By Bonnie Burns, Consultant to California Health Advocates
People who own a CalPERS long-term care insurance policy have received notices with options to reduce the impact of the current premium increase of 52%. At the same time, policyholders are also learning about a preliminary settlement in a class action law suit against the CalPERS long-term care program. These are two separate and unconnected events, but policyholders are having trouble understanding the differences between the two.
The proposed settlement involves approximately 80,000 CalPERS members who were living in California in February 2013 and had a long-term care policy known as LTC1 or LTC2 that included automatic inflation protection when CalPERS notified them of an 85% premium increase. The settlement is NOT final. The date to finalize the settlement is June 8, 2022. “If you let your CalPERS Long-Term Care Policy lapse or cancel it, this could significantly and negatively impact what you will receive from the settlement and may leave you uninsured.” See CalPERS’ class action lawsuit website for more information.
The proposed settlement includes nine different categories of damages, depending on the amount of coverage a policyholder has and any actions they took or didn’t take as a result of the premium increase announced in 2013, whether they were or are on claim, whether they gave up their policy or died within certain dates, and several other factors. The administrator for the settlement is charged with sending out notices during the last two weeks of August to all class members. The notice will describe in detail which category a member is in and what damages they may be entitled to. One option for the largest number of class members is a return of premiums paid. This option has gotten a lot of attention. It has been confused with the current premium increase of 52%. These two actions are completely separate from one another and one does not depend on the other.
The Premium Increase
CalPERS notified its long-term care insurance policyholders in May of a pending premium increase spread over two years; 52% this year and an additional 25% next year. This premium increase is not connected to the settlement. However, any member of the settlement who drops their policy or fails to pay premiums may not be eligible for a premium refund, or could end up in a different category for damages.
Policyholders are receiving individualized notices of the amount their premium will increase, and options to reduce the impact of that increase. The first option is a “do nothing” option that retains existing coverage at the new premium cost. Option 2 is usually an offer to reduce the duration of coverage from the existing number of years, or lifetime coverage, to a fewer number of years of coverage in return for a lower premium. This option is usually described in terms of a total dollar amount of benefits and a certain number of years that benefits will last. For policyholders who still have a benefit for automatic inflation protection, Option 3 is usually an offer to drop that benefit in return for a much lower premium. CalPERS requires a response to these options within about 30 days, although the application of the actual increase will not take effect until November.
Reducing benefits is a serious step. Policyholders should take the time to think through their age and proximity to needing benefits, their gender and marital status, their tolerance for risk, and their financial ability to absorb the increased premium or a need to reduce the premium amount they are paying. Policyholders can call their local HICAP (Health Insurance Counseling and Advocacy Program) for help with sorting through their options. HICAP is a free state and federally funded program to help consumers with these difficult decisions around long-term care insurance. Find your local HICAP here.