CALIFORNIA: INSURANCE HEAD MAY TRIM LONG-TERM BENEFITS

      California Insurance Commissioner Chuck Quackenbush "is
 planning to use a little-known provision" in the Kassebaum-
 Kennedy health insurance reform law "that would allow insurance
 companies to trim benefits in long term care policies."  LOS
 ANGELES TIMES reports that Quackenbush is making the move amid
 complaints from consumer groups and the chair of the state Senate
 Insurance Committee, who says the commissioner is "usurping
 legislative power and may be violating a 1992 California law." 
 That law makes it easier for consumers to utilize long-term care
 benefits.
      BACKGROUND:  TIMES reports that "hundreds of thousands" of
 long term care policies have been sold in the state, mostly to
 the elderly.  "Now, with the specter of cutbacks in Medicare,"
 TIMES reports, "insurance companies are bracing for a new surge
 in sales of these policies as more and more people seek private
 coverage for the infirmities that often accompany old age."  But
 the new Kassebaum-Kennedy law, which attempts to encourage the
 sale of such policies by providing tax breaks for both purchasers
 and policy sellers, has "created a conflict in California." 
 TIMES reports that the conflict is a result of a state law that
 "requires companies to offer a greater array of benefits to the
 policyholder than those that would be offered in policies that
 qualify for the tax exemption."  
      BENEFITS TRIGGER:  According to Bonnie Burns, a consumer
 representative for the National Association of Insurance
 Commissioners, the major difference between the state- and
 federally-sanctioned policies "are the disabilities that qualify
 a person for benefits."  Under California law, the "inability to
 walk can help trigger benefits," but it is not a factor in the
 new tax-exempt policies.  Burns said that some companies have
 stopped selling the policies with greater benefits, and predicted
 that "it would be only a matter of time until insurance carriers
 stopped offering" the policies altogether "because they provide
 lower profit margins."  State Sen. Hersche Rosenthal (D),
 insurance committee chair, said in a letter to Quackenbush last
 week that "the ability to collect benefits was of much greater
 value to consumers than the tax write-off."  He said, "Rather
 than serving the insured's interest, the proposed changes will
 create a burdensome situation for consumers who will be forced to
 meet greater standards of disability before collecting benefits." 
      REAX:  Richard Wiebe, a spokesperson for Quackenbush, said
 that the commissioner "decided to issue a directive to permit the
 sale of policies with lesser benefits so both consumers and
 companies could take advantage of the tax breaks."  He said, "Are
 we to penalize hundreds of thousands of people who want to buy
 this policy to satisfy the concerns of one state senator and some
 consumer groups?"  He added that Quackenbush "must act now"
 because it could be "months or even years" before tax-exempt
 policies would be made available to Californians through state or
 federal legislation.
      OUT OF BOUNDS?:  Rosenthal said that Quackenbush "should
 have waited for the state Legislature to convene next year before
 taking a unilateral action."  TIMES reports that consumer groups
 agree that the commissioner "acted hastily," and charge that he
 moved to aid the insurance industry "which has contributed
 hundreds of thousands of dollars to his political campaigns since
 1994."  Jamie Court, leader of the Proposition 103 Enforcement
 Project, said that instead of allowing insurers to sell policies
 with fewer benefits, Quackenbush "could have asked federal
 regulators to approve the current California policy as sufficient
 for tax exemptions."  Court said, "If this commissioner wanted to
 act on behalf of the insured rather than the insurers, he would
 go to bat for them with the federal regulators.  Instead he's
 going to bat for his campaign contributors" (Ellis/Gladstone,
 12/10).