Insurers and brokers selling long-term care (LTC) insurance in California should be aware of the California Department of Insurance (CDI) bulletin of August 23, 2023, expressing concern over certain complaints received by CDI regarding marketing efforts being used to encourage California residents to purchase LTC insurance in advance of any LTCi public option that may be implemented in California. Specifically, the complaints alleged that marketing efforts have included statements that such LTCi public option will be implemented in 2024; that a payroll tax will be levied on California residents as part of the public option program; and that – like the regime in Washington – such tax can be avoided by purchasing LTCi before the end of 2023.

As part of the bulletin, the CDI emphasized that no legislation concerning a public option has been passed. Rather, pursuant to California Assembly Bill 567 (2019), a task force has been created to study potential design structures, which feasibility study was issued in December of last year. Additionally, the task force is currently working on an actuarial analysis of the proposed design structures, due to be issued by January 1, 2024. The CDI emphasized that, following the issuance of any actuarial report, the Legislature “may choose to adopt some, all, or none of the recommendations of the Task Force.”

Given this uncertainty, CDI emphasized it “will not tolerate” marketing campaigns that include false or misleading communications, emphasizing:

Whether a [public option] program will be enacted and the date of enactment are unknown at this time. Any communication that states that a public program will be (or is likely to be) enacted on January 1, 2024, or on any other specific date, is blatantly untrue and is presumed to be a knowing violation of the law. References to inaccurate “deadlines,” “facts,” “mandatory taxes” and other unknown details are not acceptable. Small print disclaimers are not an adequate means of redeeming an otherwise threatening, pressure-filled communication.

CDI noted that violations of California law for the marketing methods described in the bulletin are punishable up to $25,000 per violation for agents and brokers, and $500,000 per violation for insurers.