AB 1696: Long-term care insurance coverage

Adults aged 65 and older are the fastest growing segment of California's graying population. Estimates are that by 2030, one in five Californians will fall into this age group, and that over half of these individuals will require some form of long-term care for chronic conditions.

Long-term care insurance protects an individual's quality of life and assets when confronted with a debilitating condition. Often these policies are employer-sponsored. There are approximately 600,000 long-term care policies in force in California. Coverage applies when an insured develops (1) a "chronic illness," often defined as the inability to perform certain "activities of daily living" such as feeding, dressing and bathing without substantial assistance, or (2) a severe cognitive impairment (such as Alzheimer's disease). These policies enumerate certain benefits included under their coverage; however insureds often request additional benefits not specifically provided by the policy.

Under California Assembly Bill 1696, an insured and an insurer may agree to benefits and services that are not specifically provided by the policy (referred to as an "alternate plan of care"). For example, an older policy may only cover nursing home care, but an alternate plan of care might allow stays in different types of facilities or even home care. An alternate plan of care may also provide for additional equipment or home safety devices not otherwise provided for in the policy.

In theory, AB 1696 expands long-term care insurance coverage in California, by authorizing the provision of additional benefits and services that are not specifically enumerated in the policy. However, the new law has no "teeth": AB 1696 expressly provides that an insurer's denial of a request for an alternate plan of care "is not a denial of a claim." In so doing, AB 1696 effectively renders an insurer's rejection of a request for an alternate plan of care non-actionable. While in the past, policyholders have asserted that the refusal to accommodate requests for alternate plans of care constituted not only breach of contract, but also bad faith and potentially financial elder abuse, AB 1696 could nullify these claims. A potential solution is for employers or insureds to negotiate appropriate insurance policy language providing that an insurer's consent to an alternate plan of care shall not be unreasonably withheld.