The State Worker

CalPERS long-term care policyholders downgrade coverage, avoid rate hike

More than a quarter of policyholders covered by CalPERS’ most costly long-term care insurance switched to cheaper plans over the last year, avoiding a controversial premium hike that looms in 2015.

About 16,000 people shifted from programs that guaranteed life-time benefits with inflation-adjusted payouts to policies that cap payments for convalescent care, in-home assistance and similar services, CalPERS executive Ann Boynton told reporters during a Tuesday conference call,

Still, 41,000 top-level policies remain in effect, so CalPERS recently sent letters to those policyholders, reminding them that their premiums are set to go up 5 percent this year and 85 percent in 2015 and 2016. They can avoid the steep increase by purchasing one of several capped-benefit policies.

“We think the folks (who want to) make the conversion have already made it,” Boynton said, but CalPERS is reaching out anyway. The increase won’t affect CalPERS’ 100,000 or so long-term care insurance policyholders with without open-ended coverage.

Boynton also said CalPERS quietly launched a new program in December that allows family of CalPERS’ members to purchase long-term care. CalPERS had closed enrollment for a number of years while it sought to restore the program’s viability.

“We’ve received just over 200 applications, which is great,” Boynton said, “considering we haven’t done any marketing.”

CalPERS is trying to stabilize its privately-funded long-term care program after it overestimated investment returns, underestimated risk for many years. Over the last decade it has periodically increased premiums and stopped writing new policies. Private long-term care insurers experienced similar struggles. Many left the business.

After CalPERS’ board finalized a plan to sharply raise premiums, a firestorm erupted. Some long-time policyholders said CalPERS sold the product with a false claims that their premiums would never go up.

Lawmakers held a hearing but concluded that they couldn’t intervene. Insurance Commissioner Dave Jones’ office said the program is outside its jurisdiction. Policyholders eventually banded together to file a lawsuit The case is pending in Los Angeles Superior Court.

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