By Bonnie Burns, Consultant to California Health Advocates
As we learn new information about the lawsuit settlement or the premium increase and options to reduce the cost imposed on your policy, we will post it here to help CalPERS members sort through their options.
Please be aware that the notice from the lawsuit and the notice of a premium increase both use the term “option” to describe actions CalPERS policyholders can take. It’s important to remember that these two events are entirely separate from each other and that each notice provides different information, remedies, and dates to take action. It’s important to keep each notice separate from the other and to follow the instructions for each one. It’s also important to comply with the different dates in each notice.
Members of the Class Action Settlement
You Must Continue to Pay Your Premium: Please remember that if you are a member of the class action settlement, you must be paying the premium for your long-term care insurance through the next year to retain your option to get all of your premiums back, or to consider the proposed alternative coverage. “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 Long-Term Care Class Action FAQ #32 for more information. The notice you get from the settlement has instructions that must be followed and dates that must be met. Read the 11-page document carefully so you don’t miss any important information.
You Must Opt Out Of The Settlement To Keep Your CalPERS Long Term Care Insurance Policy: To keep your policy with or without changes you made to reduce your premium, you will have to affirmatively opt out of the settlement. From the settlement notice: “If you want to keep your CalPERS LTC Policy, you must exclude yourself from the Settlement by following the directions spelled out in Section 12 of the Notice of Class Action Settlement or by returning the Award Acknowledgment Form and checking Option 3. If you do not return your Award Acknowledgement Form, it will be assumed that you have elected to Surrender your CalPERS LTC Policy in exchange for a full refund of your premiums.”
Replacement Coverage: If you want to consider the replacement coverage, you will retain the option to request a refund of your premiums or opt out of the settlement later. However, you must comply with the instructions and the dates in that notice. Your daily benefit amount will depend on the amount of premium you have paid. All other benefits will be at the same difference from your nursing home benefit as in your original policy. You will be notified of the exact amounts if replacement coverage is obtained.
The Settlement Is Not Final: The court will decide on June 8, 2022 if the settlement is final. Only after that decision is made, will checks be issued to class members or their estate. Many things can happen between now and then to delay or void the settlement. Class members must continue to pay premiums for their long-term care policy until the date the settlement is final and retain their position in the settlement.
Accepting A Refund of Paid Premium: The settlement notice advises policyholders to check with a financial advisor to determine if accepting a cash refund of premiums paid will trigger a change in your taxes or create a tax event.
Premium Increase ~ Making Changes to Your CalPERS Coverage
Your policy has contractual language that allows you to reduce your benefits at any time. The options you were given with the recent premium increase were calculated to offer you a premium that was less than you were currently paying. However, you have the right to negotiate benefit reductions that are different than those you were offered that could cost more than you are currently paying but less than the total amount of the premium increase. You can do this at any time, not just when there is an increase in your premium. In general, there will be a 60-day lag between the date your request for reduced benefits is received by Long Term Care Group (LTCG) and the date the change in premium is recorded.
You can reduce the number of years your policy will cover, the amount of your daily benefit, or reduce or give up the inflation protection in your policy without any medical screening. But you can’t increase your current benefits without passing medical screening and CalPERS agreeing to that increase.
A Word About The Number of Years of Coverage
When you see a certain number of years along with the total dollar amount of your benefits this is a calculation based on your daily benefit amount. It means that if you use 100% of your daily benefit every single day to pay for care, it will last the total number of years shown. But you will always have the total dollar amount of benefits the policy will pay, and those dollars may last longer than the stated number of years if your care costs less than your total daily benefit amount.
When considering the amount of benefits you need, it’s important to think about how long care will be needed once you start needing care. The number is usually statistically higher for women than for men because women have a higher risk of needing care, and when they need care, it often lasts longer than care for a man. Women are often living alone when they need care while men are more likely to have a spouse at home to help with their first need for care. Women have a higher life expectancy, while men have a shorter life expectancy. These factors affect the need for care and when care begins.
Negotiation Tools And The Next Premium Increase
CalPERS may offer coverage reduction options with the next increase, or every increase. It’s prudent to think ahead when exercising the right to reduce your coverage. If you reduce your benefits this time, you may not have room to reduce them further to offset the amount of a future premium increase.
Inflation protection is a high-cost benefit and reducing the percentage or dropping the benefit can result in lower premium cost. The older you are at the time of a premium increase, the less important the inflation protection benefit is for payment of your future care needs. The younger you are, the more important some amount of inflation protection is to keep up with the cost of care. Negotiating with CalPERS to reduce the percentage to a lower amount, for example, from 5% to 3%, is one way to preserve that protection and reduce the cost of your premium without giving that protection up entirely.
Is the CalPERS Long-Term Care Program Solvent?
No one can answer that question until the result of the latest premium increase and the settlement are known. The answer will depend on many complex pieces of information. CalPERS has the option of pulling out of the settlement if it will result in harm to the program. It must calculate all of the decisions members make about their coverage to determine the need for future increases. CalPERS is self-funded and responsible only to the CalPERS Board. It is not an insurance company and is not governed by the laws for long-term care insurance in California, nor is it a member of the state’s Guaranty Association that protects policyholders of insolvent insurance companies.
California Health Advocates will continue to post updates to inform CalPERS policyholders of changes that affect their benefits as we learn of them.
For assistance, you can call your local HICAP (Health Insurance Counseling and Advocacy Program) for help with sorting through your 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.