insurance policies; employer contributions.  (a)  No later than
 
13 January 1, 2000, every employer, labor organization, or other
 
14 entity specified under the definition of "group long-term care
 
15 insurance", shall offer a choice of two or more group long-term
 
16 care insurance policies issued by separate insurers with at least
 
17 the minimum coverages specified under section 431:10A-   (a) that
 
18 has been approved by the insurance commissioner under section
 
19 431:10A-526, to its employees or members, as appropriate;
 
20 provided that employees or members shall not be required to
 
21 purchase a policy.
 
22      (b)  For purposes of subsection (a), all insurers that are
 
23 subject to this part shall make available a group long-term care
 

 
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 1 insurance policy to every employer, labor organization, or other
 
 2 entity specified under the definition of "group long-term care
 
 3 insurance", without regard to the number of employees or members.
 
 4      (c)  In the absence of an agreement between an employer and
 
 5 an employee or member, an employer, labor organization, or other
 
 6 entity described in subsection (a) shall not be required to
 
 7 contribute to the payment of premiums for a policy purchased
 
 8 under subsection (a).  Any agreement shall specify a percentage
 
 9 of the premium to be contributed.
 
10      (d)  If an employee purchases a policy under subsection (a),
 
11 the employer shall not be required to withhold the employee's
 
12 premium from wages, unless the employer agrees to contribute to
 
13 paying the premiums under subsection (c).
 
14      (e)  A person who purchases a policy under this section and
 
15 who terminates employment or terminates membership in a labor
 
16 organization or other entity described in subsection (a) for any
 
17 reason, including but not limited to retirement, may:
 
18      (1)  Convert the policy to an individual long-term care
 
19           insurance policy from the same carrier; or
 
20      (2)  Continue coverages with another employer having a group
 
21           long-term care insurance policy; provided that if the
 
22           policy is from a different carrier, there shall be a
 
23           transfer of reserves that is calculated actuarially.
 

 
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 1      (f)  For purposes of subsection (a), if the insurance
 
 2 commissioner has not approved the policy pursuant to section
 
 3 431:10A-526 by January 1, 2000, a policy may be issued; provided
 
 4 that all policies shall be issued with a written explanation that
 
 5 the policy may be subject to modification pending approval of the
 
 6 insurance commissioner.
 
 7      431:10A-     Purchase of policy and payment of premiums on
 
 8 an individual's behalf.  An individual or group long-term care
 
 9 insurance policy issued after October 14, 1998, shall allow a
 
10 person to purchase a policy and pay the premiums for an
 
11 individual or group long-term care insurance policy that covers
 
12 the person, the person's spouse or reciprocal beneficiary, as
 
13 well as their parents and grandparents, including in-laws.
 
14      431:10A-     Policy lapse for nonpayment of premium.  (a)
 
15 An individual or group long-term care insurance policy issued
 
16 after October 14, 1998, shall not lapse for a period of not less
 
17 than sixty days for the nonpayment of premium if the nonpayment
 
18 is a result of an impairment of the cognitive ability of the
 
19 insured.
 
20      (b)  A policy that has lapsed under subsection (a) may be
 
21 reinstated by payment of premiums in arrears if all premiums in
 
22 arrears are paid within sixty days following the date of the
 
23 lapse.
 

 
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 1      (c)  Except as provided in subsection (a), an individual or
 
 2 group long-term care insurance policy issued after October 14,
 
 3 1998, shall lapse if payment of a premium is not made within
 
 4 forty-five days, or a greater time set by the policy, from the
 
 5 payment due date.
 
 6      (d)  If a policy has been in effect for not less than ten
 
 7 years before a lapse under this section, the policy shall provide
 
 8 for paid-up benefits in an equitable amount that is calculated
 
 9 actuarially.
 
10      431:10A-     Alzheimer's, brain diseases covered.  An
 
11 individual or group long-term care insurance policy issued after
 
12 October 14, 1998, shall provide coverage for long-term care
 
13 resulting from Alzheimer's disease or other brain-related
 
14 disease.
 
15      431:10A-     Inflation protection.  For all individual or
 
16 group long-term care insurance policies issued after October 14,
 
17 1998, each policyholder, at the time of purchase, shall be
 
18 offered the option to purchase an inflation protection feature
 
19 that provides for automatic increases in benefit levels to
 
20 account for reasonable anticipated increases in the cost of long-
 
21 term care services covered by the policy, and that provides at a
 
22 minimum:
 
23      (1)  Annual increases in benefit levels;
 

 
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 1      (2)  A guarantee to the insured individual of the right to
 
 2           periodically increase the benefit levels without
 
 3           providing evidence of insurability or health status; or
 
 4      (3)  Coverage for a specified percentage of actual or
 
 5           reasonable charges.
 
 6      431:10A-     Age-graded premiums.  (a)  Premiums for an
 
 7 individual or group long-term care insurance policy issued after
 
 8 October 14, 1998, shall be graded by age of the applicant at the
 
 9 time of purchase of the policy.  Premiums shall be fixed over the
 
10 life of the policy; provided that the commissioner may allow an
 
11 adjustment in premiums if the commissioner finds that an
 
12 adjustment is necessary for the addition of benefits or solvency
 
13 of the insurer in the line of long-term care insurance; provided
 
14 further that no adjustment shall be made to any age group sixty-
 
15 five or older.
 
16      (b)  Reasonable underwriting criteria other than age may be
 
17 utilized with the approval of the insurance commissioner;
 
18 provided that the criteria shall not result in denying long-term
 
19 care insurance or in assessing unreasonable premiums to average
 
20 risks as a whole.
 
21      431:10A-     Conflict with federal law.  If a conflict
 
22 occurs between a provision of part V of chapter 431:10A and the
 
23 Health Insurance Portability and Accountability Act of 1996, P.L.
 

 
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 1 104-191, as amended, the provision shall be deemed amended to
 
 2 comply with that federal law.
 
 3      431:10A-     Participation in guarantee association.
 
 4 Beginning January 1, 2000, all insurers underwriting long-term
 
 5 care insurance shall participate in the Hawaii life and
 
 6 disability insurance guarantee association under part II of
 
 7 chapter 431:16."
 
 8      SECTION 3.  Section 87-23.5, Hawaii Revised Statutes, is
 
 9 amended by amending subsections (a) and (b) to read as follows:
 
10      "(a)  The board [of trustees] shall determine the benefits
 
11 of a long-term care benefits plan for employee-beneficiaries,
 
12 their spouses or reciprocal beneficiaries, as well as their
 
13 parents and grandparents, including in-laws, and qualified-
 
14 beneficiaries.  The plan shall comply with [the provisions of
 
15 article 10A, part V, of chapter 431, upon initial plan
 
16 implementation only.] part V of chapter 431:10A.
 
17      (b)  Notwithstanding any other law to the contrary, [such]
 
18 the benefits shall be available only to employee-beneficiaries,
 
19 their spouses or reciprocal beneficiaries, as well as their
 
20 parents and grandparents, including in-laws, and qualified-
 
21 beneficiaries who enroll between the ages of twenty and eighty-
 
22 five.  Eligible persons must comply with the plan's age,
 
23 enrollment, medical underwriting, and contribution requirements."
 

 
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 1      SECTION 4.  Section 431-10A-523, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "[[]431:10A-523[]]  Disclosure standards[.]; other rules.
 
 4 The commissioner [may] shall adopt rules under chapter 91 no
 
 5 later than September 1, 1999, that include standards for full and
 
 6 fair disclosure setting forth the manner, content, and required
 
 7 disclosures for the sale of long-term care insurance policies,
 
 8 terms of renewability, initial and subsequent conditions of
 
 9 eligibility, nonduplication of coverage provisions, coverage of
 
10 dependents, preexisting conditions, termination of insurance,
 
11 probationary periods, limitations, exceptions, reductions,
 
12 elimination periods, requirements for replacement, recurrent
 
13 conditions, and definitions of terms."
 
14      SECTION 5.  Section 431:10A-526, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "[[]431:10A-526[]]  Loss ratio standards[.]; factors;
 
17 commissioner approval.  (a)  The commissioner [may] shall adopt
 
18 rules no later than September 1, 1999, establishing loss ratio
 
19 standards for long-term care insurance policies [provided that a
 
20 specific reference to long-term care insurance policies is
 
21 contained in the rules].  For all policies issued after October
 
22 14, 1998, the loss ratio standards shall provide for reasonable
 
23 benefits in relation to premiums.  Benefits shall be deemed
 

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

 
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 1           elimination periods, co-payments, high deductibles, and
 
 2           high maximum limits.
 
 3      (b)  As a condition precedent to issuing a long-term care
 
 4 insurance policy after October 14, 1998, the commissioner shall
 
 5 require an insurer to submit specific information to the
 
 6 commissioner to allow the commissioner to determine if the
 
 7 insurer is in compliance with subsection (a).  If the
 
 8 commissioner finds that the insurer is not in compliance, the
 
 9 commissioner may disallow the premiums or benefits, or both,
 
10 whereupon the insurer shall amend its premiums or benefits, or
 
11 both, to the satisfaction of the commissioner."
 
12      SECTION 6.  Section 432:1-102, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  Part III and part V of article 10A of chapter 431
 
15 shall apply to nonprofit medical indemnity or hospital service
 
16 associations.  Such associations shall be exempt from the
 
17 provisions of part I of article 10A; provided that such exemption
 
18 is in compliance with applicable federal statutes and
 
19 regulations."
 
20      SECTION 7.  Act 339, Session Laws of Hawaii 1997, is amended
 
21 by amending section 4, is amended to read as follows:
 
22      "SECTION 4.  The joint legislative committee shall submit
 
23 [a] an interim report of its findings and recommendations to the
 

 
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 1 legislature by December 1, 1998[.], and a final report by
 
 2 December 30, 1999.  The joint legislative committee shall cease
 
 3 to exist on June 30, [1999.] 2000."
 
 4                             PART III.
 
 5      SECTION 8.  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      SECTION 9.  The sum appropriated under section 8 shall be
 
12 expended by the department of commerce and consumer affairs for
 
13 the purposes of this Part.
 
14                             PART IV.
 
15      SECTION 10.  The legislature finds that comprehensive
 
16 information and analysis is needed by the State to determine an
 
17 appropriate, adequate, and affordable universal long-term care
 
18 financing program, including but not limited to:
 
19      (1)  Reliance upon private insurance, creation of a public
 
20           trust fund, or creation of a quasi-public state entity,
 
21           or a combination of these; and
 
22      (2)  Funding mechanisms, such as tax or insurance premiums,
 
23           and the amounts thereof.
 

 
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 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 also should
 
 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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 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
 
 9 or contract with a qualified long-term care actuarial firm for
 
10 the purposes of commissioning a comprehensive actuarial study and
 
11 analysis.
 
12      SECTION 13.  The sum appropriated under section 12 shall be
 
13 expended by the joint legislative committee on long-term care,
 
14 established by Act 339, Session Laws of Hawaii 1997, if the
 
15 office of the governor does not expend those funds described
 
16 under section 10, or so much thereof as necessary, or otherwise
 
17 does not initiate a comprehensive actuarial study and analysis on
 
18 long-term care, by June 30, 1999.
 
19                              PART V.
 
20      SECTION 14.  There is appropriated out of the general
 
21 revenues of the State of Hawaii the following sums, or so much
 
22 thereof as may be necessary, for fiscal year 1999-2000, for
 
23 expenses related to the joint legislative committee on long-term
 
24 care:
 

 
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 1      House of Representatives          $30,000
 
 2      Senate                            $30,000
 
 3      The sums appropriated shall be expended by the house of
 
 4 representatives and the senate respectively, for the purposes of
 
 5 conducting statewide public briefings on the findings and
 
 6 recommendations of the comprehensive actuarial study undertaken
 
 7 pursuant to this Act.
 
 8      SECTION 15.  Statutory material to be repealed is bracketed.
 
 9 New statutory material is underscored.
 
10      SECTION 16.  This Act shall take effect upon its approval;
 
11 provided that sections 8, 12, and 14 shall take effect on July 1,
 
12 1999.
 
13 
 
14                           INTRODUCED BY:  _______________________
 
15 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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