Lawsuit Says CalPERS Misled Long-Term Care Policyholders

TOPIC ALERT:

On Tuesday, three law firms filed a lawsuit against CalPERS on behalf of more than 125,000 long-term care policyholders alleging that the pension fund misled beneficiaries by saying premium rates for such plans would be stable, the Sacramento Bee reports (Kasler/Ortiz, Sacramento Bee, 8/7).

Background

In October 2012, CalPERS' Board of Administration unanimously approved a plan to raise long-term care insurance premiums by 85% for hundreds of thousands of state workers and retirees.

CalPERS officials cited cost concerns when justifying the premium hike. They said the long-term care program has enough money for now but will face shortfalls in decades to come.

Unlike its pension benefits program, CalPERS' long-term care program is not funded by taxpayers, and the state pension fund must pay its own claims.

In February, CalPERS began sending notices to more than 110,000 beneficiaries with long-term care insurance about the increase, scheduled to begin in 2015.

Policyholders criticized the plan to hike premiums, saying that CalPERS guaranteed that rates would not increase when it sold them the long-term care plans in the 1990s (California Healthline, 2/28).

Details of the Lawsuit

The suit was filed in Los Angeles Superior Court by:

  • Kershaw, Cutter & Rattinoff;
  • Shernoff Bidart Echeverria Bentley; and
  • Kreindler & Kreindler.

According to the lawsuit, CalPERS:

  • Failed to warn policyholders about the program's financial problems; and
  • Admitted to taking part in an inappropriate investment strategy (CBS Los Angeles, 8/6).

The lawsuit argues that CalPERS should return all premiums paid for long-term care plans.

The firms are seeking class-action status for the suit.

CalPERS' Response

In a statement following the filing, CalPERS said that it "took great care in coming to the decision to restructure the program so that participants could access services when they need them."

The pension fund added, "We consulted with member and policyholder groups and completed rigorous analyses of options before making the very tough decision that rate increases were necessary" (Sacramento Bee, 8/7).

Barbara Hanson
Reply to Maxine-If you can afford current rate, hang on. If not, can you afford a drop to 3 years once rates are finalized? Losing inflation is not good, as the CalPERS program usually does not pay 100% of daily for home or assisted living. Check on that, as home or assisted is where most insured folks choose to live. Home care can be $15 to $25/hour. Assisted living $3000 to $7000 a month, depending on where you live. Even $100 a day can help if you will have other ongoing income to augment the CalPERS benefit.
Maxane Goldstein
At 80 years of age it would do me no good to have my money returned. To buy a new policy through a company would be cost prohibitive I began with the top offering at $138 per month. I dropped to the next one down eventually but I"m still paying close to $300 which will increase by 85%. .
Roger Mulllins
CalPERS deserve this lawsuit. I feel sorry for policyholders who were hit by the 85% price hike. The increase was too huge and even if it has basis, the policyholders shouldn't shoulder this crazy amount of money just to keep this program running. For me, they should just return the premiums if they can't guarantee to provide coverage and pay for claims to all their policyholders. CalPERS misled a lot of people and to avoid this situation in the future, I suggest you should start reading about long term care insurance and it's real cost. Visit this: http://www.ltcoptions.com/long-term-care-insura... now.
Michael Ryan
The State simply does not have the ability to run a business. In other cases of mismanagement they raise the taxes.. Because this is privately funded those that wrongly believed now have 85% increases. There is no accountability in these government programs. Many have still have options available to them, they wont get the correct answers from CALPERS. Need help, ask.
Barbara Hanson
CalPERS had the warning in their material: The Board can raise rates. Premiums were low at that point and many folks got coverage they could never have gotten then because the underwriting was very easy. If someone bought a policy of $120 a day, unlimited, and it has grown to $240 a day in 15 years, still unlimited, they could not buy it at all today, as Unlimited is off the market. $240 a day for say 3 years for a 65 year old can be $8925/yr to buy today. Unlimited would be over $16,000 to buy -- if it were even possible, Downsize to 3 years, keep the inflation. It is better than anything you could get today—your health may have changed, and cost of care has doubled. Anyone shopping for LTC insurance today would do well to shop the private market. Unlike CalPERS, it is state regulated, there are DOI mandated reserves in approved accounts, with Guaranty Assoc. financial backup. See a long-term specialist to design something appropriate and affordable. Don't kill the CalPERS program!

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