[House Report 107-235]
[From the U.S. Government Publishing Office]
107th Congress Rept. 107-235
HOUSE OF REPRESENTATIVES
1st Session Part I
======================================================================
FEDERAL LONG-TERM CARE AMENDMENTS OF 2001
_______
October 11, 2001.--Ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 2559]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 2559) to amend chapter 90 of title 5, United States
Code, relating to Federal long-term care insurance, having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for the Legislation.......................... 2
Hearings......................................................... 4
Committee Consideration.......................................... 4
Vote of the Committee............................................ 4
Committee Oversight Findings..................................... 4
Performance Goals and Objectives................................. 4
New Budget Authority and Tax Expenditures........................ 4
Congressional Budget Office Cost Estimate........................ 4
Constitutional Authority Statement............................... 7
Section-by-Section Analysis and Discussion....................... 7
Changes in Existing Law Made by the Bill, as Reported............ 8
Markup Transcript................................................ 9
Purpose and Summary
The Long-Term Care Security Act (LTCSA) was established to
permit qualified Federal employees to purchase private long-
term care insurance at a group discount. While the legislation
contained broad preemption language, it did not exempt LTCSA
insurance premiums from State and local taxes. H.R. 2559 makes
enrollment in the program more affordable to potential
enrollees by amending the LTCSA to exempt these premiums from
State and local taxes. The bill also expands coverage to
include government personnel who presently receive a deferred
annuity under Federal retirement programs.
Background and Need for the Legislation
The Long-Term Care Security Act
Background
Last year, the LTCSA (H.R. 4040, 106th) was introduced by
Rep. Scarborough, Chairman of the Government Reform Committee's
Subcommittee on Civil Service and Agency Organization. It was
sequentially referred to the Government Reform Committee and to
the Armed Services Committee. The measure (S. 2420 in the
Senate) obtained wide bipartisan support in both Houses of
Congress and was signed into law on September 19, 2000.\1\
---------------------------------------------------------------------------
\1\ Pub. L. No. 106-265, 114 Stat. 762 (2000).
---------------------------------------------------------------------------
The LTCSA permits Federal civilian employees, members of
the uniformed services, as well as civilian and military
retirees to purchase private, long-term care insurance for
themselves and qualified relatives at a group discount. The
Office of Personnel Management (OPM) estimates resulting
savings will reduce the cost of long-term care insurance
premiums for covered employees by up to 20 percent.
``Long-term care'' refers to a broad range of supportive,
medical, personal, and social services designed for individuals
who are limited in their ability to function independently on a
daily basis. Long-term care needs may arise at any time due to
an injury, chronic illness, or the effects of the natural aging
process. According to OPM, about 20 million people will be
eligible for coverage under the LTCSA. OPM further estimates
that from 300,000 to 600,00 eligible employees will enroll in
the program.
Functional dependency is generally defined as the inability
to function independently, perform essential activities of
daily living such as dressing, bathing, eating, transferring
(e.g., from a bed to a chair), walking, or the inability to
perform instrumental activities of daily living such as
shopping, preparing meals, taking medicine, and
housekeeping.\2\ Assistance with these activities may require
hands-on assistance or direction, instruction, or supervision
from another individual. Long-term care services can be
provided in a nursing home, an assisted living facility, the
community or in the home.\3\ While section 9005 of the Act
contains broad Federal preemption language, the LTCSA does not
specifically prohibit States and localities from taxing LTCSA
insurance premiums. These premiums have been estimated to add
between three and five percent to the cost of enrollment in the
program.
---------------------------------------------------------------------------
\2\ H.R. Rep. No. 106-610, at 6 (2000).
\3\ Id.
---------------------------------------------------------------------------
H.R. 2559
Introduced by Rep. Scarborough on July 18, 2001, H.R. 2559
remedies this perceived oversight by amending LTCSA to exempt
its premiums from State and local taxes. H.R. 2559 was referred
to the Committee on the Judiciary on July 17, 2001 and to the
Subcommittee on Commercial and Administrative Law on August 6,
2001. It was discharged by the Full Committee on October 2,
2001. H.R. 2559's State and local tax exemption provision
tracks the language found in both the Federal Employees Health
Benefits Program (FEHBP) and the Federal Employees Group Life
Insurance Program (FEGLI).\4\ The measure also extends coverage
to Federal employees who currently receive a deferred annuity
under existing Federal retirement programs such as the Civil
Service Retirement System (CSRS) or the Federal Employees
Retirement System (FERS).
---------------------------------------------------------------------------
\4\ See 5 U.S.C. Sec. 8909 (f)(1) and 5 U.S.C. Sec. 8714(c)(1)
(2000).
---------------------------------------------------------------------------
Prevalence of Federal Legislation Limiting State Taxing Authority
The Constitution establishes the dual sovereignty of the
States and the Federal Government. One of the primary tenets of
sovereignty reserved to States is the authority to define their
own taxing systems. While exempting certain individuals or
programs from State taxation sometimes occasions considerable
opposition from States, Congress has periodically withdrawn
State and local taxing authority in the exercise of its
Commerce Clause authority.
There are a number of examples. Congress has provided that
members of the Armed Forces are subject to taxes only in their
respective States of residence, not the States in which they
are stationed.\5\ It has also exempted Members of Congress from
multiple State taxes. Under the legislation, only States
represented by the member have taxing jurisdiction over that
member's congressional income.\6\ In 1995, Congress passed
legislation prohibiting States from collecting taxes on the
qualified pension income of nonresidents.\7\
---------------------------------------------------------------------------
\5\ Act of Oct. 6, 1942, 1041 56 Stat. 777 (codified at 50 U.S.C.
App. Sec. 574).
\6\ Act of July 19, 1977, Pub. L. No. 95-67, 91 Stat. 271 (codified
at 4 U.S.C. Sec. 113 (1994)).
\7\ See ``The State Taxation of Pension Income Act of 1995,'' Pub.
L. No. 104-95 (1996), 109 Stat. 979 (codified at 4 U.S.C. Sec. 11(c)
(1996)).
---------------------------------------------------------------------------
Congress subsequently enacted legislation prohibiting
Oregon from taxing residents of Washington who worked on
hydroelectric facilities spanning the Columbia River. In that
legislation, South Dakota residents working along the Missouri
River were extended congressional protection from multiple
State taxes.\8\ This legislation also exempted Tennessee
residents from paying Kentucky income taxes if they worked at
Fort Campbell, Kentucky, which straddles both States.
---------------------------------------------------------------------------
\8\ Pub. L. No. 105-261 (1998), codified at 4 U.S.C. Sec. Sec. 114-
115 (2000).
---------------------------------------------------------------------------
Timing Considerations
The LTCSA will not be fully implemented until late 2002.
Final long-term care insurance proposals were submitted on
August 22, 2001. Submitted bids reflected the assumption that
premiums would not be exempt from State and local taxes. OPM's
target date for selecting a winning candidate is October 15,
2001. The open season for enrollment in this program is October
1, 2002. Prompt passage of H.R. 2559 will help ensure submitted
LTCSA bids can be amended to reflect the reduced administrative
costs that exemption from State and local tax collection would
place on the prevailing bidder.
Hearings
No hearings were held on H.R. 2559.
Committee Consideration
On October 3, 2001, the Committee met in open session and
ordered favorably reported the bill H.R. 2559 without amendment
by voice vote, a quorum being present.
Vote of the Committee
No recorded votes were taken on the bill H.R. 2559 during
Committee consideration.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Performance Goals and Objectives
H.R. 2559 does not authorize funding. Therefore, clause
3(c) of rule XIII of the Rules of the House of Representatives
is inapplicable.
H.R. 2559 is intended to make long-term care insurance
coverage more affordable to eligible enrollees by exempting
LTCSA premiums from State and local taxes. The bill also
extends eligibility to enroll in the program to Federal
employees who currently receive an annunity under existing
Federal retirement programs.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 2559, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 9, 2001.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2559, a bill to
amend chapter 90 of title 5, United States Code, relating to
Federal long-term care insurance.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Charles L.
Betley, who can be reached at 226-9010.
Sincerely,
Dan L. Crippen, Director.
Enclosure
cc:
Honorable John Conyers Jr.
Ranking Member
Identical letter sent to Honorable Dan Burton.
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 9, 2001.
Hon. Dan Burton, Chairman,
Committee on the Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2559, a bill to
amend chapter 90 of title 5, United States Code, relating to
Federal long-term care insurance.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Charles L.
Betley, who can be reached at 226-9010.
Sincerely,
Dan L. Crippen, Director.
Enclosure
cc:
Honorable Henry A. Waxman
Ranking Member
Identical letter sent to Honorable F. James Sensenbrenner Jr.
H.R. 2559--A bill to amend chapter 90 of title 5, United States Code,
relating to Federal long-term care insurance.
SUMMARY
H.R. 2559 would expand eligibility for long-term care
insurance authorized under the Long Term Care Security Act
(Public Law 106-265) to persons who had deferred their
eligibility for a Federal retirement annuity and who, under
current law, would not be able to participate when the
enrollment period opens in 2003. CBO estimates that enactment
of H.R. 2559 would not have a significant effect on Federal
spending. Because the bill would affect direct spending, pay-
as-you-go procedures would apply.
H.R. 2559 would preempt state premium taxes on long-term
care insurance offered to Federal employees, members of the
uniformed services, civilian and military retirees, and a
number of their relatives. This preemption would be an
intergovernmental mandate as defined in the Unfunded Mandates
Reform Act (UMRA). CBO estimates that states would lose
revenues totaling about $8 million annually beginning in 2003;
thus, the threshold established in UMRA ($56 million in 2001,
adjusted annually for inflation) would not be exceeded. The
bill contains no private-sector mandates as defined in UMRA.
ESTIMATED COST TO THE FEDERAL GOVERNMENT
Under current law, Federal retirees who are receiving an
annuity would be able to participate in the long-term care
insurance program for Federal employees, but those who defer
receiving their annuity are not eligible. H.R. 2559 would allow
this group to participate. CBO estimates that the number of
annuitants who would be newly eligible for the long-term care
insurance program for Federal employees because of H.R. 2559
would be about 2,000, and of these, only a portion would
purchase coverage though the Federal program. Because the
Federal Government does not contribute to enrollees' premiums,
and the insurer or insurers would be required to reimburse the
Office of Personnel Management (OPM) for its expenses in
setting up and administering the plan, net Federal outlays
would be zero over the long run.
The expenses that OPM would incur before collecting
premiums from enrollees and reimbursement from the insurers
would be funded by outlays from the Federal Government's
Employees' Life Insurance Fund. H.R. 2559 would not affect the
administrative costs of designing the plan and negotiating
contracts with insurers. However, the Federal Government would
incur additional costs to inform the additional annuitants of
their eligibility (which would primarily consist of postage and
printing additional brochures about plan choices) and the costs
incurred by OPM in registering those who choose to participate.
CBO estimates that these additional costs would total less than
$500,000, in fiscal year 2002. The costs of this legislation
fall within budget function 600 (income security).
PAY-AS-YOU-GO CONSIDERATIONS
The Balanced Budget and Emergency Deficit Control Act sets
up pay-as-you-go procedures for legislation affecting direct
spending or receipts. Although the additional outlays from the
Employees' Life Insurance Fund would be direct spending, CBO
estimates that they would total less than $500,000.
ESTIMATED IMPACT ON STATE, LOCAL AND TRIBAL GOVERNMENTS
The Long-Term Care Security Act authorized a program
through the Office of Personnel Management to offer long-term
care insurance to Federal employees, members of the uniformed
services, civilian and military retirees, and a number of their
relatives. That law preempted state laws requiring certain
levels of coverage or benefit requirements that would have
applied to long-term care insurance offered under the program.
This bill would extend the preemption to cover insurance
premium taxes, prohibiting states from collecting tax revenues
that otherwise would apply to the policies. This preemption
would be an intergovernmental mandate as defined in UMRA. CBO
estimates that states would lose revenues totaling about $8
million annually beginning in 2003; thus, the threshold
established in UMRA ($56 million in 2001, adjusted annually for
inflation) would not be exceeded.
Almost all states levy premium taxes on health care
insurance, and in most cases those taxes also would apply to
policies providing coverage for long-term care. Premium tax
rates on health insurance generally range from less than 1
percent to about 2.75 percent, with a large number at about 2
percent. CBO has estimated that about 220,000 employees and
retirees would take advantage of the new long-term care
insurance and that about half of those individuals would have
at least one eligible relative who also would purchase the
insurance. Assuming an average premium of about $1,300 annually
for such insurance, CBO estimates that states would lose about
$8 million annually in lost revenues from the preemption of
their premium taxes.
ESTIMATED IMPACT ON THE PRIVATE SECTOR
CBO estimates that the bill would have no private-sector
mandates as defined in UMRA.
ESTIMATE PREPARED BY:
Federal Costs: Charles L. Betley (226-9010)
Impact on State, Local, and Tribal Governments: Leo Lex (225-
3220)
Impact on the Private Sector: Stuart Hagen (225-2644)
ESTIMATE APPROVED BY:
Peter H. Fontaine
Deputy Assistant Director for Budget Analysis
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I section 8, clause 3 of the
Constitution.
Section-by-Section Analysis and Discussion
Section 1. This section amends 5 U.S.C. Sec. 9001(2) to
allow all individuals over the age of 18 who are entitled to an
annuity under the Civil Service Retirement System, the Federal
Employees Retirement System, or any other retirement system for
Federal employees to purchase private long-term care insurance
through the program established in the Long-Term Care Security
Act, Public Law 106-265. Without this change, individuals who
receive a deferred annuity (or a survivor annuity based upon a
deferred annuity) would not be eligible to participate.
Section 2. This section amends 5 U.S.C. Sec. 9005 to exempt
long-term care insurance policies issued through this program
from premium taxes imposed by States, local governments, or the
Commonwealth of Puerto Rico.
Section 3. This section makes these revisions retroactively
effective.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
TITLE 5, UNITED STATES CODE
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
Subpart G--Insurance and Annuities
* * * * * * *
CHAPTER 90--LONG-TERM CARE INSURANCE
* * * * * * *
Sec. 9001. Definitions
For purposes of this chapter:
(1) * * *
[(2) Annuitant.--The term ``annuitant'' has the
meaning such term would have under paragraph (3) of
section 8901 if, for purposes of such paragraph, the
term ``employee'' were considered to have the meaning
given to it under paragraph (1) of this subsection.]
(2) Annuitant.--The term ``annuitant'' means--
(A) any individual who would satisfy the
requirements of paragraph (3) of section 8901
if, for purposes of such paragraph, the term
``employee'' were considered to have the
meaning given to it under paragraph (1) of this
subsection; and
(B) any individual who--
(i) satisfies all requirements for
title to an annuity under subchapter
III of chapter 83, chapter 84, or any
other retirement system for employees
of the Government (whether based on the
service of such individual or
otherwise), and files application
therefor;
(ii) is at least 18 years of age;
and
(iii) would not (but for this
subparagraph) otherwise satisfy the
requirements of this paragraph.
* * * * * * *
Sec. 9005. Preemption
(a) Contractual Provisions.--The terms of any contract
under this chapter which relate to the nature, provision, or
extent of coverage or benefits (including payments with respect
to benefits) shall supersede and preempt any State or local
law, or any regulation issued thereunder, which relates to
long-term care insurance or contracts.
(b) Premiums.--
(1) In general.--No tax, fee, or other monetary
payment may be imposed or collected, directly or
indirectly, by any State, the District of Columbia, or
the Commonwealth of Puerto Rico, or by any political
subdivision or other governmental authority thereof,
on, or with respect to, any premium paid for an
insurance policy under this chapter.
(2) Rule of construction.--Paragraph (1) shall not
be construed to exempt any company or other entity
issuing a policy of insurance under this chapter from
the imposition, payment, or collection of a tax, fee,
or other monetary payment on the net income or profit
accruing to or realized by such entity from business
conducted under this chapter, if that tax, fee, or
payment is applicable to a broad range of business
activity.
* * * * * * *
Markup Transcript
BUSINESS MEETING
WEDNESDAY, OCTOBER 3, 2001
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 2:00 p.m., in
Room 2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
Now, pursuant to notice, I call up the bill H.R. 2559, a
bill to amend chapter 90 of title V of United States Code
relating to Federal long-term care insurance for purposes of
markup and move its favorable recommendation to the House.
Without objection, the bill will be considered as read and open
for amendment at any point.
[The bill, H.R. 2559, follows:]
The Chair recognizes himself. Last year, Congress enacted
the Long-Term Security Care Act introduced by Representative
Scarborough, a former Member of this Committee. The measure
obtained broad bipartisan support and overwhelmingly passed
before being signed. The legislation established a program
under which Federal civilian employees, members of the armed
forces, military and civilian retirees can purchase private
long-term care insurance for themselves and qualified relatives
at a group discount. According to OPM, about 25 million people
will be eligible for coverage under this program when it is
fully implemented late next year.
While section 9005 of the act contains broad Federal
preemption language, the act does not specifically prohibit
State and localities from taxing these insurance premiums. As a
result, participating employees and military personnel will
have to pay an additional 3 to 5 percent of the costs of
enrollment to obtain coverage. This bill remedies this problem
by amending the LTSCA to exempt premiums from State and local
taxes. It also makes qualified Federal employees who are
members of Federal retirement plans eligible for coverage under
this program.
The bill was referred to Government Reform and Armed
Services, but we got it because it deals with an exemption of
premiums from State and local taxes.
The events of September 11 have again reminded us of the
sacrifices of our uniformed services and we ought to open up
this benefit to them, and I strongly urge the Committee to
approve it without objection. Further opening statements will
be included in the record.
Gentleman from Georgia.
Mr. Barr. I thank the Chairman. Mr. Chairman, I would like
to express my strong support for H.R. 2559 and applaud the
Chairman for taking steps to ensure prompt consideration of
this bill. I would also like to commend former Committee Member
Joe Scarborough for his efforts to secure passage of the Long-
Term Care and Security Act in the last Congress and for
introducing H.R. 2559 this Congress.
Military service members and their families are asked to
make personal sacrifices on a regular basis. Often the costs of
premiums for membership in long-term care insurance plans are
prohibitive to men and women in uniform. The Long-Term Care
Security Act addresses this problem by allowing members of the
military and other Federal employees to purchase long term
health care insurance for themselves and their families at a
group discount. H.R. 2559 makes this insurance even more
affordable by exempting these premiums from State and local
taxes.
H.R. 2559 was referred to the Commercial and Administrative
Law Subcommittee, which I chair. I applaud the Chairman for
scheduling H.R. 2559 for expedited passage and urge all Members
to support this important legislation supporting our military
and military retirees.
Chairman Sensenbrenner. Are there amendments? Hearing none,
question occurs--the Chair notes the report and quorum is
present. The question occurs on the motion to report the bill
H.R. 2559 favorably. Those in favor will say aye. Opposed no.
The ayes appear to have it. The ayes have it. The motion is
agreed to, and the bill is favorably reported without
objection.
The Chair is authorized to move to go to conference
pursuant to House rules. Without objection, the staff is
directed to make any technical and conforming changes and all
Members will be given 2 days, as provided by House rules, in
which to submit additional supplemental dissenting or minority
views.
[Intervening business.]
And the Committee is adjourned.
[Whereupon, at 8:30 p.m., the Committee was adjourned.]