HLS 13RS-827 ORIGINAL
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Regular Session, 2013
HOUSE BILL NO. 545
BY REPRESENTATIVE CROMER
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
INSURANCE/LIFE: Provides for an alternative long-term care benefit option for Medicaid
applicants with life insurance policies who enter into certain viatical settlement
contracts
AN ACT1
To amend and reenact R.S. 47:293(10) and to enact R.S. 22:1806, R.S. 36:254((D)(2)(e),2
and R.S. 47:293(9)(a)(xviii), relative to an alternative long-term care benefit option3
for Medicaid applicants with life insurance policies who enter into certain viatical4
settlement contracts; to provide with respect to such viatical settlement contracts,5
including specific requirements for such contracts; to provide with respect to the6
duties and powers of the commissioner of insurance and the secretary of the7
Department of Health and Hospitals relative to such contracts; to provide for a state8
personal income tax exemption for the settlement proceeds from any such viatical9
settlement contract; and to provide for related matters.10
Be it enacted by the Legislature of Louisiana:11
Section 1. R.S. 22:1806 is hereby enacted to read as follows:12
§1806. Alternative long-term care benefit option for Medicaid applicants with life13
insurance policies who enter into certain viatical settlement contracts14
A.(1) The owner of a life insurance policy with any face amount in excess of15
ten thousand dollars may enter into a viatical settlement contract, in exchange for16
payments directly to a health care provider for Medicaid covered long-term care17
services for the recipient of such services in accordance with this Section.18 HLS 13RS-827 ORIGINAL
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(2) The proceeds of a viatical settlement contract entered into pursuant to this1
Section shall not be considered as a resource or asset in determining a Medicaid2
applicant's or recipient's eligibility for Medicaid and shall only be used as allowed3
for Medicaid covered long term-care services in accordance with this Section. No4
state or federal Medicaid funds shall be used for such Medicaid recipient’s care until5
such available proceeds are spent down, except for the amount provided for in6
Paragraph (B)(1) of this Section.7
B. In addition to any requirements contained in this Part, any viatical8
settlement contract entered into pursuant to this Section shall include the following:9
(1) A requirement that the lesser of five percent of the face amount of the10
policy or five thousand dollars shall be reserved and be payable to the viator's estate11
or a named beneficiary upon the death of the insured under the policy that is the12
subject of the viatical settlement contract for burial expenses.13
(2) A requirement that the balance of proceeds of the viatical settlement14
contract that are unpaid at the death of the insured shall be paid to the viator’s estate15
or a named beneficiary.16
(3) A schedule evidencing the total amount payable to the viator under the17
viatical settlement contract.18
C. All proceeds of the viatical settlement contract shall be held in an19
irrevocable state or federally insured account for the benefit of the recipient of the20
services and administered in accordance with this Section.21
D. The type of long-term care services payable from the irrevocable state or22
federally insured account shall be chosen only by the recipient of the services. Any23
attempt by any person to require the use of a specific long-term care provider to24
obtain long-term care services pursuant to this Section shall be strictly prohibited and25
shall constitute an unfair trade practice under R.S.22:1803.26
E. Any viatical settlement provider entering into a viatical settlement contract27
pursuant to this Section shall maintain a surety bond, executed and issued by an28
insurer authorized to issue surety bonds in this state, a policy of errors and omissions29 HLS 13RS-827 ORIGINAL
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insurance, or a deposit of cash, certificates of deposit or securities, or any1
combination thereof in the amount of five hundred thousand dollars.2
F. For purposes of this Section, in addition to any requirements of this Part:3
(1) Viatical settlement forms for contracts entered into pursuant to this4
Section shall be filed and approved by the commissioner of insurance.5
(2) Advertising and marketing materials used by a viatical settlement6
provider pursuant to this Section shall be filed with the commissioner.7
G. For purposes of this Section, for any policy that is the subject of a viatical8
settlement contract that has been in force for five years or more, the provisions of9
R.S. 22:1801(G) shall not apply.10
H. Notwithstanding the provisions of R.S. 22:1804(2), the proceeds of a11
viatical settlement contract entered into pursuant to this Section shall be greater than12
the cash surrender value or accelerated death benefit in the policy available at the13
time the contract is executed by all parties.14
I. Any claim against a viatical settlement provider from a viator, the viator’s15
estate, any beneficiary, or any other person with respect to the viatical settlement16
contract may not exceed the face amount of the policy, less the proceeds paid under17
the viatical settlement contract and the total amount of premiums paid subsequent18
to entering into the viatical settlement contract. Any payment of a claim by a viatical19
settlement provider shall be made from the funds provided for pursuant to Subsection20
E of this Section.21
J. The commissioner shall conduct periodic market examinations, in22
accordance with R.S. 22:1796, of each viatical settlement provider regarding viatical23
settlement contracts entered into pursuant to this Section.24
K. The secretary of the Department of Health and Hospitals shall provide,25
written notice of the life insurance policy option provided for in this Section as part26
of the application for Medicaid, or in a separate document, signed by the applicant.27
L. The commissioner of insurance and the secretary of the Department of28
Health and Hospitals are authorized to promulgate and adopt rules to ensure that:29 HLS 13RS-827 ORIGINAL
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(1) The proceeds from the viatical settlement contract shall be distributed1
directly to a health care provider in accordance with this Section.2
(2) Eligibility for Medicaid shall be determined without considering the3
balance of the viatical settlement proceeds pursuant to Paragraph (A)(2) of this4
Section,5
(3) Medicaid and applied income payments shall begin the day following the6
exhaustion of the life settlement proceeds.7
Section 2. R.S. 36:254((D)(2)(e) is hereby enacted to read as follows:8
§254. Powers and duties of the secretary of the Department of Health and Hospitals9
* * *10
D.11
* * *12
(2) Except as otherwise limited by a specific provision of law, the secretary13
is authorized to perform all of the following relative to or concerning the Medical14
Assistance Program:15
* * *16
(e) Exercise those powers and duties provided for him in R.S. 22:1806,17
including providing written notice of the alternative long-term care benefit option18
provided for pursuant to that Section to applicants for the Medical Assistance19
Program and adopting and promulgating necessary rules or regulations pursuant to20
that Section.21
* * *22
Section 3. R.S. 47:293(10) is hereby amended and reenacted and R.S.23
47:293(9)(a)(xviii) is hereby enacted to read as follows:24
§293. Definitions25
The following definitions shall apply throughout this Part, unless the context26
requires otherwise:27
* * *28 HLS 13RS-827 ORIGINAL
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(9)(a) "Tax table income", for resident individuals, means adjusted gross1
income plus interest on obligations of a state or political subdivision thereof, other2
than Louisiana and its municipalities, title to which obligations vested with the3
resident individual on or subsequent to January 1, 1980, and less:4
* * *5
(xviii) The settlement proceeds from a viatical settlement contract entered6
into pursuant to R.S. 22:1806.7
* * *8
(10) "Tax table income", for nonresident individuals, means the amount of9
Louisiana income, as provided in this Part, allocated and apportioned under the10
provisions of R.S. 47:241 through 247, plus the total amount of the personal11
exemptions and deductions already included in the tax tables promulgated by the12
secretary under authority of R.S. 47:295, less the proportionate amount of the federal13
income tax liability, excess federal itemized personal deductions, the temporary14
teacher deduction, the recreation volunteer and volunteer firefighter deduction, the15
construction code retrofitting deduction, any gratuitous grant, loan, or other benefit16
directly or indirectly provided to a taxpayer by a hurricane recovery entity if such17
benefit was included in federal adjusted gross income, the exclusion provided for in18
R.S. 47:297.3 for S Bank shareholders, the deduction for expenses disallowed by19
I.R.C. Section 280C, the deduction for net capital gains, the deduction for the20
settlement proceeds from a viatical settlement entered into pursuant to R.S. 22:1806,21
and personal exemptions and deductions provided for in R.S. 47:294. The22
proportionate amount is to be determined by the ratio of Louisiana income to federal23
adjusted gross income. When federal adjusted gross income is less than Louisiana24
income, the ratio shall be one hundred percent.25
* * *26
Section 4. The provisions of Section 3 of this Act shall be applicable for all taxable27
periods beginning on or after January 1, 2013.28 HLS 13RS-827 ORIGINAL
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Section 5. This Act shall become effective upon signature by the governor or, if not1
signed by the governor, upon expiration of the time for bills to become law without signature2
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If3
vetoed by the governor and subsequently approved by the legislature, this Act shall become4
effective on the day following such approval.5
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: HLS 13RS-827 ORIGINAL
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(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))