With an 85 percent premium hike looming, government workers and retirees covered by CalPERS' costliest long-term care insurance policies face a crucial decision: Swallow the increase or get out of a program they have been paying into for years.

The reality of the increase literally came home this week as letters from CalPERS hit the mailboxes of 148,000 policyholders.

The fund's board last year voted to raise premiums for the 90 percent of insured members who bought the top-tier plan – lifetime coverage and inflation protection for things like nursing home and assisted-living care.

Half of those policyholders are in the very highest tier and also face two small increases over the next two years before the 85 percent jump kicks in. In all, rates for them will roughly double.

CalPERS says it is hiking rates to keep the insurance fund solvent long-term. Losses from higher-than-expected claims, lower-than-expected investment returns and loose underwriting standards early on forced the decision.

Many long-term care insurers suffered similarly, said Cynthia S. Meyers, a Sacramento-based certified financial planner.

"There's been an evolution in long-term care insurance" as underwriters learned more over time, she said.

CalPERS' program also draws from a relatively shallow pool of policyholders because it is a members-only plan. Larger insurers can spread risk more widely. "That's catching up with them," Meyers said.

Unlike its pension benefits program, CalPERS' $3.6 billion long-term care insurance fund isn't backstopped by taxpayers. Dollars spun from investments have to cover all claims.

CalPERS first raised rates in 2003 and has done so periodically ever since. It eventually closed enrollment.

The premiums average $2,200 per year, depending on the insured's age and coverage terms, said CalPERS spokesman Bill Madison III.

Policyholders could opt for less expensive coverage that caps benefits. The fund estimates just 1 percent of policyholders need more than 10 years of long-term care coverage.

"The inflation factor is much more important," Meyers said. "So this is an opportunity for policyholders to look at options and ask, 'What kind of insurance do I really need?'"

CalPERS officials hope policyholders will drop their top-shelf coverage for a cheaper option. They estimate at least 10 percent of policyholders will do that by this summer.

Although the 2015 rate hike was made official last year, this week's letter still shocked Richard and Judy Garcia, an Auburn couple who bought coverage when CalPERS launched the program in 1995. Not long afterward, they retired from their Roseville city jobs and kept paying their premiums.

Richard Garcia, 72, said he figures the coming rate hikes would boost their monthly payment from $160 to about $350.

"We can't afford that," he said. "What we're going to have to do is move down to a lesser plan."

The Garcias could cancel their policy, but they wouldn't get a refund. That's left them feeling trapped because they view their premiums over the years as more of an investment than a hedge against the high cost of care.

"If I knew then that they were going to do these types of increases," Garcia said, "I would have never done it to begin with."

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