DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part of
the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute part of
the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Cromer HB No. 545
Abstract: Provides for an alternative long-term care benefit option for Medicaid applicants with
life insurance policies who enter into certain viatical settlement contracts.
Present law provides for viatical settlement contracts by which the owner of a life insurance
policy may enter into a written agreement under which compensation will be paid to that owner
during his lifetime in return for his assignment, transfer, sale, or bequest of the death benefit or
ownership of the policy at the time of his death.
Present law, relative to Medicaid estate recovery, requires that Medicaid applicants surrender life
insurance policies with a cash value of at least $2,000 in order to qualify for Medicaid. Also,
pursuant to regulations adopted pursuant to proposed law, Medicaid recipients are limited to a
small amount of money per month on discretionary spending (thus resulting in the lapse or
surrender of life insurance policies owned by some Medicaid recipients).
Proposed law provides for an alternative long-term care benefit option for Medicaid applicants
with life insurance policies who enter into certain viatical settlement contracts, as follows:
(1)Requires that Medicaid applicants be notified that they may sell (rather than abandon)
their life insurance policies pursuant to a viatical settlement contract, as further
specifically provided in proposed law. Requires that the proceeds of such a contract be
placed in a state or federally insured irrevocable trust that must spend the proceeds on
Medicaid eligible expenses, paid directly to a health care provider (thus dedicating this
money to pay for the applicant's health care needs with the applicant's own resources, so
that the applicant will be delayed or completely diverted from entering the Medicaid
system).
(2) Further provides that the lesser of 5% of the face amount of the policy or $5,000 shall be
reserved in the trust to be for burial needs at the time of the recipient's death and that any
other proceeds of the trust that are unused at the time of the recipient's death shall be paid
to a named beneficiary or the deceased's estate.
(3)Requires that all such viatical settlement transactions meet the requirements of present
law relative to viatical settlements generally.
(4)Places additional requirements on such viatical settlement contracts, including the
following: (a)That all such viatical settlement providers maintain a surety bond, executed and
issued by an insurer authorized to issue surety bonds in this state, a policy of
errors and omissions insurance, or a deposit of cash, certificates of deposit or
securities, or any combination thereof in the amount of $500,000 and that all
claims against a viatical settlement provider be limited and paid from these funds.
(b)That all such viatical settlement contract forms be filed with and approved by the
commissioner of insurance.
(c)That all advertising and marketing materials used by such a viatical settlement
provider be filed with the commissioner of insurance.
(5)Specifically requires the secretary of the Department of Health and Hospitals (DHH) to
provide written notice of this alternative long-term care benefit option as part of the
application for Medicaid, or in a separate document, signed by the applicant.
(6)Authorizes the commissioner of insurance and the secretary of DHH to promulgate and
adopt rules to ensure that: (a) the proceeds from the viatical settlement contract shall be
distributed directly to a health care provider; (b) eligibility for Medicaid shall be
determined without considering the balance of the viatical settlement proceeds; and (c)
Medicaid and applied income payments shall begin the day following the exhaustion of
the life settlement proceeds.
(7)Exempts the settlement proceeds of a viatical settlement contract entered into pursuant to
proposed law from state personal income taxation, applicable for all taxable periods
beginning on or after Jan. 1, 2013.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 47:293(10); Adds R.S. 22:1806, R.S. 36:254((D)(2)(e), and R.S.
47:293(9)(a)(xviii))