Last week 3 law firms filed a lawsuit against the California Public Employees Retirement System (CalPERS) on behalf of more than 125,000 long-term care policyholders for planning an 85% rate increase when CalPERS had originally told beneficiaries that the premiums for such plans would be stable.
This lawsuit comes after CalPERS’ Board of Administration unanimously approved a plan to raise long-term care insurance premiums for its hundreds of thousands of covered state workers and retirees in October 2012. Letters went out to policyholders in February 2013 notifying them of the 85% rate increase scheduled for 2015.
While CalPERS officials state they currently have enough money to pay claims, they are concerned funds will fall short in the next 10, 20, 30 years. Taxpayers do not fund its long-term care program, unlike its pension benefits program; the state pension fund is required to pay its own claims.
Policyholders are outraged about the planned premium hike. They claim that CalPERS guaranteed that rates would not increase when they bought the long-term care plans in the 1990s (see California Healthline article, 2/28).
The following details of the lawsuit are from California Healthline article, 8/7:
The suit was filed in Los Angeles Superior Court by:
- Kershaw, Cutter & Rattinoff;
- Shernoff Bidart Echeverria Bentley; and
- Kreindler & Kreindler.
According to the lawsuit, CalPERS:
- Failed to warn policyholders about the program’s financial problems; and
- Admitted to taking part in an inappropriate investment strategy (CBS Los Angeles, 8/6).
The lawsuit argues that CalPERS should return all premiums paid for long-term care plans.
The firms are seeking class-action status for the suit.
CalPERS reps said they consulted with member and policyholder groups and “completed rigorous analyses of options before making this very tough decision that rate increases were necessary.” (See Sacramento Bee, 8/7).