example.scss

.block {
  &:hover {
    &__element {
      color: red;
    }
  }
}

/* Expected/desired output: */
.block:hover .block__element {
  color: red;
}

/* Actual output: */
.block:hover__element {
  color: red;
}
/* This is not a thing :( */

/* Shitty workaround: */
.block {
  $n: #{&};
  &:hover {
    #{$n}__element {
      color: red;
    }
  }
}

/* This works: */
.block {
  &:hover &__element {
    color: red;
  }
}

/* But, sadly, still means relatively more labor if I want to style more than one thing in the pseudo-class/state: */
.block {
  &:hover &__element {
    color: red;
  }
  
  &:hover &__bar {
    color: blue;
  }
  
  &:hover &__foo {
    color: green;
  }
}

/* VS: */
.block {
  &:hover {
    &__element {
      color: red;
    }
    
    &_bar {
      color: blue;
    }
    
    &__foo {
      color: green;
    }
  }
}

SassMeister test: http://sassmeister.com/gist/d88368304e4b5d674c82