CalPERS Long-Term Care Tentative Settlement

Although UC employees are not generally covered by CalPERS unless they did some prior work in a CalPERS-covered position, when CalPERS offered long-term care insurance, UC employees - because they were state employees - were eligible. Many did buy long-term care insurance from CalPERS, but then were hit with big premium increases. Litigation resulted. From CalMatters:

CalPERS is preparing to pay out roughly $800 million to settle claims that it misled retirees when it began offering long-term care insurance in the late 1990s and pledged it wouldn’t substantially raise rates on certain plans. The nation’s largest public pension fund in the 1990s and early 2000s sold long-term care insurance with so-called inflation-protection that members believed would shield them from dramatic spikes in premiums. CalPERS nonetheless hiked long-term care insurance rates by 85% in 2012 and continued to raise fees in subsequent years, straining household budgets for retirees on fixed incomes.

The settlement, tentatively approved by a Los Angeles Superior Court judge earlier this month, would resolve a lawsuit that centers on that steep 2012 fee increase. The settlement cannot take effect until plaintiffs in the class-action lawsuit review it and have an opportunity to submit comments to the court on it in a process that’s expected to take place between April and early June, according to court records. 

The California Public Employees’ Retirement System pays for long-term care out of a specific fund that is separate from the $443 billion portfolio that supports pensions for its 2 million members. The long-term care fund had about $4.9 billion as of June and about 105,000 active policies, according to CalPERS.

The agreement is the second court-approved settlement in the case. It is significantly less expensive for CalPERS than the first one. The previous agreement would have cost CalPERS as much as $2.7 billion and required retirees to drop their long-term care plans in exchange for payments of as much as $50,000 apiece. Thousands of retirees chose security over cash and rejected that agreement because they wanted to retain to long-term care insurance, according to attorneys representing the plaintiffs.

Under the new agreement, retirees who want to cancel their long-term care insurance will receive 80% of the premiums they paid into CalPERS’ long-term care fund. That could amount to tens of thousands of dollars for retirees. The settlement does not cap how much money a policyholder can receive. Members of the class who want to keep their long-term care insurance will receive $1,000 and a commitment from CalPERS that their rates will not increase until November 2024.

Source: https://calmatters.org/health/2023/03/calpers-long-term-care-lawsuit/.