BILL ANALYSIS Ó SB 475 Page 1 SENATE THIRD READING SB 475 (Monning) As Amended September 4, 2015 Majority vote SENATE VOTE: 31-4 -------------------------------------------------------------------- |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+-----------------------+---------------------| |Human Services |5-2 |Chu, Calderon, Lopez, |Mayes, Maienschein | | | | | | | | | | | | | |Mark Stone, Thurmond | | | | | | | |----------------+-----+-----------------------+---------------------| |Aging |5-2 |Brown, Gipson, Gray, |Hadley, Mathis | | | |Levine, Lopez | | | | | | | |----------------+-----+-----------------------+---------------------| |Appropriations |12-5 |Gomez, Bloom, Bonta, |Bigelow, Chang, | | | |Calderon, Gordon, |Gallagher, Jones, | | | |Eggman, |Wagner | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Holden, Quirk, Rendon, | | SB 475 Page 2 | | |Weber, Wood | | | | | | | | | | | | -------------------------------------------------------------------- SUMMARY: Imposes additional repayment and other requirements on certain continuing care contracts once a unit has been vacated. Specifically, this bill: 1)Prohibits a continuing care retirement community (CCRC) provider from charging a resident or his or her descendants a monthly fee once a unit has been permanently vacated by the resident, unless the fee is part of an equity interest contract. Further requires a continuing care contract to contain, among other things, a statement regarding this prohibition. 2)Requires a continuing care contract to contain the policy or terms for repaying a lump sum of any portion of the entrance fee, and further requires every continuing care contract that provides for a refund or repaying a lump sum of all or part of the entrance fee to, among other things, do the following: a) State that the provider shall make a good faith effort to reoccupy or resell a unit for which a lump-sum payment is conditioned upon resale of the unit and, by July 1, 2016, notice current residents, as specified, regarding this statement as clarification of the resident's existing contract; and b) State, for all contracts with a repayment of all or a portion of the entrance fee conditioned upon the resale of the unit, the average and longest amount of time that it has taken to resell a unit within the last five calendar SB 475 Page 3 years. 3)Requires, for contracts signed after January 1, 2016, if the unit remains vacant for 120 days after the resident's termination, a repayment of at least 10% of the full lump-sum payment if termination is the result of a resident's death, and 20% if termination occurs for any other reason. Further specifies that this repayment shall not cause the contract to be deemed a refundable contract requiring a refund reserve, as specified. 4)Requires, for continuing care contracts entered into on or after January 1, 2016, that any payment balance that has not been paid to a resident within 180 days shall accrue simple interest, to be compounded annually, at a rate of 4%. Further requires that any payment balance that has not been paid within 240 days shall accrue simple interest, to be compounded annually, at a rate of 6% and that interest shall continue to accrue until the date the full lump-sum payment is paid to the resident. 5)Exempts, until January 1, 2017, projects in development prior to January 1, 2016, for which contracts were entered into on or before January 1, 2017, from certain requirements regarding refunds, lump-sum charges and repayment, and interest payments, as specified. 6)Clarifies that, after the death of a resident, repayment and interest requirements apply to a lump-sum payment that is conditioned upon the resale of a unit and that any payment and interest shall be payable to the resident's estate. 7)States that these repayment and other requirements shall not be construed to limit or alter any legal remedies otherwise SB 475 Page 4 available to the resident or his or her estate. 8)Establishes a process for a resident to file a complaint with the Department of Social Services (DSS) if his or her unit has not been resold for more than 12 months after the unit was made available to the provider, as specified. Further establishes processes for residents and providers to request a review of DSS's resulting determination and stipulates that if a provider is found to not have made a sufficient good faith effort to reoccupy or resell a unit, that provider shall repay the full lump-sum payment due the resident within 20 business days, as specified. FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill may contain minor and absorbable costs, likely less than $50,000 (General Fund) per year to DSS to investigate complaints. COMMENTS: Continuing Care Retirement Communities: CCRCs offer individuals 60 years or older a housing option that includes long-term care services that are typically provided for the lifetime of the resident. CCRCs offer a long-term continuing care contract, which is an agreement between a provider and a resident promising that a range of services will be provided to the resident at the CCRC (sometimes at an additional cost, depending on the type of contract). These services include housing, residential services, and nursing care. Continuing care contracts can vary widely across CCRCs, with differing provisions on costs, payment methods, services provided, and other elements. Continuing care contracts typically require an individual to pay an entrance fee and SB 475 Page 5 monthly fees. Entrance fees can range widely, typically from $100,000 to $1 million, and monthly fees vary depending in part on the level of services included in the contract. CCRC contracts are sometimes referred to by three "types": Type A contracts (also known as life care contracts), are the most expensive and are all-inclusive agreements wherein all housing, services and healthcare are covered by the entrance fee and monthly fees; Type B contracts typically offer discounted healthcare services for limited amounts of time, after which services can be purchased; and Type C contracts offer the lowest entrance and monthly fees, but require residents to be responsible for paying for healthcare services at market rates. Also, continuing care contracts may be refundable or non-refundable. Refundable contracts refund a portion of the entrance fees, sometimes on a scale that decreases over time the percentage of the entrance fee that is refunded. These types of contracts require a CCRC to maintain a reserve for refunds (in addition to other reserves required for the operation of a CCRC). Alternatively, many CCRC providers choose instead to offer a repayment of a designated portion of the entrance fee - a "lump-sum payment" - that is conditioned upon resale of the unit. A reserve is not required in this case, as it is assumed that the resale of the unit will result in the new resident's entrance fee covering the cost of repaying a portion of the former resident's entrance fee. In California, there are currently no requirements that resale and/or repayment of entrance fees take place within a certain period of time. There are currently nearly 100 CCRCs in California, with over 20,000 units. Roughly 65% of CCRC providers are non-profit. The Community Care Licensing Division of DSS oversees CCRCs by: a) ensuring that licensing laws and regulations are followed (CCRCs are required to obtain a certificate of authority and an RCFE license; they must also obtain a SNF license through the Department of Public Health (DPH) if offering skilled nursing services), and b) reviewing and approving CCRC applications and SB 475 Page 6 monitoring CCRCs' financial condition and their ability to uphold their contractual obligations to residents. Need for this bill: According to the author, "Under current law, Continuing Care Retirement Community (CCRC) contracts that base the repayment of a resident's entrance fee upon the resale of the unit and not upon vacancy are unfair arrangements for consumers and there is little incentive to resale those units in a timely manner. In many cases the CCRC provider is able to take advantage of this type of contract, which can lead to seniors or their estates experiencing significant delays in the repayment of entrance fees. For example, a CCRC in Pacific Grove had not paid $530,600 to the estate of a resident who died more than 3 years ago because the refund was conditioned upon resale of the unit. [This bill] levels the playing field for the CCRC resident in a manner that will result in more timely repayments and adds an incentive for a CCRC to resale a unit in the form of interest on the unpaid remaining balance. The resident safeguards in the bill balance the need for steadfast repayment while ensuring the CCRC can remain fiscally solvent so the current residents are not adversely impacted." Analysis Prepared by: Daphne Hunt / HUM. S. / (916) 319-2089 FN: 0002166 SB 475 Page 7