PROPOSED LEGISLATION AS OF APRIL 5, 2018:
SB 1248 (Gaines and Glazer) implements a recommendation by a group of stakeholders to reform the Partnership for Long-Term Care Program (“Partnership”) housed at the Department of Health Care Services (DHCS). Specifically, the bill would establish a new minimum floor for benefit levels provided through long-term care insurance (LTCI) policies certified by the Partnership.
The Mechanics of Long-Term Care Insurance
As a newer form of insurance, LTCI borrows characteristics of its predecessors. Like life insurance, the policy is intended to be in place for the rest of the insured’s life with level premiums. Premium rates cannot be raised based on a change in circumstance or health or claims history; however they may be raised for members of the same class who purchased similar policies from that insurer.
Like health insurance, LTCI usually only pays certain covered services (although some policies pay cash a benefit, those are very rare and expensive).
Those services may be provided at home, a residential care facility or a nursing home. Services provided at home include home health care, adult day care, personal care, homemaker services, hospice services and respite services. Care provided in a residential care facility or nursing home includes room and board and other expenses.
Unlike health insurance, benefits are not paid according to the service but to the value of all covered services for the life of the policy and in much shorter increments, usually a daily or monthly benefit based on the type of care. For example, an insured may have a lifetime policy of $100,000, but that only pays $100 a day for home care benefits and $200 a day for nursing home stays. (The nursing home stay would spend the policy down twice as fast.)
Moreover, policies typically have an “elimination” or “deductible” period, a period where the insured meets the eligibility criteria but must pay out-of-pocket and thereby delay use of the policy. Typical elimination periods include 30, 60, 90, and 100 days.
Selecting lower benefits and longer elimination periods lowers the cost of the policy, but it also leaves more of the burden on the insured or others to pay or provide for care. So, using the $100 a day example, if needed services actually cost $175 dollars a day the insured would have to pay the $75 out-of-pocket or through some other means.
In the early 1990s, California created the Partnership to provide affordable LTCI coverage to middle-income consumers—it may be the only state program designed to help these consumers secure long-term care financing. The program is often considered a cooperative effort between DHCS, private insurers, other state agencies, and the federal government.
The program certifies special LTCI policies that offer private front-end coverage but are designed to transition insureds to Medi-Cal, without forcing impoverishment, when policy benefits are exhausted. For every dollar of benefit received, a dollar is disregarded for the purposes of determining Medi-Cal eligibility and any recovery the state may have against the beneficiary’s estate.
Simply put, an insured would be able to enroll in Medi-Cal and keep some assets that would normally have been “spent down.” The Partnership has other unique characteristics as well.
Aside from the asset protection feature, regulations governing Partnership eligibility require more consumer-friendly features than those offered in standard LTCI.
- Minimum lifetime and per diem benefit levels designed to cover at least 70% of the costs to stay in a nursing home for one year. (22 CCR 58059.)
- Minimum inflation protection that increases benefit levels every year on a compounded basis. (22 CCR 58059.) Until 2017, insurers were required to include an inflation escalatory that increased benefits by 5% every year.
- Independent care management and care coordination services that help the consumer identify which services are needed and how best to access then, including those not covered under the policy, such as Meals on Wheels. The Partnership requires that these services be offered by a provider independent of the carrier. (22 CCR 58059.)
These standards exceed those applicable to non-Partnership and some have a tendency to drive up the costs. Since the Partnership standards were first adopted in 1993, when LTCI still severely underpriced, prices have increased dramatically and become far more sensitive to rich benefits. Partnership policies have grown unaffordable to the program’s target market, i.e. middle-income consumers with some assets at risk if they have to impoverish themselves to enroll in Med-Cal.
Sales have dropped to single digits for the last five reported quarters (up to the 2nd quarter of 2017) and only two carriers are actively offering Partnership policies (Genworth and CalPERS). This presents an additional challenge of attracting insurers back to the program and reinvigorating distribution channels.
Additionally, designing new products and obtaining approval for any LTCI product can be expensive and take several years. Whatever reforms are adopted may take time to bear fruit, so stakeholders are focusing on those reforms that can be implemented quickly.
Some stakeholders suggest that the programs higher standards are driving up the costs and urgently recommend addressing affordability. For many years, the regulations required a 5% compound inflation escalator, a feature that automatically increases the benefit limits but also doubles the cost compared to a 3% inflation escalator.
SB 1384 (Liu, 2016) required insurers to offer a lower-cost option (compared to a 5%) and also created a task force to reform the program. That task force is now looking at mandatory benefit levels. SB 1248 arises out of these discussions and addresses mandatory benefit levels.
DHCS regulations require all Partnership policies to meet certain levels of coverage in relation to the “Average Daily Private Pay Rate” (“ADPPR”) for nursing home care. That rate is calculated using data provided by the Office of Statewide Health Planning and Development (OSHPD) but is two years behind.
DCHS estimates the ADPPR by extrapolating current trends and the minimum standards based on that estimate. While the regulations require the use of the statewide average, local nursing home costs can vary dramatically, from $440 per day in Siskiyou County to $206 in Imperial County.
SB 1248 would require that the insurer offer a policy with the level of care established by the current regulations, but authorizes the insurer to offer more affordable options so long as it meets a minimum floor. Any policy would also remain subject to the minimum benefit levels currently established in statute.
LTCI policies cover services up to a maximum cost as broken down by per day or month, per year, and lifetime according to the type of care (home, residential care, or nursing home care).
There is no minimum lifetime benefit established for non-Partnership policies although Insurance Code Section 10232.92 requires that the benefit amount for residential care be no less than 70% of nursing home care and Insurance Code Section 10232.9(d) requires policies to provide a maximum home care benefit that is at least 50% of the nursing home benefit with a minimum of $50.
By imposing a minimum nursing home floor of 70% of the ADPR multiplied by 365, the regulations indirectly establish floors for the other services as well. requires comprehensive policies to provide nursing home benefit per diem benefit of at least and a lifetime benefit to cover at least one year at that level.
Consequently, Partnership policies sold in 2018 must provide a minimum per diem benefit of $220 per day for nursing home care, $154 for residential care facility care, $110 per day for home care, and a lifetime maximum benefit of at least $80,300. The chart below illustrates how these numbers come together.
California Partnership under SB 1248
|Home||Residential Care Facility (RCF)||Nursing Home (NH)|
|Statute||50% of NH |
Ins. Code § 10232.9(d)
At least $50
Ins. Code § 10232.9(d)
|70% of NH|
Ins. Code § 10232.92
|Partnership||Life time = 70% of ADP * 365
|Per Diem (Monthly) Benefit||$110|
|70% of ADP
 The Partnership program prepares a chart of available
facilities and costs at http://rureadyca.org/california_counties
for agents and brokers to use when advising clients on benefit levels.
 22 CCR Section 58059(i).
 Partnership regulations also require that periodic benefit limits
be capped according to month which is the per diem benefit multiplied by 30.
The regulations were established when home care was relatively new. Now, overwhelmingly, home care is preferred and feasible for more conditions as medical and assistive technology has improved.
Because the regulation emphasizes nursing home care, it may force a consumer to purchase higher coverage for that service when higher coverage for home care may be appropriate. For example, families who will insist on caring for a relative at home rather than using institutional care.
Also, because the regulation establishes a statewide-standard based on an average, some consumers may be forced to over-insure. The regulation requires them to purchase full coverage given the lower cost of nursing home care in that county; for example, Tehama and Imperial Counties have ADPPRs less than the $220 minimum.
That means those residents must purchase a Partnership policy that covers the full cost of nursing home care for a year. On the other hand, the minimum only covers 50% of the care in Siskiyou County or 60% in Santa Clara. Generally speaking, these decisions are best made according to the individual circumstances of the consumer.
SB 1248 would require participating insurers to offer the policy currently defined in regulation (the $80,300 policy), but allow the insurer to offer lower benefit levels on certain conditions.
The lower-cost option must provide at least $100 a day for any type of benefit (whether nursing home, residential care facility care, or home care) and must provide a lifetime benefit of at $73,000 ($100 a day for two years).
Theoretically, this proposal could cut the premium for some policies by 50% allowing some insurers to offer policies that run as low as $100 a day (but only in highly favorable circumstances).
|Type of Policy|
Age 57 Male
Age 57 Female
Under existing law, DHCS has complete authority to adopt this proposal as a regulation, repeal the existing regulation, or establish a new standard by regulation.
The primary purpose of enacting this through legislation would only be to relieve DHCS of the rulemaking process and expediting the change. DHCS, however, would be barred from establishing minimums above the one put in place by statute (they couldn’t, for example, require all Partnership policies to cover 80% of the ADP). Amendments might be necessary to allow DHCS to adjust the new minimum floor via regulation adopted after the bill goes into effect.
Also, one consumer advocate conditioned her support for this proposal on the assumption that the consumer will be well-informed about the potential impact of the lower benefit amounts and how it would apply to actual claim scenarios.
In fact, this is a recurring theme during task force discussions—how should consumers be informed, and agents and advisors explain, the products and features. This issue might need to be addressed in this legislation or further task forces efforts to establish Partner-specific suitability and consumer best interest standards and disclosures.
SB 255 (Mendoza, 2017) is a “clean-up” bill to SB 1384 (Liu, 2016), the bill that established the task force and required a lower inflation escalator option. It is currently pending in the Assembly Insurance Committee and contains technical and noncontroversial provisions that should be added to this bill (since former-Senator Mendoza will not be pursuing SB 255).
Benefits, Liabilities and Further Challenges
From a consumer perspective, it is critical to balance broad coverage with increased costs. The availability of more affordable options with less coverage raises the risk that a consumer may purchase too little coverage for their needs.
Nevertheless, a consumer purchasing outside the Partnership has far more options and flexibility to choose plans at lower cost. SB 1248 would simplify the benefit floor and make it easier for insurers to participate and offer new products under the California Partnership. Consumers would have more affordable options to select from.
Still, the availability of more affordable options with less coverage raises the risk that a consumer may purchase too little coverage for their needs.
Additionally, policies that offer less robust benefits will be less effective at deferring Medi-Cal enrollment. This is probably an important reason that they were put in place.
Still, very few consumers purchasing Partnership policies will ever qualify for Medi-Cal anyway given their incomes and assets; unless the program experiences a dramatic increase in participation, the risk is severely limited.
This proposal is really just a minor step and the program may require additional reform. Nonetheless, some stakeholders view it as critical. The proposed legislation addresses those issues and communicates that reforms are moving forward, a critical message to insurers who might consider participating.
The following provides hypothetical examples that illustrate the differences between the current standards and those posed by this bill.
Original Partnership Policy
Currently the Partnership requires policies to provide minimum benefit levels that include an $80,300 total lifetime benefit, $220 a day nursing home benefit, $154 for residential care facility benefit, and $110 a day home care benefit. This policy might cost a male, age 57, about $2,626 per year and a female, same age, about $3,859.50.
- Abel lived in a nursing home. His costs ran about $270 day, so he had to cover $50 a day with his own money. Abel’s policy lasted a year.
- Ann lived in an assisted living facility. Her costs ran about $143 a day and her insurance covered the entire amount for about a year and a half.
- Amy received care at home, although her daughter would also take her to an adult day care facility. Her costs ran about $150 a day and her daughter had to cover $40 a day. Her policy lasted two years.
In all three instances, the policyholders earned $80,300 in asset protection.
For the purposes of Medi-Cal eligibility for nursing home care, Medi-Cal will ignore the $80,300 for the purposes of determining eligibility for nursing home coverage. For example, if they had $100,000, then they would only have to spend $17,700 (including the $2,000 that does not get spent down).
Applicants for other services, such as the In-Home Supportive Services (IHSS) program might only be subject to an “asset test” if their income is too high and that income may be subject to a “share-of-cost.”
SB 1284 Lower-Cost Policy
The proposal would require Partnership insurers to offer the above policy, but would allow the insurer to offer a policy with lower benefits so long as they provide a minimum $100 a day benefit for any covered services (nursing home, residential care facility, or home care) with a $73,000 lifetime benefit. It would last at least two years. This policy would cost a male, age 57, about $1,751 per year and a female, same age, about $2,573.
- Brad lived in a nursing home. His costs ran about $270 day, so he had to cover $170 a day with his own money. Brad’s policy lasted two years.
- Bing lived in an assisted living facility. His costs ran about $143 a day and he had to contribute $43 a day. His policy lasted two years.
- Beth received care at home, although her daughter would also take her to an adult day care facility. Her costs ran about $150 a day and her daughter had to cover $50 a day. Her policy lasted two years.
In all three instances, the policyholders earned $73,000 in asset protection.
For the purposes of Medi-Cal eligibility for nursing home care, Medi-Cal will ignore the $73,000 for the purposes of determining eligibility for nursing home coverage. For example, if they had $100,000, then they would only have to spend $25,000 (including the $2,000 that does not get spent down).
As of April 18th, SB1284 has sailed through the Health Committee with full bi-partisan support
It is now moving to the Insurance Committee the week of April 23rd, where is it believed it will receive full support.
However, there is still time for changes, additions, and modifications to occur all designed to simplify, make affordable, and motivate new and existing Partnership supporters including Insurance Companies to participate in the revitalization of Traditional/Partnership LTCI Products.
The timeline for all of this to occur in which carriers could begin to file (under a stream-line/turn-key approach) could be made available to the public by fourth quarter.
Senior Insurance Training Services is working diligently and has been for the last 7 years working closely with the Legislator, Department of Insurance, Consumer Advocates, and the Task Force to allow middle income Californians the ability to protect their hard-earned assets.
S.I.T.S. has been developing new and improved educational tools to be used in upcoming Partnership Courses as well as being introduced in the LTCI Webinar-based training courses.
Learn and hear more about the new and exciting opportunities coming to the California Long-Term Care Insurance Market, contact Tom Orr at or visit our website and register for one of our upcoming Partnership courses or LTC/CTQ Webinars.
The market opportunity for Long-Term Care Insurance in California is about to change…. FINALLY!