AN ACT Relating to continuing care contracts; adding a new chapter to Title 48 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. No person, association, or organization may enter into a continuing care contract as a provider except pursuant to this chapter. For the purposes of this chapter, "continuing care contract" means a contract to provide to a person for a term in excess of one year, nursing services, medical services, or health-related services, board and lodging and care as necessary, or any combination of such services, which are conditioned upon the transfer of property.

NEW SECTION. Sec. 2. Facilities offering continuing care contracts must possess a certificate of authority issued by the insurance commissioner. The commissioner shall adopt application forms for continuing care certificates of authority. The commissioner may adopt such rules as are deemed necessary for the administration of this chapter.

NEW SECTION. Sec. 3. An application for a certificate of authority shall include the following:

(1) Projected annual income statements for not less than a five-year period commencing on the date the facility is intended to become operational, or, if already operational, projected annual income statements commencing on the date the application for a certificate of authority is filed;

(2) The beginning cash balance of the facility;

(3) The anticipated earnings on cash reserves;

(4) An estimate of gifts or bequests to be relied on to meet operational expenses;

(5) The estimates of net receipts from entrance fees and a description of the actuarial basis and method of calculation for the projection of entrance fee receipts;

(6) A projection of estimated operational expenses of the facility, including a description of the assumptions and methods used in the projections;

(7) An estimate of annual payments of principal and interest required by any mortgage loan, lease, contract, rental agreement, or other long-term financing method;

(8) The name and business address of the applicant;

(9) A description of the physical property of the facility;

(10) The names of the members of the board of directors, the trustees, the managing partners, or other responsible officers;

(11) The estimated number of residents of the facility to be provided services pursuant to continuing care contracts;

(12) A statement of the provisions that have been made, or will be made, to provide reserve funding or security by the provider to enable full performance of obligations arising under continuing care contracts;

(13) A statement indicating any religious, charitable, or other nonprofit organization affiliation, and the extent to which the affiliate organization will be responsible for the financial and contractual obligations of the facility;

(14) A statement identifying any affiliate or parent corporation of the facility;

(15) A statement disclosing any restrictive order of a court of record and any suspension or revocation of any state or federal license or permit relating to the facility or its officers in their official capacities;

(16) A statement of any periodic rates to be paid by residents, the method used to determine the rates, and the manner by which the rates may be adjusted in the future. If the facility is in operation when the application is filed, the statement must include data showing the frequency and average dollar amount of each increase in periodic rates for the previous five years;

(17) An estimate of the cost of any construction, lease, rental, or purchase of fixtures and real property anticipated within five years of the filing of the application.

NEW SECTION. Sec. 4. Prior to the issuance of any certificate of authority, the insurance commissioner shall require that the applicant establish a reserve fund escrow account with any bank which is a member of the federal deposit insurance corporation, savings and loan association which is a member of the federal savings and loan insurance corporation, trust company, or other escrow agent. The escrow account shall be maintained in an amount equal to the aggregate principal and interest, rental, or lease payments due during a twelve-month period on any first mortgage or other long-term financing of the facility or any leases or other rental agreement for the facility.

NEW SECTION. Sec. 5. Any organization or person receiving a certificate of authority to enter into continuing care contracts as a provider shall maintain reserves covering obligations assumed under the contracts. The reserves shall be in an amount not less than the sum computed in accordance with the standard valuation based upon a current table of mortality selected by the insurance commissioner.

The reserves may be maintained in deposits, notes, bonds, stocks, real estate, or other investments approved by the insurance commissioner.

NEW SECTION. Sec. 6. An individual, association, or organization planning to construct a continuing care facility using deposits from potential residents, may apply to the commissioner for a permit to sell deposit subscriptions. The permit to sell deposit subscriptions shall be based on the same criteria as an application for a certificate of authority plus an acceptable arrangement for maintaining deposits by an escrow agent until the project is at least fifty percent completed and fifty percent subscribed to.

NEW SECTION. Sec. 7. The insurance commissioner may suspend, limit, or revoke any certificate of authority:

(1) If the application is found to contain materially erroneous data; or

(2) If the certificate holder fails to maintain at all times the minimum reserves required by this chapter.

NEW SECTION. Sec. 8. This act shall take effect on January 1, 1986.

NEW SECTION. Sec. 9. Sections 1 through 7 of this act shall constitute a new chapter in Title 48 RCW.