PA's Act 40 of 2007 on Long Term Care Insurance

PA Senate Bill 548 (Printer's No. 1299) was signed on July 17, 2007, by Governor Rendell as Act 40 of 2007. After unanimous adoption by the Legislature in separate final votes, SB 548 was signed in the Senate on July 16th, in the House on July 17th, and by the Governor upon his receipt. It became effective immediately, on July 17, 2007.

The new law establishes a new "Long-Term Care Partnership Program" under federal guidelines to promote long-term care insurance in the Commonwealth under the auspices of the PA Department of Public Welfare.

The website of Senator Jake Corman, the bill's prime sponsor, described the bill's general intention:

With the enactment of the Federal Deficit Reduction Act, states can now offer individuals the option of a LTC partnership where they can protect their assets when they purchase long-term care insurance.

Partnerships create an alternative to "spending down" assets to become eligible for Medicaid. With a partnership program, an individual is permitted to retain assets equal to the amount of benefits purchased under an approved LTC insurance policy, and Medicaid becomes the payer only after the long-term care insurance benefits are exhausted.

This is an approach that encourages individuals to take personal responsibility for their future LTC needs, while also preserving funds for their families.

SB 548 was substantially revised from its original version into its second & final version as Act 40 of 2007. See: SB 548's Legislative History. Technically, it amends the existing "Insurance Company Law of 1921" (an unconsolidated act).

A major addition is contained in a new Section 1110.1 of the Insurance Law, which now reads as follows:

(a) There is hereby established the Long-Term Care Partnership Program, to be administered by the Department of Public Welfare in accordance with the requirements for qualified state long-term care insurance partnerships.

The purpose of this program is to reduce future medicaid costs for long-term care by delaying or eliminating dependence on medicaid by providing incentives for individuals to ensure against the potentially substantial costs that arise upon the need for long-term care.

(b) In order to implement the program, the Department of Public Welfare shall file a state plan amendment with Centers for Medicare and Medicaid Services of the United States Department of Health and Human Services pursuant to Title XIX of the Social Security Act (49 Stat. 620, 42 U.S.C. § 1396 et seq.) within 30 days of the effective date of this section.

The program, including the treatment of assets for Medicaid eligibility and estate recovery, shall be structured and administered by the Department of Public Welfare in accordance with federal law and applicable federal guidelines for qualified state long-term care partnerships.

On July 17, 2007, SB 548 was described in an article entitled "Corman's Long-Term Care Insurance Incentive Bill Headed to Governor", which appeared in the State College News.

* * * The General Assembly gave final approval this week to Senate Bill 548, which is intended to give people the opportunity to protect their personal assets by purchasing long-term care the insurance.

"Under the current system, health care consumers are required to 'spend down' their assets before taxpayer-funded Medicaid steps in to cover the expenses associated with long-term care," [Senator Jake] Corman said.

"As a result, many individuals and families lose all of their assets well before they go into long-term care, and then taxpayers are forced to pick up the costs, which can be significant." * * *

The article further explained the need for legislative action and the anticipated changes upon the Medicaid program in Pennsylvania:

Corman said that the Department of Public Welfare has missed its self imposed deadline to submit Pennsylvania’s plan to the federal government, which necessitated this legislation.

"Until this administration files Pennsylvania's plan, families cannot accurately plan to protect assets," Corman said. "This issue is too important to delay, and my bill will ensure that Pennsylvania consumers have the option to purchase the insurance they need."

Under the LTC Partnership Program, individuals would be allowed to retain an amount equal to the amount of long-term care insurance they hold. Therefore, a person who has a $100,000 policy would be entitled to keep $100,000 in assets when Medicaid steps in. That means Medicaid would realize savings of $100,000, based on the amount paid by the policy, and the individual would be able to keep $100,000."

This is a common sense bill that will help to lower health care costs and protect consumers in cases where long-term care is needed," Corman said.

"Long-term care is the largest single line item in the public welfare budget, and we must look at all alternatives to reduce the growth of this taxpayer-funded program as we look to cut costs and be more fiscally responsible."

The legislation now is in effect. Thus, the filing required from the PA Department of Public Welfare to the federal government will be due on August 16, 2007.