The State Worker

$1.2 billion CalPERS lawsuit over long-term care gets go-ahead from judge

Public workers and retirees who sued CalPERS over an 85 percent rate increase to long-term care insurance plans could find out next week whether their lawsuit will move forward.

The lawsuit cleared a potential hurdle when a judge tentatively ruled that it shouldn’t be thrown out based on how much time passed before it was filed, and a decision on a second piece of the trial is expected Monday or Tuesday.

A few people who bought the plans filed a class-action lawsuit after the California Public Employees’ Retirement System notified them it planned to hike premiums in 2015 and 2016. The suit’s class includes up to about 100,000 people who faced the rate hikes. Plaintiffs claim the increases and associated costs amount to about $1.2 billion.

The people who filed the lawsuit said the rate hike violated contracts and promises in marketing materials for the plans. CalPERS said it had the authority to raise the rates and needed to do so to sustain the insurance plans.

A trial started June 10 with hearings in Los Angeles County Superior Court. The trial was divided into three central questions: whether too much time had passed for the policyholders’ claim to be valid, whether CalPERS had contractual authority to raise rates, and whether CalPERS breached its contract with policyholders.

Judge William Highberger tentatively ruled that the lawsuit shouldn’t be thrown out based on too much time passing, according to transcripts from the trial.

CalPERS had argued that since it raised rates in 2003, 2007, 2010, 2011, 2012 and 2013, the lawsuit should have been filed earlier to comply with the statute of limitations.

Highberger’s decision on whether CalPERS had contractual authority to raise rates is expected Monday or Tuesday, according to the transcript.

The transcript indicates Highberger was more inclined to rule that the claims of 85,000 people who bought “inflation protection” — an option to pay more each month with an assurance that the rates would remain steady — were valid than the other 15,000 class members who didn’t purchase the protection.

If Highberger sides with the policyholders Monday, a jury trial would be scheduled this fall, unless the sides reach a settlement agreement.

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