By Bonnie Burns, Policy and Training Specialist
The CalPERS Second Settlement resulting from the class action lawsuit against the program is generating concerns about the program’s long-term solvency. There is no government agency oversight of CalPERS Long Term Care because it is a self-funded program. The CalPERS board is solely responsible for its solvency.
The law firms representing the class members state that “The New Settlement balances the interests of all Settlement Class Members by providing significant benefits to those who wish to leave (or have left) the program while at the same time ensuring that the CalPERS LTC program is able to meet its ongoing and future financial obligations.” The long-term solvency of the program is the responsibility of the CalPERS board and the Investment Committee that monitors it.
The program agrees to freeze current premiums until at least November 1, 2024 as part of an option to policyholders in Category A. CalPERS has the option to withdraw from this settlement if more than 1% of policyholders choose to opt out of the lawsuit and refuse any of the options available to them. It seems unlikely that many policyholders would choose to withdraw from the lawsuit since no one is required to opt out of the lawsuit to keep their policy or to be eligible for a benefit of the settlement.
Category A: (Not on Claim)
Deciding whether to take OPTION 1, which is to receive 80% of premiums paid and surrender their policy, depends on each class member’s personal situation. Some who are young enough and who can pass medical screening may be able to find replacement coverage at a price they are willing to pay. Those who can’t, or who want to keep their policy can choose OPTION 2 , keep their policy and get $1,000, plus the assurance that their premium won’t increase before November 1, 2024.
In either case, it is important to remember that policyholders must continue to pay premiums until the final date of the Second Settlement to be eligible for either of these two options. If a policyholder goes on claim, dies, or exhausts their benefits before the settlement is approved by the court, they or their estate will get the settlement option for the appropriate category at the time the settlement is approved by the court.
Those who are in Category A and do nothing will automatically get Option 2 unless they qualify for a different settlement category on the date the final settlement is approved by the court.
Category B: (On Claim)
A policyholder who is on claim both on the date of the settlement notice AND also on the date the court approves the final settlement, and who paid any part of the increased premium has two options. OPTION 1 is they can get a refund of 80% of the premiums paid minus any benefits that were paid and surrender their policy. The minimum benefit for this option is no less than $8,000, minus any benefits that were paid. If a policyholder is getting benefits paid by their policy, they would have to weigh the value of the total amount of potential benefits that would be paid against the amount of refunded premium and giving up their policy. It is likely that someone on claim is also having their premium waived. OPTION 2 is they keep their policy, get $1,000, and continue collecting any remaining benefits.
Those who do nothing will automatically get Option 2 unless they qualify for a different settlement category on the date the final settlement is approved by the court.
Category C: (On Claim and Reduced Their Benefits)
A policyholder who was on claim both on the date of the settlement notice AND also on the date the court approves the final settlement and had reduced their benefits because of the increased premium has two options. OPTION 1 they get 80% of the premiums paid minus any benefits that were paid and surrender their policy. The minimum benefit for this option is no less than $8,000, minus any benefits that were paid. OPTION 2 is they keep their policy, get $1,000, and continue collecting any remaining benefits.
Category D: (Lapsed Their Policy #1)
If a policyholder let their policy lapse between February 1, 2013 and December 31, 2014, they must submit a Lapse Claim Form under penalty of perjury that the policy lapsed because of the premium increase. They can receive a premium refund of all the premiums they paid equal to 40% of the premiums paid from the date they took out their policy through the date of the lapse. If any benefits had been paid while their policy was in force, that amount will be deducted from any refund they are entitled to.
Category E: (Lapsed Their Policy#2)
Policyholders who let their policy lapse between January 1, 2015 and the date the court approves the final settlement must submit a Lapse Claim Form under penalty of perjury that they let their policy lapse because of the premium increase. Because they paid the increased premium, they can receive a refund of 80% of the increased premiums they paid or $2,000, whichever amount is larger.
Category F: (Died and Reduced Their Benefits)
The estates of policyholders who died, or who were on claim and then died, between February 1, 2013 and the date the court approves the final settlement and had reduced their benefits because of the premium increase can receive a refund of 80% of the increased premiums they paid or $2,000, whichever amount is larger.
Category G: (Died and Didn’t Reduce Their benefits)
The estates of policyholders who died, or were on claim and then died, between February 1, 2013 and the date the court approves the final settlement and never reduced their benefits because of the premium increase can receive a refund of 80% of the increased premiums they paid or $2,000, whichever amount is larger.
Category H: (Exhausted Their benefits)
Policyholders who paid the increased premium and went on claim before the date the court approved the final settlement and subsequently exhausted their benefits before that date, can receive a refund of 80% of the increased premiums they paid.
Category I
Policyholders who were not on claim at the time they received the settlement notice but are on claim on the date the court approves the final settlement will receive a Late Election Form and have two options. OPTION 1 is a refund of 80% of premiums paid to the date of the final settlement, an amount no less than $8,000, minus any benefits that have been paid. If a policyholder is getting benefits paid by their policy, they would have to weigh the value of the total amount of potential benefits that would be paid against the amount of refunded premium and giving up their policy. Once a policyholder is on claim, premiums are usually waived after benefits have been paid for 90 days and they wouldn’t have to pay premium increases as long as they continued to qualify for benefit payments. OPTION 2 is keeping their policy and getting $1,000 cash payment. If a policyholder is on claim and their premium is being waived, they would not need to pay premiums for as long as they continued to qualify for benefit payment and would not have to pay premium increases.
Policyholders who don’t file a late election form will automatically be given Option 2.
California Health Advocates will publish updates as we become aware of new information about this lawsuit and settlement actions.
Also see our previous CalPERS Updates:
- CalPERS Update #12: Second Settlement Announced – Your Options & Actions to Take
- CalPERS Update #11: CalPERS to Offer 2nd Settlement in Class Action Lawsuit
- CalPERS Update #10: Next Steps & Who Oversees CalPERS Anyway?
- CalPERS Update #9: Did You Receive a Letter About Past Due Premiums?
- CalPERS Update #8 – Background & Next Steps
- CalPERS Update #7: Investigation into CalPERS Long-Term Care Insurance Program
- CalPERS Update #6: CalPERS Opts Out of Settlement
- CalPERS Update #5: Settlement Decision Deadline is January 28, 2022
- CalPERS Update #4: Replacement Coverage Deadline Extended
- CalPERS Update #3 (Oct 2021)
- CalPERS Update #2 on Settlement & Premium Increase
- CalPERS Update: Premium Increases & Class Action Settlement Are Not Related
