Thursday, May 1, 2014

In the Long Run It's a Bad Deal

The ads for long-term care are so enticing.  But at the end of the day, you are betting on some insurance company - which may by then have been merged, acquired, or who-knows-what - to honor a contract that you are too old to enforce by the time you need it.  At one point, CalPERS offered what seemed like a bargain in long-term care.  And it wasn't just any old insurance company.  Although UC isn't part of CalPERS, as state workers, UC employees were able to buy such policies.  But now - as blog readers will know - CalPERS is jacking up the rates and/or cutting back on the policies and subscribers are suing.

The legal battle is continuing.  From the Sacramento Bee:

A small band of CalPERS long-term care policyholders have again blasted the system and its leadership in court documents that allege dishonestly and mismanagement of the private insurance program have led to soaring rate hikes planned for next year.  Aside from reinforcing charges made in an earlier court filing that CalPERS has since rebutted, the new documents filed last week in Los Angeles County Superior Court toss in some new arguments for the court to intervene. Among them: The “evidence of coverage” document given to policyholders is a contract that allows for rate changes, not rate increases. And when CalPERS says that it is raising rates to compensate for higher-than-expected costs for plans that increase maximum coverage by a compounded 5 percent annually, the fund is violating a provision of the contract that says “Your premium will not increase as a result of  these annual benefit increases.” In a separate court filing, the plaintiffs allege that Towers Watson, the outside underwriter for the long-term care policies, negligently advised CalPERS to misprice premiums. The lawsuit was triggered by CalPERS’ decision last year to increase the rates of its lifetime and inflation-adjusted long-term care policies by 85 percent in 2015 and 2016. The plaintiffs want the court to grant class-action status to their complaint and prevent CalPERS from raising rates.


Needless to say, caveat emptor if you buy a long-term care policy from CalPERS or any other source.

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