Report Title:

Long-Term Care



Establishes the Hawaii Long-Term Care Financing Program; Establishes a Board of Trustees who shall administer and establish criteria for the program; Creates the Hawaii Long-Term Care Benefits Fund. (SB2416 HD2)



S.B. NO.



S.D. 2


H.D. 2




RELATING TO the hawaii long-term CARE financing act.



SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:




-1 Definitions. As used in this chapter:

"Acute condition" means that an individual is medically unstable and requires frequent monitoring by medical professionals such as physicians and registered nurses to maintain the individual's health status.

"Adult day care" means a program for six or more individuals, of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly, or other disabled adults who can benefit from care in a group setting outside the home.

"Adult residential care home" means any facility providing twenty-four-hour living accommodations, for a fee, to adults unrelated to the care home operator, who require at least minimal assistance in the activities of daily living, personal care services, protection, and health care services, but who do not need the professional health services provided in an intermediate, skilled nursing, or acute care facility.

"Assisted living facility" means a combination of housing, health care services, and personalized support services designed to respond to individual needs. Services may include nursing assessment, monitoring, and services.

"Beneficiary" means an individual qualified under this chapter to receive reimbursement for long-term care services as determined by the board of trustees of the Hawaii long-term care financing program.

"Board of trustees" means the board of trustees of the Hawaii long-term care financing program.

"Department" means the department of budget and finance.

"Expanded adult residential care home" means any facility providing twenty-four-hour living accommodations, for a fee, to adults unrelated to the care home operator, who require at least minimal assistance in the activities of daily living, personal care services, protection, and health care services, and who may need the professional health services provided in an intermediate or skilled nursing facility.

"Extended care adult residential care home" means an adult residential care home providing twenty-four-hour living accommodation, for a fee, to adults who are unrelated to the care home operator and who have acute care needs. The primary caregiver shall be qualified to provide care to nursing facility level individuals and have been certified for this type of facility.

"Fund" means the Hawaii long-term care benefits fund.

"Home health care services" means medical and nonmedical services provided to ill, disabled, or infirm persons in their residences. These services may include homemaker services, assistance with activities of daily living, and respite care services.

"Hospice home" means any facility operated by a licensed hospice service agency providing twenty-four-hour living accommodations to no more than five unrelated persons who are admitted for hospice service.

"Program" means the Hawaii long-term care financing program.

"Respite care" means services provided in a minimally restrictive environment for short-term care to meet the needs, ranging from simple to complex, of persons with developmental disabilities or mental retardation. The purpose of respite care is to avoid, if possible, the necessity for long-term institutional care or to provide relief to families and care providers.

"Trustee" means a trustee of the board of trustees of the Hawaii long-term care financing program.


-11 Establishment of board. There is established within the department of budget and finance for administrative purposes the board of trustees of the Hawaii long-term care financing program.

-12 Composition of board. The board shall consist of five trustees appointed by the governor; provided that:

(1) The trustees represent as equally as possible the professions of accounting, business, finance, law, insurance management, portfolio management, health care management, long-term care, and other related fields;

(2) At least one member shall have an academic background in geriatrics, nursing, medicine, or other similar health-related profession; and

(3) One member shall represent the public in general, from a field outside of the professions of accounting, business, finance, law, insurance, or health care management.

-13 Term of a trustee; vacancy. The term of office of each trustee shall be four years; provided that a trustee may be reappointed for one additional consecutive four-year term. Each term shall commence on January 1 and expire on December 31. The governor may reduce the terms of those initially appointed so as to provide, as far as practicable, for the expiration of at least one term each year.

A vacancy on the board shall be filled by appointment of the governor; provided that the criteria used for selecting the successor shall be the same criteria used for selecting the person's predecessor. The person appointed to fill a vacancy shall serve for the remainder of the term of the person's predecessor.

If, by the end of a trustee's term, a trustee is not reappointed or the trustee's successor is not appointed, the trustee shall serve until the trustee's successor is appointed.

-14 Chairperson. The trustees shall elect a chairperson from among the members.

-15 Compensation and expenses. Trustees shall serve without compensation but shall be reimbursed for expenses, including per diem and travel expenses, necessary for the performance of their duties.

-16 Voting. Each trustee shall be entitled to one vote on the board of trustees. Three concurring votes shall be necessary for a decision by the trustees at any meeting of the board.


-21 Administration of the program. (a) The board shall administer and carry out the purpose of the program.

(b) The board may require the department of taxation to assess, levy, and collect any income tax that may be imposed under this chapter.

(c) The board shall adopt rules pursuant to chapter 91 necessary for the purposes of this chapter.

-22 Fiduciary and other obligations. (a) The trustees shall:

(1) Discharge their duties solely in the best interests of the program;

(2) Not knowingly participate in or undertake to conceal an act or omission of a trustee, when the act or omission is known to be a breach of fiduciary responsibility; fail to discharge specific fiduciary responsibilities in a manner that enables another trustee to commit a breach; or, having knowledge of a breach, fail to take whatever action that is reasonable and appropriate under the circumstances to remedy the breach; and

(3) Act with the care, skill, prudence, and diligence under the circumstances then prevailing, that a prudent trustee, acting in a like capacity and familiar with similar matters would use in conducting an enterprise of similar character and purpose.

(b) The board may contract with a qualified entity to:

(1) Administer the program, process claims for benefit payments, or both; provided that the entity shall be appropriately licensed under chapter 431; or

(2) Assume the risk of underwriting loss under the program at a capitated rate of payment to the entity; provided that the entity shall be appropriately licensed under chapter 431 and be adequately capitalized; and provided further that the entity contracted shall perform the functions under paragraph (1), in addition to assuming the risk.

Selection of the entity shall be subject to chapter 103D. The board may request the advice of the insurance commissioner in the selection of the entity.

-23 Program financing. The board shall establish a proposed method for financing the program and shall take the necessary measures to prepare to implement the financing mechanism.

-24 Eligibility. (a) The board shall establish eligibility criteria to determine who can qualify as a beneficiary consistent with this chapter to ensure that established residents will benefit from this program.

(b) In addition to the criteria specified by the board, the individual shall have a written certification from a physician licensed under chapter 453 or 460, or an advanced practice registered nurse under section 457-8.5.

-25 Program benefits. (a) The board shall establish a benefits package for each of three levels of care:

(1) Level 1 shall include services that require minimal professional health care including:

(A) Home health care services;

(B) Adult day care services; and

(C) Respite care services.

(2) Level 2 shall include services that may require some professional health care including:

(A) Adult residential care home services;

(B) Expanded adult residential care home services; and

(C) Hospice home services.

(3) Level 3 shall include services for individuals with acute conditions requiring frequent professional health care including:

(A) Assisted living facility care services;

(B) Extended care adult residential care home services; and

(C) Hospital services.

(b) The board shall determine the services that may be covered by the program and how the funds will be disbursed.

(c) The board shall determine and shall establish specific criteria describing how long benefits will be provided to a beneficiary.


-31 Hawaii long-term care benefits fund; establishment. (a) There is established in the state treasury the Hawaii long-term care benefits fund.

(b) The fund shall consist of contributions, interest, income, dividends, refunds, rate credits, legislative appropriations, and other returns. The department shall cause the moneys to be deposited in federally insured financial institutions in Hawaii to preserve the balance and ensure a reasonable return under prevailing interest rates. Investments of the moneys may be made subject to subsection (c).

(c) With the advice of the director of finance to ensure investment soundness, the board shall invest moneys in the fund solely in:

(1) Obligations of any of the following classes:

(A) Obligations issued or guaranteed as to principal and interest by the United States or by any state thereof or by any municipal or political subdivision or school district of any of the foregoing; provided that the principal of and interest on such obligations are payable in currency of the United States, or sovereign debt instruments issued by agencies of, or guaranteed by, foreign governments;

(B) Revenue bonds, whether or not permitted by any other provision hereof, of the State or any political subdivision thereof, including the board of water supply of the city and county of Honolulu, and street or improvement district bonds of any district or project in the State; and

(C) Obligations issued or guaranteed by any federal home loan bank including consolidated federal home loan bank obligations, the Home Owner's Loan Corporation, the Federal National Mortgage Association, or the Small Business Administration;

(2) Obligations eligible by law for purchase in the open market by federal reserve banks;

(3) Securities and futures contracts in which in the informed opinion of the board it is prudent to invest funds of the program, including currency, interest rate, bond, and stock index futures contracts and options on such contracts to hedge against anticipated changes in currencies, interest rates, and bond and stock prices that might otherwise have an adverse effect upon the value of the program's securities portfolios; covered put and call options on securities and stock; whether or not the securities, stock, futures contracts, or options on futures are expressly authorized by or qualify under the foregoing paragraphs, and notwithstanding any limitation of the foregoing paragraphs; and

(4) Any other investments deemed secure on the advice of the state director of finance.

(d) Expenditures from the fund shall be made solely for the purpose of making benefit payments and costs of administering the program.

(e) Notwithstanding any law to the contrary, moneys in the fund shall not be transferred to another fund at any time for any purpose.

(f) The board shall maintain proper books of accounts and records of the administration of the program.

(g) The auditor shall conduct an audit of the fund annually for the first three years from the date the fund first receives deposits, and, at a minimum, every three years thereafter. The auditor shall publish a report of the results of every audit, including any recommendations.

-32 Reports. The board shall submit to the legislature, no later than twenty days prior to each regular session, an annual report for the preceding fiscal year. The annual report shall include but not be limited to information regarding:

(1) Investments detailed by type and amount;

(2) Current balance in the fund;

(3) Projected liabilities for the upcoming fiscal year;

(4) Current reserve requirements to meet the projected liabilities;

(5) Amount of claims paid and moneys received by the fund; and

(6) Information that may be used to determine the fiscal soundness of the fund.

SECTION 2. (a) The board shall provide a detailed proposal of the benefits package and method of financing the program to the legislature no later than December 31, 2002.

(b) The proposal shall be in a form ready to be immediately implemented subject only to adoption by the legislature.

(c) The board shall conduct a public education program to educate residents about the long-term care problem in Hawaii, the importance of long-term care financial preparation, and the proposed recommendation of the board to the 2003 legislature.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $100,000 or so much thereof as may be necessary for fiscal year 2002-2003 for the purpose of implementing the Hawaii long-term care financing program.

The sum appropriated shall be expended by the department of budget and finance for the purposes of this Act.

SECTION 4. This Act shall take effect upon its approval; provided that section 3 shall take effect on July 1, 2002.