PA 15-115—sHB 5358

Human Services Committee

AN ACT ESTABLISHING A BILL OF RIGHTS FOR RESIDENTS OF CONTINUING-CARE RETIREMENT COMMUNITIES

SUMMARY: This act allows residents of continuing care facilities to form residents councils, defined in the act as boards elected by residents to advocate for their rights and advise the provider on resident welfare and interests. The act also stipulates rights and entitlements for continuing care residents.

It adds to continuing care contracts (see BACKGROUND) new requirements regarding refunds, new construction, and periodic charges and fees. It also requires continuing care facility providers to give residents advance notice of major construction, ownership changes, and increases in monthly service fees.

The act decreases the amount of funds continuing care providers must keep in escrow and allows providers to use funds in accounts for mortgage loans, bond indentures, or other long-term financing in their computation of required reserve amounts for the escrow account, in certain circumstances.

It also makes several changes to required information providers must (1) file with the Department of Social Services (DSS) and (2) include in the disclosure statement a person entering into a continuing care contract must receive.

The act extends current penalties for providers that violate continuing care facility laws to also apply to providers who violate the act's requirements on residents' rights, residents councils, and provider communications.

The act also makes minor, technical, and conforming changes.

EFFECTIVE DATE: October 1, 2015

2 & 4 — RESIDENT PROTECTIONS

Under the act, residents of continuing care facilities are entitled to:

1. a voice in all decisions affecting their health, welfare, and financial security;

2. transparency regarding the financial stability of the provider operating the facility;

3. timely notification about developments affecting the facility, including (a) ownership changes of the provider operating the resident's facility, (b) changes to the provider's financial condition, and (c) facility construction and renovation;

4. independence in decisions about medical care and assisted living services; and

5. reasonable accommodations for persons with disabilities.

The act prohibits providers from infringing upon a resident's right to obtain treatment, care, and services, including home health and hospice care, from those providing health care who are not under contract or affiliated with the provider. This prohibition is subject to the provider's policies and procedures for protecting residents' health and safety.

The act stipulates that residents receiving assisted living or skilled nursing services are entitled to all rights and protections provided by law, including the right to refuse medications and treatments. It also prohibits providers from infringing on a resident's right to participate, as much as he or she is able, in decision making about permanent moves to an assisted living facility or skilled care unit. Providers must inform designated family members of the resident's medical condition and care plan.

The act requires providers to make reasonable accommodations in accordance with the federal Americans with Disabilities Act and other federal and state laws to ensure that services and notices are accessible and communicated to residents who have hearing loss, low vision, or other disabilities. (By law, these accommodations are already required. )

3, 10, & 11 — PROVIDER COMMUNICATION WITH RESIDENTS

The act requires each provider to develop a process for facilitating communication between residents and the personnel, management, board of directors, and owner of the provider. This process must include:

1. permitting residents at each facility to form a residents council and

2. allowing residents, including those who serve on a residents council, to serve as voting members of the provider's board of directors or other governing body, if that body's rules allow for resident membership and the board or governing body approves.

If the provider has no board of directors or similar governing body, or if a residents council is not established, then the provider must seek comments from residents before designing or adopting policies affecting its ability to avert financial distress. The law, unchanged by the act, defines “financial distress” as failing to meet debt service payments, drawing down on debt service reserve, or receiving a negative going concern opinion (i. e. , a report from an auditor or accountant expressing doubts about the company's ability to stay in business).

Major Construction

For any major construction, modification, renovation, or expansion project, the act requires providers to (1) amend the most recently filed disclosures statement (see below) to avoid misstatements or omissions of fact and (2) give residents, individually or through the residents council, at least 120 days advance written notice. The notice must include at least: (1) a project schedule and areas to be impacted, (2) funding needed for the project, (3) financing plans, (4) the expected amount of debt to be incurred, and (5) projected income from the project.

Under the act, if the provider plans to use any incurred debt to fund a project at a location other than the facility, the provider must hold at least one meeting with residents to discuss the project and advise them in writing of any impact on their monthly service fee.

Under the act, these notice requirements do not apply to immediate renovation or construction necessary to address a public safety or health issue or natural disaster, as long as the provider gives reasonable written notice about these projects to the residents council or each resident.

Change in Ownership

The act requires a provider to notify DSS and residents at all facilities the provider operates at least three months before any changes in ownership. The act allows DSS to excuse providers from this requirement on a case-by-case basis, if reasonable written notice of the ownership change is also provided to each residents council or, if no residents council exists, to each resident.

Monthly Service Fee Increases

The act requires a provider to give residents at all facilities it operates (1) at least 30 days advance written notice of increases in any monthly service fees charged to residents, (2) an explanation for such increases and (3) an opportunity for dialogue and comments from residents concerning the increases.

Resident Satisfaction Surveys

By January 1, 2016, and at least every two years thereafter, the act requires providers to (1) conduct resident satisfaction surveys at each facility, (2) make survey results available to the facility's residents council (or to each resident if there is no council), and (3) post a copy of the results at a conspicuous location at each facility.

6, 11, & 17 — DISCLOSURE STATEMENTS AND OTHER FILINGS

Required Information

Prior law required continuing care providers to file with DSS, (1) before executing a contract, the disclosure statement that must be delivered to prospective contract holders; (2) within 150 days of the first fiscal year of operation, financial documents, including a revised disclosure statement; and (3) annual filings, including financial documents and other statistics. Prior law specified various information requirements for each filing. The act consolidates filing requirements by eliminating the annual filing requirement, adding much of its specified information to the disclosure statement, and requiring providers to file the disclosure statement with DSS annually. It also makes several changes to what information is required.

The act eliminates a requirement that the disclosure statement include (1) a summary of information filed annually with DSS that includes any anticipated excess of future liabilities over future revenues and (2) a description of how the provider plans to meet these liabilities.

Prior law required disclosure statements to include the provider's audited and certified financial statements, including a balance sheet for the end of the most recent fiscal year and income statements for the three most recent fiscal years. The act instead requires disclosure statements to include the provider's financial statements for its two most recent fiscal years. These statements must include (a) a balance sheet, income statement, and statement of cash flow and (b) associated notes or comments on these statements.

Under prior law, disclosure statements also included pro forma annual income statements for the facility for the next five years. The act instead requires pro forma cash flow statements for the next three years and a summary of projections used in the assumptions for these statements. Prior law required a provider's annual filings to include, among other things, (1) anticipated resident turnover rates, (2) average age of residents, (3) health care utilization rates, (4) the number of health care facility admissions and days of care per year, and (5) the number of permanent transfers. The act instead requires this data in the disclosure statement as part of the summary of projections used for pro forma statements.

Prior law also required a provider's annual filings to include the facility's current rate schedule. The act instead requires this information in disclosure statements and specifies that it includes current rate schedules for entrance fees, monthly fees, and fees for ancillary services. The act also reduces, from seven to five years, the required disclosure of past entrance fee increases and periodic charges.

The act eliminates the requirement to file with DSS a statement of source and application of funds for the five-year period beginning the year of initial filing or, in some cases, subsequent filings. However, it maintains a requirement that, if the operation of the facility has not yet commenced or construction is to be completed in stages, the provider must include the anticipated source and application of funds involved with such construction or purchase in the disclosure statement.

The act eliminates a requirement that the provider file with DSS the basis for amortization assumptions for its capital costs. It also eliminates explicit requirements that financial and actuarial projections be determined on an actuarially sound basis using reasonable assumptions for mortality, morbidity, and interest. The act also eliminates a requirement that the provider include in disclosure statements obligations assumed by the provider under continuing-care contracts for each facility the provider operates.

Prior law required providers to include verification of the maintenance of required escrow accounts in the filing required within 150 days of the first FY of operation. The act instead requires disclosure statements to include a sworn statement of the applicable escrow agents that (1) such required escrows have been established and maintained or (2) an independent certified public accounting firm has verified the accounts.

Viewing and Copies

Under prior law, each provider operating a facility in the state had to make a provider's annual filings available to its residents for viewing during regular business hours. Prior law also required providers to (1) provide residents with a copy of the most recently filed financial information upon request and (2) notify them at least annually of their right to view filings and receive a copy of the most recent filing. The act instead applies these requirements to disclosure statements filed with DSS.

Filing Fees

The act eliminates a provision requiring the DSS commissioner to prescribe fees of up to $100 for filings, excluding the initial filing. By law, unchanged by the act, a provider must pay an annual filing fee of $24 for each resident unit it operates to remain registered with DSS.

7 & 10 — REQUIREMENTS BEFORE CONSTRUCTION

For providers that have not yet begun constructing facilities, the law, unchanged by the act, prohibits construction from beginning until a minimum number of living units have been presold. Prior law set the minimum number at (1) one-half of the units in the facility or (2) if the construction is to be completed in stages, one-half of the units in the designated part of the planned facility that show financial feasibility. Under the act, the minimum number is instead at least (1) one-half of the units in the facility or (2) 50% of any designated part or parts thereof as determined by DSS.

The act eliminates the requirement that such units evidence feasibility through a written notice from the DSS commissioner stating that the provider has filed proof of committed construction financing or other documentation of financial feasibility deemed sufficient by the commissioner.

The law, unchanged by the act, also requires the provider to have received a minimum deposit for all presold units before beginning construction. Under prior law, the minimum deposit was the lesser of 5% of the entrance fee per unit for all presold units or $10,000 per unit for all presold units. The act instead requires a minimum deposit of $10,000 for each presold unit.

The act applies these new requirements to contracts entered into after October 1, 2015.

7 — ADDITIONAL CONTRACT SPECIFICATIONS

Refunds

By law, continuing care facility contracts must specify (1) the terms and conditions under which the contracts may be cancelled by the provider or the resident and (2) the conditions for any entrance fee refunds. The act requires that, for contracts entered into after October 1, 2015, any refund must be delivered to the resident or his or her estate within three years from the date the contract is terminated or sooner if contractual conditions for the refund are met.

Periodic Charges and Recurring Fees

By law, the provider must include in the contract the manner in which it may adjust periodic charges or other recurring fees and any limitations of these adjustments. Prior law required that if there were no limits on these adjustments, the provider had to include a clear statement that such increases may be made at the provider's discretion. For contracts entered into after October 1, 2015, the act instead prohibits providers from increasing periodic charges or other recurring fees unless they give residents 30 days advance written notice.

8, 9, & 11 — ESCROW REQUIREMENTS AND FINANCIAL DISTRESS

Connecticut Place of Business Requirement

By law, providers must establish an entrance fee escrow with a bank or trust company as escrow agent before soliciting or entering into any continuing care contract. Prior law required that if a prospective resident was a Connecticut resident when signing the contract, the bank or trust had to be one that had its principal place of business in Connecticut. The act instead requires all providers to use banks or trusts with a place of business in Connecticut.

Funds in Escrow and Reserve Requirement Calculations

The act decreases the required amount providers must maintain in a reserve fund escrow. Prior law required providers to maintain enough funds in escrow to cover all principal and interest, rental, or lease payments due during the next 12 months on account of any first mortgage or other long-term financing of the facility. The act decreases this requirement to six months. By law, unchanged by the act, the provider must also have enough in escrow to cover the total cost of operations of the facility for one month, excluding payments for debt service, rental or lease payments, and capital improvements.

The act allows providers to use funds in accounts for mortgage loans, bond indentures, or other long-term financing in their computation of required reserve amounts, provided funds are available to make payments when operating funds are insufficient for these purposes. The act also allows providers to apply cash amounts held pursuant to requirements for such loans, indentures, or financing toward the provider's computation of the required operating reserve amount. Under the act, DSS may accept the terms or covenants regarding establishing or maintaining reserve or escrow funds or financial ratios associated with such loans, indentures, or other long-term financing as an alternative to the reserve requirements.

Collateral

Under prior law, entrance fee or reserve fund escrows could not be pledged as collateral. The act creates an exception to allow providers to pledge reserve fund escrows as collateral for a first mortgage or other long-term financing obligation of the facility.

Financial Distress and Remediation Plan

Under the act, if a provider seeks modification, waiver, or extension of any of its material financial covenants or material payment terms under a mortgage loan, bond indenture, or other long term financing agreement, the provider must, within seven business days of making the request, (1) report the request in writing to the DSS commissioner and (2) provide a copy to the applicable residents councils. If DSS determines that a facility is in financial distress, the provider must propose a remediation plan to improve its financial health. Under the act, the provider must submit the plan to DSS and disclose the plan to the residents council. The provider must file regular reports (quarterly or on an alternative schedule established by DSS) on its progress in meeting its remediation plan with DSS and the residents council.

16 — ADVISORY COMMITTEE

The act requires the Advisory Committee on Continuing Care to meet by August 1, 2015 (though the act is not effective until October 1, 2015) and quarterly thereafter. It adds to the committee a DSS designee who must report to the DSS commissioner after every meeting on actions taken and recommendations made at the meeting.

By law unchanged by the act, the committee (1) assists continuing-care staff in its review and registration of functions; and (2) reports to the commissioner on developments in the field, any special problems associated with continuing care, and providers' and residents' concerns; and (3) when appropriate, recommends changes in statutes and regulations.

14 — ENFORCEMENT AND PENALTIES

By law, the DSS commissioner, if he determines that anyone has violated continuing care facility laws, may ask the attorney general to seek restitution or damages and other appropriate relief for anyone injured by the violation. The act also applies this provision to violations of its requirements on residents' rights, residents councils, and provider communications.

15 — REGULATIONS

Prior law required DSS to adopt regulations to carry out provisions related to continuing care facilities and contracts. The act instead allows DSS to adopt such regulations, including those concerning resident rights and protections.

BACKGROUND

Continuing Care Contract

By law, a continuing care contract is an agreement in which the provider furnishes a person care and shelter in a facility or care at home with the right to future access to care and shelter in a facility and medical or nursing services or other health-related benefits for the life of a person or for a period in excess of one year. By law, the agreement governs care for a person not related to the provider and requires a present or future transfer of assets or an entrance fee in addition to or instead of periodic charges.

OLR Tracking: MF: JKL: SD: cmg