Friday, May 30, 2014
Judge hands CalPERS 1st-round loss in long-term care lawsuit
Jon Ortiz, State Worker blog of Sacramento Bee:
CalPERS can be sued for allegedly mishandling its privately-funded long-term care insurance program, a Los Angeles court has tentatively ruled, clearing the way for a trial. Judge Jane Johnson turned aside CalPERS request to throw out the case, which contends that the fund’s board members violated their personal duty to watch out for members’ best interests. The fund also breeched policy contracts and dealt unfairly with policyholders, according the the lawsuit.
The Los Angeles Superior Court complaint, if granted class-action status, would represent about 150,000 CalPERS members who purchased long-term care insurance 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 policyholders, many of whom believed their premiums would never be increased.
CalPERS stopped selling the so-called “lifetime, inflation-protected” policies a decade ago. It incrementally raised premiums on existing policyholders because the program was going broke. Officials have blamed under-performing investments, underpriced policies and higher-than-expected payouts for the trouble. Private-sector insurance carriers have had the same experience long-term-care coverage. Many have exited the business.
Lawyers got involved, however, when CalPERS announced it would hike premiums 85 percent for the most lucrative plans starting next year. Members who had purchased policies and paid premiums for nearly a decade or more were outraged. CalPERS asked the court to throw out the case for a variety of reasons, but Johnson ruled that none were valid. The tentative ruling isn’t yet final, however such decisions are rarely overturned...
Full story at http://m.sacbee.com/sacramento/db_294804/contentdetail.htm?contentguid=eb42YegP&full=true#display
Right now both CalPERS - and its customers for long-term care - are both big losers.