Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 131
                                        S.D. 2

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Ways and Means, to which was referred S.B.
No. 131, S.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to establish minimum
standards for long-term care (LTC) insurance.  Specifically, this

     (1)  Requires employers to offer LTC insurance policies to
          their employees;

     (2)  Appropriates funds for an actuarial study; and

     (3)  Appropriates funds for the insurance division to hire
          an LTC actuary.

     Your Committee received testimony in support of this measure
from the Executive Office on Aging, Hawaii State Commission on
the Status of Women, Hawaii State Association of Life
Underwriters, Faith Action for Community Equity, Healthcare
Association of Hawaii, American Family Life Assurance Company of
Columbus, Hawaii Coalition for Affordable Long Term Care, and
American Council of Life Insurance.  Informational testimony was
provided by the Hawaiian Electric Company.

     This measure is based on the recommendations of the Joint
Legislative Committee on Long-Term Care (JLC), established by

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Act 339, Session Laws of Hawaii 1997.  The JLC undertook an
eighteen month study to develop a sound financial plan to address
a problem of compelling state interest, the current and future
LTC needs of the people of Hawaii.  The JLC members are Senator
Suzanne Chun Oakland and Representative Dennis Arakaki, co-
chairs, and members Senators Les Ihara, Jr., (replacing Senator
Rosalyn Baker), Andrew Levin, and Sam Slom, and Representatives
Marcus Oshiro, Paul Whalen, and Nobu Yonamine.

     Your Committee finds that Hawaii's population of age seventy
and over is the fastest growing segment of the overall
population.  The population of disabled residents is also
increasing gradually.  As people age or become disabled, they
need help in daily living, which can be little or nonexistent
except for care from family members.  Caring for a family member
can be physically, financially, and emotionally draining for the
average two-spouse working family or single working parent,
particularly with Hawaii's high cost of living. 

     Current methods of financing LTC involve predominantly
Medicaid, private insurance, and personal assets.  Medicaid is
limited to financially qualified persons of low income, however
Medicaid matching funds from the federal government cannot be
relied upon in the future, due to the recent cutbacks in federal
funding for Medicaid.  Medicaid funding from the State is a drain
upon the general fund, due largely to the increase in the target
population and the escalating costs of providing LTC.  Because of
high premiums, private insurance is not widespread.  Most people
do not have sufficient personal assets to afford to pay for LTC.

     Your Committee is convinced that the State needs a method of
financing LTC that is affordable and suitable for the majority of
residents who do not qualify for Medicaid, do not currently have
private LTC insurance, and do not have sufficient personal
assets.  Encouraging the purchase of LTC insurance is a feasible
and reasonable method that can be immediately implemented,
without risk to the State as in setting up a trust fund and
without the burden of a mandatory tax.  Your Committee believes
that LTC insurance can become universal and affordable, while
providing quality benefits at the time of payout and protecting
the policyholder throughout the life of the policy.

     Hawaii's LTC insurance statutes were first enacted in 1989
and have not undergone any revision since 1991.  During this
time, LTC insurance policies have developed and proliferated to
the point today of becoming a matured insurance product that can
be actuarially evaluated.  However, Hawaii's LTC insurance
statutes have not kept pace with the product or with the
development of LTC insurance law in other states.   Current LTC

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insurance statutes in Hawaii are basically enabling legislation
that need to be updated in order to upgrade the quality of the
LTC insurance product to provide the kind and quality of benefits
and protections which your Committee desires.

     The insurance provisions of this measure are recommended by
Dr. Larry Nitz, consultant to the JLC.  He contracted for comment
and analysis with a certified mainland actuary, John C. Wilkin of
Actuarial Research Corporation.  Wilkin is a consultant to the
Assistant Secretary for Policy and Planning, United States
Department of Health and Human Services, and for the LTC plan of
the Federal Office of Personnel Management for LTC insurance
policies for federal employees.  He has also been instrumental in
setting national LTC actuarial standards for the Society of

     To increase the number of people covered by an LTC insurance
policy, this measure requires that employers and other groups
offer to their employees or members an LTC insurance policy for
optional purchase, without requiring the employer to pay any
premiums unless the employer agrees to it as an employee benefit.
To encourage the purchase of LTC insurance policies, premiums are
made more affordable in separate measures that provide for an
income tax deduction or an income tax credit for premiums paid. 

     Your Committee is concerned that there are many LTC policies
on the market that were sold under current law and may not afford
as much protection or benefits as they could.

     Your Committee has amended this measure on the
recommendation of the Insurance Commissioner by:

     (1)  Inserting the Long-Term Care Insurance Model Act of
          1998 and related regulations; and

     (2)  Repealing part V of article 10A of chapter 431, Hawaii
          Revised Statutes, relating to long-term care insurance,
          and enacting a new chapter for long-term care

Your Committee has also:

     (1)  Clarified the provision for minimum coverages to
          conform to the federal Health Insurance Portability and
          Accountability Act (HIPAA), and deleted the related
          provision that provides for conformity to federal tax

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     (2)  Deleted the provisions and inserted corresponding
          provisions in the Model Act relating to portability,
          lapse, Alzheimer's and brain disorders, and inflation

     (3)  Deleted the appropriations for an actuarial study and
          for expenses of the JLC; 

     (4)  Deleted the provision that extended the sunset date of
          the JLC; and

     (5)  Made technical, nonsubstantive amendments for purposes
          of clarity and to reflect preferred drafting style.
     As amended, this measure:

     (1)  Establishes minimum required coverages in group and
          individual LTC insurance policies in conformity to
          HIPAA, for home- and community-based care, adult
          residential homes, respite care, nursing home care,
          hospice care, and assisted living facilities; 

     (2)  Requires employers, labor organizations, retiree
          organizations and other entities to offer LTC insurance
          policies to their employees or members, without
          requiring them to purchase and without requiring the
          employer, labor organization, retiree organization, or
          other entity to pay for premiums, unless they so

     (3)  Requires all LTC insurers to make available an LTC
          policy to employers, labor organizations, retiree
          organizations, and other entities;

     (4)  Allows a person to purchase an LTC insurance policy
          that covers the person, the person's spouse or
          reciprocal beneficiary, as well as their parents and
          grandparents, including in-laws;

     (5)  Requires age-graded premiums to be fixed over the life
          of the policy unless changes are allowed by the
          Insurance Commissioner;

     (6)  Provides that the HIPAA controls in cases of conflict
          between subpart B and HIPAA;

     (7)  Uses interchangeably the terms "group long-term care
          insurance" and "individual long-term care insurance";

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     (8)  Allows a member of the Public Health Fund to purchase
          an LTC insurance policy that covers the person, the
          person's spouse or reciprocal beneficiary, as well as
          their parents and grandparents, including in-laws;

     (9)  Requires specified loss ratio standards for evaluating
          LTC policies;

    (10)  Requires mutual benefit societies to belong to the Life
          and Disability Guaranty Association for that part of
          their business in selling LTC insurance;

    (11)  Requires HIPAA consumer protection provisions relating
          to renewability, portability, permissible exclusions,
          unintentional lapse and reinstatement, disclosure
          standards, inflation protection;

    (12)  Requires non-HIPAA consumer protection provisions
          relating to disclosure of tax consequences, benefit
          triggers, prohibiting preexisting condition
          requirements in replacement policies, nonforfeiture
          (paid-up) benefit option;

    (13)  Establishes HIPAA LTC insurer performance standards
          relating to application for LTC insurance, replacement
          LTC policies, reporting to the Insurance Commissioner,
          standards for marketing procedures, providing outline
          of coverages to the insured;

    (14)  Appropriates funds for the Insurance Commissioner to
          hire a qualified LTC actuary to provide services to the
          Insurance Division; and

    (15)  Adds a severability clause.

     Your Committee requests that the Department of Commerce and
Consumer Affairs collaborate with specialty insurance
stakeholders to further the discussion on the issue of providing
universal access to long-term care insurance.

     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of S.B.
No. 131, S.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as S.B. No. 131,
S.D. 2.

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                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,

                                 CAROL FUKUNAGA, Co-Chair

                                 ANDREW LEVIN, Co-Chair

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