From time to time, we have reported on a lawsuit by individuals who bought long-term care policies from CalPERS and were subsequently subject to large rate hikes.* Although UC is not part of CalPERS, because UC employees are state employees, they were allowed to buy these policies.
We have also cautioned about long-term care policies in general; you are trusting that some insurance entity will treat you properly, perhaps ten or twenty years into the future or more, when you are likely to be incapacitated.
It was hoped when CalPERS initially offered the policies, that - as a public organization - it would be more reliable than a private insurance company - but subsequent events indicated that was a false expectation.
In any case, the Sacramento Bee is carrying an article related to the settlement of the lawsuit noted above. The article is somewhat confusing concerning what individuals covered by the suit should do. So we just reproduce it as published below and are not offering advice (other than you should seek advice if you are covered by the lawsuit).
From the State Worker blog of the Sacramento Bee:
CalPERS long-term care insurance settlement: how to avoid missing out on $35,000 checks
Wes Venteicher 8-23-21
People with CalPERS long-term care insurance policies might have questions about two pieces of mail they received recently. The first informed them of another big rate hike — 90% over two years — coming to their plans, which help cover nursing home and in-home care costs. The second told them about the proposed settlement of a class-action lawsuit related to a previous round of rate hikes.
CalPERS agreed to pay up to $2.7 billion in July to settle the lawsuit, which was filed in 2013 by policyholders who claimed CalPERS improperly raised rates on their plans. The plans at issue came with an “inflation protection” benefit and a promise that rates would remain stable. The settlement agreement gives 60,000 current policyholders a choice: they can participate in the settlement and receive a refund of all the premiums they’ve ever paid, but will lose their coverage. Or they can reject the settlement and keep their policy at a higher price.
The 90% rate hikes require a separate choice, and people who want to remain eligible for maximum settlement checks — up to about $50,000 — need to make the right one, plaintiffs’ attorneys said Friday. Policyholders can keep their plans and pay 90% more over two years starting this fall, they can reduce their benefits and pay a smaller increase, or they can drop their plans entirely. No one who is covered by the lawsuit should drop their plan, Stuart Talley, an attorney in the lawsuit from Sacramento-based law firm Kershaw, Cook and Talley said in a Friday webinar. “The most important thing is you need to keep paying your premiums,” Talley said.
Those who pay the full increase and those who pay a smaller increase will each be eligible for a full refund of all the premiums they will have paid when the settlement is fully finalized, he said. Anyone who drops their plan to avoid the rate hike would lose out on the full premium refund they could get in the settlement, Talley said. “When CalPERS sends you that notice of the rate increase that’s coming up, and you have to decide, ‘do I downgrade the policy or pay the rate increase,’ you need to make that decision as if there was no settlement,” he said.
WHO’S INCLUDED IN THE LTC SETTLEMENT
The settlement covers policyholders who purchased CalPERS long-term care policies with inflation protection benefits before 2004 and who were living in California in 2013, when CalPERS announced that it planned to raise rates by 85% in 2015 and 2016. The suit covers people who paid the increases, those who dropped their plans to avoid the higher prices and beneficiaries of policyholders who have died. Most eligible policyholders would receive settlement checks of $35,000 to $50,000, and the minimum is $10,000 Talley said.
The money will come from a specific long-term care insurance fund, not from the $484 billion fund CalPERS uses to pay retirees’ pensions. If the settlement agreement is finalized, it won’t be until sometime next summer, said Gretchen Nelson, of Los Angeles-based firm Nelson and Fraenkel. A judge is scheduled to decide June 8, 2022, whether to grant final approval. The settlement likely will be finalized about 60 days after that, Nelson said.
Policyholders who drop their plans would still receive a settlement check, but dropping the plan would move a policyholder into a different settlement category with a much smaller payout, attorneys said. The nine categories of class members are listed in the settlement agreement posted at calpersclassactionlawsuit.com. On top of the 60,000 current policyholders included in the lawsuit, another 20,000 people are covered, including those who dropped the plans instead of paying the increases along with family members of dead policyholders.
OPTION FOR NEW INSURANCE
Additionally, the agreement includes a potential option for policyholders to swap out their CalPERS long-term care insurance for a new long-term care insurance policy. The attorneys said they are working with insurance brokers to see if anyone will offer the group a new policy after they leave CalPERS.
Policyholders who are interested in that option must return the award acknowledgment letters they received in the mail by Sept. 22, attorneys said. Once the attorneys have received all letters expressing interest, they can take the details to insurance brokers who will decide whether they will offer coverage to the group or not. If an insurer takes them up on it, policyholders would receive similar coverage at reduced daily benefit amounts but would pay no future premiums, the attorneys said. Under that option, policyholders wouldn’t receive premium refunds — all the money would instead go to the new insurer. The lawsuit faces another hurdle: if more than 10% of the 80,000 members of the settlement class reject the agreement, choosing to keep their plans and pay the new rate hikes, CalPERS will have the option to nullify the settlement.
More information is available at calpersclassactionlawsuit.com. The attorneys plan to hold three more information webinars, which may be accessed by computer or phone. The dates for the educational sessions are on the website or at 1-866-217-8056.
Source: https://amp.sacbee.com/news/politics-government/the-state-worker/article253645333.html.
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NOTE: THE LAWYERS OFFERING SETTLEMENT ADVICE ABOVE THEMSELVES ARE INTERESTED PARTIES. IF YOU ARE POTENTIALLY AFFECTED BY THIS SETTLEMENT, I SUGGEST YOU LOOK ALSO FOR INDEPENDENT ADVICE.
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*Example: http://uclafacultyassociation.blogspot.com/2020/01/litigation-over-calpers-long-term-care.html.
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