Report Title:

Long-Term Care Tax-Based Financing System; Design

 

Description:

Enacts the Hawaii long-term care financing Act; establishes a temporary board of trustees to formulate a plan; appropriates $40,000 to the UH to convene a long-term care summit. (CD1)

THE SENATE

S.B. NO.

2416

TWENTY-FIRST LEGISLATURE, 2002

S.D. 2

STATE OF HAWAII

H.D. 2


C.D. 1

A BILL FOR AN ACT

 

RELATING TO THE HAWAII LONG-TERM CARE FINANCING ACT.

 

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

SECTION 1. The legislature finds that people in Hawaii are living longer, due in large measure to the State's excellent health care. The legislature further finds that as they age, they incur concomitant chronic health diseases such as cancer, cardiovascular disease, and stroke, all of which necessitate intense daily care in the later years of life. However, the irony would be if the State could not also provide a means to care for the elderly who have benefited from the enhanced health care in their younger years.

The whole dynamic of the extended family in Hawaii will radically change to place impossible financial and social hardship on Hawaii families. As people age or become disabled, they need services to help them with activities of daily living. The approach to helping Hawaii's elderly and disabled should be prompted by compassion and caring, although the problem is inextricably one of economics. Medicaid, Medicare, long-term care insurance, and personal assets are insufficient or inaccessible to most individuals.

This Act is a product of the joint special committee of the Legislature, formed pursuant to Senate Concurrent Resolution No. 23, C.D. 1, 2001, to develop and implement a plan for a dedicated source of revenue to support the long-term care needs of all citizens in the State regardless of income.

The purpose of this Act is to enact the Hawaii long-term care financing Act to provide a universal and affordable system of providing for long-term care.

SECTION 2. The Hawaii Revised Statutes, is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

HAWAII LONG-TERM CARE FINANCING ACT

§   -1 Definitions. As used in this chapter:

"Long-term care services" means a broad range of supportive services needed by individuals who:

(1) Have physical or mental impairments and have lost or never acquired the ability to function independently; and

(2) Need assistance with the activities of daily living of means of bathing, continence, dressing, eating, toileting, and transferring.

§   -2 Hawaii long-term care benefits fund; establishment. (a) Beginning July 1, 2003, there is established in the state treasury the Hawaii long-term care benefits fund, to be administered by a board of trustees of the Hawaii long-term care benefits fund, as appointed by the governor as provided in section 26-34.

(b) The fund shall consist of contributions, interest, income, dividends, refunds, rate credits, legislative appropriations, and other returns. The department of budget and finance 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 of trustees 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 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 moneys of the fund, 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 of trustees 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.

§   -3 Fiduciary obligations of the board of trustees of the Hawaii long-term care benefits fund. (a) The board of trustees of the Hawaii long-term care benefits fund shall:

(1) Discharge its duties solely in the best interest of the system;

(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; 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; 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.

§   -4 Actuarial report; annual report. (a) The board of trustees shall cause to be prepared an annual 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.

(b) The board of trustees 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 3. Temporary board of trustees; duties. (a) There is established within the department of health, executive office on aging, for administrative purposes a temporary board of trustees of the Hawaii long-term care benefits fund. The governor shall appoint the temporary board of trustees, without regard to section 26-34, to serve beginning July 1, 2002, until June 30, 2003, for purposes of designing a tax-based long-term care system to finance long-term care services. The department of health, executive office on aging, shall have administrative responsibilities for the temporary board, as provided by sections 26-8 and 26-35.

(b) The members of the temporary board of trustees shall have experience in accounting, business, finance, law, or other similar fields, and experience equivalent to five years as an officer or manager of a viable business, community, or organization involved with insurance management, portfolio management, health care management, or similar field. The composition of the temporary board shall represent a diversity of relevant experience. The governor or designee shall serve as an ex officio member of the temporary board of trustees.

(c) The temporary board of trustees shall elect a chairperson from among themselves. The trustees shall serve without compensation but shall be reimbursed for all expenses, including travel and per diem expenses, necessary for the performance of their duties.

(d) The temporary board of trustees shall report to the legislature no later than December 31, 2002, with a detailed proposal for the creation and operation of a tax-based long-term care system to finance long-term care services for all qualified persons in this State, including proposed legislation. The report shall include findings and recommendations concerning the:

(1) Amount of and means of collection of a tax;

(2) Nature and amount of benefits;

(3) Eligibility criteria to receive benefits and claims processing procedures;

(4) Administration of the program, including consideration of a third-party administrator to:

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

(B) 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; and

(5) Appointment of a permanent board of trustees, including terms, numbers, qualifications, and responsibilities of the members.

(e) The temporary board of trustees shall consider the following for purposes of its report, among other information deemed appropriate by the board:

(1) S.B. No. 2416, 2002, and all drafts thereto;

(2) H.B. No. 2638, 2002, and all drafts thereto;

(3) Special Committee Report No. 4, on S.C.R. No. 23, dated January 30, 2002; and

(4) The "Actuarial Report to the Executive Office on Aging on the Proposed Hawaii Long-Term Care Financing Program".

(f) The temporary board of trustees shall conduct research into whether a long-term care financing scheme is preempted by or violates the federal Health Insurance Portability and Accountability Act or the federal Employee Retirement Income and Security Act, and to recommend appropriate legislation accordingly.

(g) The department of taxation shall assist the temporary board of trustees as appropriate for purposes of subsection (d).

(h) Administrative expenses of the temporary board of trustees shall be paid from moneys obtained through savings, if any, by the governor on general fund appropriations to executive agencies.

SECTION 4. The University of Hawaii at Manoa shall convene a long-term care summit to bring together private and public organizations, including State, county, and community organizations, to collaborate to identify the types and quality of services, service delivery system, and service delivery policies that ensure the development of a comprehensive and affordable long-term care system for the State.

The University of Hawaii at Manoa shall report to the legislature on findings and recommendations no later than twenty days before the convening of the regular session of 2003.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $40,000, or so much thereof as may be necessary for fiscal year 2002-2003, for a long-term care summit to be contracted by the University of Hawaii at Manoa with a nongovernmental Hawaii public policy organization. The summit shall bring together business, labor, government, including state and county agencies, and community organizations, to work together to identify the types and quality of services and service delivery system and policies to implement a comprehensive and affordable long-term care system for Hawaii.

The sum appropriated shall be expended by the University of Hawaii.

SECTION 6. This Act shall take effect upon its approval; provided that section 5 shall take effect on July 1, 2002.