The grim questions Shirley Neill thought she’d answered 20 years ago – with a reassurance from CalPERS – are bearing down on her again.
How long will I live? How much care will I need?
From 1995 to 2004, Neill and about 150,000 other state and local government employees answered those questions by taking out private insurance policies promoted by CalPERS to cover convalescent care, assisted living and similar services. Most of the policies guaranteed lifelong coverage, inflation-adjusted coverage or both. Many purchasers, including Neill, believed sales pitches that said their premiums wouldn’t increase.
Now she and other policyholders with those Cadillac plans have until May 1 to opt into cheaper coverage or face a 35 percent premium increase in July. An even bigger hike looms next year. Meanwhile, a Southern California lawsuit seeks premium rollbacks and refunds, alleging CalPERS mismanaged the program.
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None of this has been secret. Nearly three years ago, CalPERS announced that top-tier coverage would get a lot more expensive this year and next. For example, a $597 monthly premium will jump to $813 in July, according to a recent reminder letter to policyholders. Next year, that same policy will cost $1,220 per month. Opting into a fixed-benefit policy would cost as little as $237 per month.
The $4.2 billion long-term care fund is trying to recover from years of poor investment returns and higher-than-expected costs. CalPERS attempted to fix things with smaller premium hikes, selling lower-benefit policies and freezing enrollments. The new rates are the next try at righting the fund.
The lawyers suing CalPERS are reviewing 30,000 pages of documents and taking statements from potential witnesses, said plaintiff’s attorney Stuart Talley. A court hearing on whether the lawsuit merits class-action status is set for October. If the class is certified, “we would expect trial within eight months after the decision,” he said, and affected policyholders would be contacted.
That’s awhile away. Then a judgment could be appealed. Or CalPERS could win. With all that uncertainty, “your policy decisions are entirely up to you,” Talley’s firm advises policyholders on its website.
As of Friday, 57,554 policyholders still had coverage with lifetime benefits, inflation protection or both, CalPERS said. About 80,000 have cheaper policies.
Neill, now 75 years old and widowed for three years, has paid tens of thousands of dollars in premiums, but she’s really angry about revisiting unsettling questions about her health and mortality “when I’m most vulnerable.” After thinking through the costs, the lawsuit, her age and relatively good health, Neill said, she’s grudgingly switching to cheaper coverage.
“All these years and now I have to make a decision like this again?” Neill said. “It’s simply wrong.”
Call Jon Ortiz, Bee Capitol Bureau, (916) 321-1043. For more columns, go to sacbee.com/stateworker. Sign up for State Worker email alerts at www.sacbee.com/site-services/newsletters.