The State Worker

Case against CalPERS program inches toward class-action status

jvillegas@sacbee.com

A lawsuit seeking to reverse hefty rate hikes for some CalPERS long-term care programs recently moved closer to receiving class-action status, strengthening prospects that a single case will cover up to 150,000 policyholders.

A tentative decision by Judge Jane L. Johnson late last month certified the case as a class-action matter. Then, after lengthy debate in her Los Angeles County courtroom, she allowed both sides time to file written arguments ahead of her final decision. CalPERS lawyers have until Dec. 21 to file their arguments. Lawyers with three firms representing the plaintiffs must respond by Jan. 15.

Johnson will issue a final decision in late January or early February, said Stuart Talley, one of the six attorneys suing CalPERS.

Class-action certification is key for cases with a large number of potential plaintiffs because it allows a single lawsuit to cover everyone who may have be harmed. It also significantly raises the stakes because a settlement or judgment takes each impacted member of the class into account.

If the judge affirms her tentative decision – and judges rarely reverse themselves – the court will send notice to everyone in the class. At that point they can opt out of the lawsuit or be automatically added as a member of the class.

The complaint seeks to represent CalPERS members who took out private policies between 1995 and 2004 to cover convalescent care, in-home living assistance and similar services. Nearly all the policies guaranteed inflation-adjusted payments for the life of the policyholder.

CalPERS stopped selling the so-called “lifetime, inflation-protected” policies and periodically raised premiums because the program was going broke from under-performing investments and soaring payouts. Many private-sector insurance carriers had the same experience selling long-term-care coverage and got out of the business.

To stabilize the $3.7 billion fund, CalPERS’ board hiked premiums on those Cadillac policies by 85 percent this year and next. Policyholders had the option to purchase cheaper coverage. Some did.

But the rate increases angered members because they had been told when they purchased the coverage that their premiums would remain fixed. The lawsuit seeks to reverse the premium increases and make the members whole. Talley has suggested the Legislature could come up with the money, even though the policies were purchased privately.

Editors note, Dec. 15, 2015, 9:41 a.m.: This post was corrected to reflect long-term care premiums are increasing a total 85 percent over two years.

  Comments