No. 40953 (New Rule): Rule R590-273. Continuing Care Provider Rule

(New Rule)

DAR File No.: 40953
Filed: 11/04/2016 04:04:29 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This is a new rule required by Title 31A, Chapter 44, which was created by H.B. 323, Continuing Care Retirement Community Amendments, passed during the 2016 General Session. It creates protections for residents of continuing care facilities.

Summary of the rule or change:

Because of the substantial payments that residents make to Continuing Care Retirement Communities (CCRCs), combined with recent bankruptcies and the potential risk of financial loss to residents, the Utah Legislature has created Title 31A, Chapter 44, to regulate the financial stability and market conduct practices of CCRCs seeking to do business in the state. The rule outlines standards for monitoring CCRCs through periodic disclosure and reporting requirements. Additionally, the rule outlines registration and annual renewal procedures for CCRCs, including disclosure of the CCRC's finances, fees, and refund provisions. The rule requires independent actuarial reviews for CCRCs offering "insurance like" future care. The rule addresses minimum refunds in the event of contract rescission or early withdrawal by the resident.

Statutory or constitutional authorization for this rule:

• Subsection 31A-44-601(6)(f)
• Subsection 31A-44-503(4)(d)
• Subsection 31A-44-203(4)
• Subsection 31A-44-602(2)(b)
• Subsection 31A-44-202(2)
• Section 31A-2-201
• Section 31A-44-314
• Subsection 31A-44-401(3)
• Subsection 31A-44-402(2)
• Subsection 31A-44-502(2)(d)

Anticipated cost or savings to:

the state budget:

There will be no direct impact on the state budget. No new appropriation was requested or received as a result of this rule. The rule does prescribe a fee paid by the CCRC at initial registration and with the required annual renewal. This fee is intended to defray the costs of regulating the CCRC.

local governments:

There will be no impact on local government because the rule does not address the domain of local government and no local government employees perform functions related to the CCRC rule.

small businesses:

The revisions will not impact small businesses because this rule only applies to CCRCs. Currently, there is only one CCRC operating in Utah.

persons other than small businesses, businesses, or local governmental entities:

The rule only applies to CCRCs and not to other persons.

Compliance costs for affected persons:

A CCRC will incur regulatory costs associated with filing financial statements, registration and renewal statements, and associated fees. A CCRC is also required to bear the cost of periodic financial examinations and any possible fines or forfeitures for noncompliance with the Title 31A, Chapter 44, and this rule. The cost of the regulation of a CCRC in Utah is estimated to be similar or less than the cost a CCRC would incur in other state jurisdictions. Annual licensure and renewal fees are currently set at $6,900 per year. Additional costs may be in the range of $5,000 to $20,000 year, including the cost of internal employee compliance time and the cost of periodic financial examinations performed by the Utah Insurance Department.

Comments by the department head on the fiscal impact the rule may have on businesses:

The $6,900 annual fee that will be paid by continuing care providers will represent a minimal cost in their ongoing budgets. However, the protections it will provide for residents of such facilities will be significant.

Todd E. Kiser, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Steve Gooch at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

01/03/2017

Interested persons may attend a public hearing regarding this rule:

• 12/01/2016 10:00 AM, State Office Building, 450 N State St, Room 3110, Salt Lake City, UT

This rule may become effective on:

01/10/2017

Authorized by:

Steve Gooch, Information Specialist

RULE TEXT

R590. Insurance Administration.

R590-273. Continuing Care Provider Rule.

R590-273-1. Authority.

This rule is promulgated by the Insurance Commissioner pursuant to:

(1) Section 31A-2-201, which authorizes the commissioner to make rules to implement the provisions of Title 31A;

(2) Subsection 31A-44-202(2) for the registration process;

(3) Subsection 31A-44-203(4) for the annual renewal process;

(4) Section 31A-44-314 for the establishment of registration and renewal fees;

(5) Subsection 31A-44-401(3) to define financial hardship in the case of resident dismissal contract exceptions;

(6) Subsection 31A-44-402(2) to determine when actuarial reserves will be required;

(7) Subsection 31A-44-502(2)(d) to determine market value of land and infrastructure improvements in rehabilitation;

(8) Subsection 31A-44-503(4)(d) to determine market value of land and infrastructure improvements in liquidation;

(9) Subsection 31A-44-601(6)(f) to determine the conditions under which a lien will be superior to a property lease; and

(10) Subsection 31A-44-602(2)(b) to establish financial disclosure and market conduct rules including conditions for enforcement.

 

R590-273-2. Purpose and Scope.

(1) The purpose of this rule is to outline the responsibilities of a provider of continuing care where required by Title 31A, Chapter 44.

(2) Pursuant to Subsection 31A-44-104(5), a provider that begins marketing a continuing care facility project:

(a) on or before May 10, 2016, will not be subject to the provisions of this rule until May 10, 2017; or

(b) after May 10, 2016 will be subject to this rule 45 days after the effective date of the rule.

 

R590-273-3. Definitions.

(1) The definitions in Sections 31A-1-301 and 31A-44-102 apply to this rule.

(2) "Qualified actuary" means a member of the American Academy of Actuaries or the Society of Actuaries or a person recognized by the commissioner as having comparable training or experience.

 

R590-273-4. Registration.

Thirty days prior to entering into a continuing care contract or reservation agreement, a provider must complete and submit to the commissioner:

(1) the initial registration form, supporting documentation, and attachments, which shall be filed electronically with the commissioner; and

(2) payment of the initial registration fee in accordance with Rule R590-102 through the online payment portal at https://secure.utah.gov/ips/uidrenewal.

 

R590-273-5. Registration Renewal.

(1) A registered provider must complete and submit to the commissioner:

(a) the renewal registration form and attachments, which shall be filed electronically with the commissioner by September 30 of each year; and

(b) payment of the renewal registration fee in accordance with Rule R590-102 through the online payment portal at https://secure.utah.gov/ips/uidrenewal.

(2) Registration forms are posted at the department's webpage at https://insurance.utah.gov/agent/agent-other/CCRC.php.

 

R590-273-6. Financial Hardship Refund.

A continuing care facility resident is in a condition of financial hardship for purposes of Subsection 31A-44-401(3) if:

(1) the resident's regular monthly expenses exceed his or her regular monthly income; and

(2) the resident has net assets, over and above his or her entrance fee at the continuing care facility, of less than $25,000.

 

R590-273-7. Additional Actuarial Reserve.

(1) Pursuant to Subsection 31A-44-402(2) the commissioner may require the additional reserve fund described in Subsection 31A-44-402(1) if the department determines it is necessary pursuant to Subsection 31A-44-204(1)(a).

(2) The additional reserve fund shall be determined by:

(a) a qualified actuary; or

(b) a person recognized by the commissioner as having comparable training or experience.

(3) The commissioner may require an independent actuarial review to determine the adequacy of the additional actuarial reserve.

(4) The provider will pay the reasonable costs of the actuarial review described in Subsection (3) pursuant to Subsection 31A-44-603(3).

 

R590-273-8. Market Value of Land and Infrastructure Improvements in Rehabilitation.

In determining the market value of land and infrastructure improvements under an order of rehabilitation pursuant to Section 31A-44-502(2)(d), the commissioner shall:

(1) Consider the most probable price as of a specified date, for which the land and infrastructure improvements owned in fee by the ground lessor should sell:

(a) after reasonable exposure in a competitive market;

(b) under all conditions requisite to a fair sale;

(c) with the buyer and seller each acting prudently, knowledgeably and for self-interest; and

(d) assuming neither buyer or seller is acting under duress.

(2) Disregard the existence or terms of the ground lease.

(3) Determine if a commercial appraisal is required to assign the market value.

 

R590-273-9. Market Value of Land and Infrastructure Improvements in Liquidation.

In determining the market value of land and infrastructure improvements under an order of liquidation pursuant to Subsection 31A-44-502(2)(d), the commissioner shall:

(1) Consider the most probable price as of a specified date, for which the land and infrastructure improvements owned in fee by the ground lessor should sell:

(a) after reasonable exposure in a competitive market;

(b) under all conditions requisite to a fair sale;

(c) with the buyer and seller each acting prudently, knowledgeably and for self-interest; and

(d) assuming neither buyer or seller is acting under duress.

(2) Disregard the existence or terms of the ground lease.

(3) Determine if a commercial appraisal is required to assign the market value.

 

R590-273-10. Lien Held by the Commissioner in Favor of a Resident or a Group of Residents.

Pursuant to Subsection 31A-44-601(6)(f), the amount of a lien on a provider's property that is superior to the lien created by Subsection 31A-44-601(1) includes:

(1) all amounts used to pay fees and costs for architectural and engineering for the design of the Facility;

(2) all amounts paid for engineering, environmental and similar studies, reports and surveys with respect to the facility;

(3) all amounts paid for appraisals, marketing and other reports and surveys in connection with the construction, acquisition or improvement of the facility;

(4) fees and costs paid to contractors, developers, brokers, salespersons and other employees and agents, including affiliates of provider;

(5) all fees, charges, assessments, taxes charged or imposed by any governmental unit, district or similar body having jurisdiction over the facility; and

(6) reimbursements to a provider or other owner of the facility for expenditures that would otherwise qualify under Subsection 31A-44-601(1) or this rule if paid directly from loan proceeds.

 

R590-273-11. Enforcement.

(1) Pursuant to Subsection 31A-44-602(2)(b) the commissioner may conduct an examination or investigation of a provider to determine compliance with Title 31A, Chapter 44, Part 6:

(a) to determine the financial solvency of a facility;

(b) to determine the adequacy of the additional actuarial reserve under R590-273-7;

(c) to verify a statement contained in a disclosure or actuarial statement;

(d) to act on a complaint against a provider or a facility;

(e) to obtain all documents requested by the commissioner; or

(f) to take any corrective action to enforce compliance.

(2) The commissioner may request corrective actions, including but not limited to:

(a) counsel to suggest correct behavior;

(b) restrict or prohibit behavior by the provider that is misleading, unfair or abusive;

(c) issue a cease and desist from committing any further violation;

(d) suspend, revoke, or refuse issuance or renewal of the person's registration;

(e) provide transparent information to compare continuing care contracts, providers, or facilities;

(f) disclosure of all terms and conditions of continuing care contracts and agreements;

(g) disclosure of any financial risks;

(h) promote certain communications between the residents and the provider;

(i) employ or hire examiners, hearing officers, clerks, and others to perform the department's duties in this chapter;

(j) judicially, foreclose a lien as described in Section 31A-44-601; or

(k) appoint a receiver.

(3)(a) The commissioner shall have free access to all the books and papers relating to the business and affairs of the provider.

(b) The books and records required under Subsection 31A-44-603(2)(a) shall be available for the inspection by the commissioner during normal business hours from the date of the transaction for no less than three years, plus the current calendar year.

(4) Nothing in this section prohibits the commissioner from billing to the provider, the reasonable costs of any examination or investigation, including the cost of the review by an actuary.

(5) Nothing in this section prohibits the issuance of administrative forfeitures calculated under R590-273-12.

(6) Nothing in this section prohibits the destruction of books and records past the required records and books retention in R590-273-11(3).

 

R590-273-12. Penalties.

(1) A person found to be in violation of this rule shall be subject to penalties as provided under Section 31A-2-308.

(2) The issuance of administrative forfeitures shall be calculated at an amount not greater than $1,000 per violation, and with an aggregate maximum of $30,000 per calendar year.

 

R590-273-13. Enforcement Date.

The commissioner will begin enforcing this rule 45 days from the rule's effective date.

 

R590-273-14. Severability.

If any provision of this rule or its application to any person or situation is held to be invalid, that invalidity shall not affect any other provision or application of this rule which can be given effect without the invalid provision or application, and to this end the provisions of this rule are declared to be severable.

 

KEY: insurance, continuing care facility

Date of Enactment or Last Substantive Amendment: 2017

Authorizing, and Implemented or Interpreted Law: 31A-44-202(2); 31A-2-201; 31A-44-314; 31A-44-401(3); 31A-44-402(2); 31A-44-502(2)(d); 31A-44-503(4)(d); 31A-44-601(6)(f); 31A-44-602(2)(b); 31A-44-203(4)

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