SB1464

Report Title:

Long-Term Care; Community Elder Care

Description:

Enacts the Community Elder Care Act of 2005 to provide for a premium assessment and for home and community-based long-term care services.

THE SENATE	S.B. NO.	1464
TWENTY-THIRD LEGISLATURE, 2005
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO COMMUNITY ELDER CARE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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

"Chapter

COMMUNITY ELDER CARE ACT OF 2005

§ -1 Purpose. This chapter provides an affordable universal system of long-term care front-end home and community care benefits for elders that is affordable and adequate for the vast majority of persons needing long-term care. This chapter enacts a long-term care premium, to be collected by and administered by a third-party entity.

§ -2 Long-term care premium; assessment. (a) There is assessed upon and shall be paid by all residents of Hawaii of age twenty-three to seventy-five, a long-term care premium.

(b) The long-term care premium shall be collected by a qualified and bonded third-party administrator contracted by the executive office on aging.

If the age of person is: The premium shall be:

Under 23 $0

23 and up to 40 $__

41 and up to 50 $__

51 and up to 60 $__

61 and up to 70 $__

71 and up to 75 $__

Over 75 $0

§ -3 Defined benefit. (a) Beginning January 1, 2010, payment of a defined benefit for long-term care services in amounts as specified in section -6 shall commence. The defined benefit shall be $70 a day up to a cumulative period of one full year; provided that the daily defined benefit may be adjusted from time to time by the third party administrator.

(b) The defined benefit shall begin after the thirtieth day following the date of the approval of the written certification under section -4 and shall be made to the recipient of a long-term care service, or to the legal representative of the recipient in the name of the recipient, as a reimbursement for long-term care service expenditures. The amount of the defined benefit shall not be qualified by the income of the recipient.

(c) The defined benefit under this program shall be primary to private insurance and medicaid benefits. An individual shall not receive a defined benefit while the individual is receiving medicare benefits for long-term care; provided that if medicare benefits are exhausted, the individual shall be required to qualify under section -4.

(d) The defined benefit received under this section shall not be subject to state income tax.

§ -4 Qualified long-term care services. (a) To be eligible for benefit payments for long-term care services under this chapter, a qualifying individual shall:

(1) Need assistance with two or more activities of daily living, including bathing, continence, dressing, eating, toileting, and transferring; or

(2) Be afflicted with Alzheimer's disease or dementia.

(b) An individual qualifying for long-term care services under the program shall have written certification from a physician licensed under chapter 453 or 460, or an advanced practice registered nurse recognized under section 457-8.5, assigned by the third-party administrator certifying that the individual requires one or more long-term care services for the period of time during which the individual receives the benefits under the program. The written certification shall specify that the individual:

(1) Is unable to perform, without substantial assistance from another individual, at least two of six activities of daily living for a period of at least ninety days due to a loss of functional capacity; or

(2) Requires substantial supervision to protect the individual from threats to health and safety to self or others due to severe cognitive impairment.

§ -5 Vesting to receive a defined benefit. (a) Any individual who has paid the long-term care premium for ten years shall be fully vested to receive the defined benefit provided under section -3.

(b) An individual shall earn one-tenth of the defined benefit for each consecutive twelve-month period that the individual pays the long-term care premium. An individual shall be allowed twelve consecutive months of non-payment of the income premium without penalty; provided that after the twelve consecutive months of non-payment, the individual shall forfeit one-tenth of the defined benefit amount for each year of non-payment.

§ -6 Long-term care benefits; disbursement; benefit levels; delinquency; loss carryback; adjustment and actuarial review. (a) The proceeds of the long-term care premium shall be deposited into the long-term care benefits fund created in section -7. Benefit disbursements shall begin no earlier than the day following the end of the third year of long-term care premium collections.

(b) The initial benefit level shall be $70 per day for one full year, subject to restrictions imposed by the required vesting period, for long-term care services as described in section 431:10H-301(c). The benefits shall increase as follows:

(1) $72.10 per day on January 1, 2011;

(2) $74.26 per day on January 1, 2012;

(3) $76.49 per day on January 1, 2013;

(4) $78.79 per day on January 1, 2014;

(5) $81.15 per day on January 1, 2015;

(6) $83.58 per day on January 1, 2016, and thereafter.

(1) Is or has been delinquent in paying the premium; and

(2) Begins to pay overdue back premiums within three years of the initial delinquency,

the delinquent long-term premium payments shall be credited to the individual's vesting record and restore any benefit loss up to that point.

(d) Notwithstanding any law to the contrary, all defined benefits paid under this section shall be excluded from income taxation under chapter 235 and need not be reported as income.

§ -7 Long-term care benefits fund. (a) There is established in the state treasury the long-term care benefits fund, into which shall be deposited moneys collected as long-term care premiums. The department of budget and finance shall administer the fund. The third-party administrator shall forward to the department of budget and finance moneys collected as long-term care premiums for deposit 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 the requirements of section -8.

(b) Expenditures from the fund shall be made solely for the purpose of making benefit payments and the cost of administration.

(c) Notwithstanding any law to the contrary, moneys in the fund shall not be transferred to another fund at any time nor for any purpose.

(d) Costs for the administration of the program shall be paid from moneys in the long-term care benefits fund as follows:

(1) Up to four per cent of the total monthly deposit into the fund to cover general administrative expenses; and

(2) Up to four per cent of the total monthly amount of claims paid out from the fund may be used to pay for administrative expenses related to claims processing.

§ -8 Fiduciary and other obligations of the third-party administrator. (a) The third-party administrator shall:

(1) Have and maintain a fiduciary trustee obligation for the program;

(2) Discharge their duties solely in the best interest of the program;

(3) 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; or 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;

(4) 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; and

(5) Maintain proper books of accounts and records of the administration of the program.

(b) The third-party administrator shall have the capability to process claims for benefit payments and shall be appropriately licensed under chapter 431. Selection of the third-party administrator shall be subject to chapter 103D. The insurance commissioner shall advise the executive office on aging on the selection of a third-party administrator.

§ -9 Investments. (a) The director of finance, with the input of the third party administrator, shall invest moneys in the long-term care benefits fund in investments with sufficient liquidity to allow market transactions to meet expected payout requirements without substantial loss in value or unreasonable delay. The department shall invest 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 department it is prudent to invest funds of the system, 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 system'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 any of the foregoing paragraphs; and

(4) Any other investments deemed secure.

(b) The third-party administrator shall submit to the legislature no later than January 1 of every year, an annual report for the preceding fiscal year. The annual report shall include information concerning:

(1) Investments, including the types and amounts;

(2) Current balance in the fund;

(3) Projected liabilities for the upcoming year;

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

(5) Amount of claims paid and premiums received in the year immediately preceding the issuance of the report; and

(6) Any other useful information to determine the fiscal soundness of the fund.

§ -10 Annual audits of the long-term care benefits fund. The auditor shall conduct an audit of the long-term care benefits fund annually for the first three years from the date the fund first receives deposits, and every three years thereafter; provided that the auditor may modify the time periods after the first three years as appropriate to the circumstances. The auditor shall publish a report of the results of every audit, including any recommendations.

§ -11 Actuarial report and actuarial opinion. (a) The third-party administrator shall cause to be prepared an actuarial report and actuarial opinion, as defined by the Actuarial Standards Board of the American Academy of Actuaries. The report and opinion shall be prepared by a member of the American Academy of Actuaries who is a fellow of the Society of Actuaries, certifying that the program is in actuarial balance. Costs of the actuarial report shall be deemed an administrative expense under section -7.

(b) The actuarial report shall contain a statement by the actuary certifying that the techniques and methods used are generally accepted within the actuarial profession and that the assumptions and cost estimates used are reasonable. The report shall include:

(1) An estimate of the expected future income to and disbursements to be made from the Hawaii long-term care benefits trust fund during each of the next ensuing ten fiscal years;

(2) A projection of the premium rates necessary to keep the Hawaii long-term care benefits trust fund actuarially sound over the short-range and long-range future periods;

(3) A statement of actuarial assumptions and methods used to determine costs and a detailed explanation of any change in actuarial assumptions or methods;

(4) The current and projected number of participants and beneficiaries and the current and projected paid-in premiums, defined benefits, current and permanent benefit defined benefits, and the like, aggregated by current and past Hawaii resident status and age;

(5) The current value of accumulated assets of the Hawaii long-term care financing program and the value of assets used by the actuary in any computation of the amount of required premiums; and

(6) The results of short-range and long-range actuarial sensitivity analyses.

(c) Based upon the actuarial report and actuarial opinion under subsection (a), the third-party administrator may adjust the defined benefit.

(d) All work products, papers, documents, and data used or prepared by the actuary in preparing the actuarial report shall be subject to chapter 92F.

(e) The actuarial report shall demonstrate actuarial solvency for seventy-five years, and be submitted annually to the governor and the legislature."

SECTION 2. Chapter 346C, Hawaii Revised Statutes, is repealed.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________