LTC program benefits are administered by a third party administrator hired by CalPERS to handle functions that include claims processing, application underwriting, and member inquiries. Member claims are paid for by invested policy premiums and are not supplemented by taxpayer revenues.
Initially, the LTC program was billed as top-tier insurance available to all public employees, retirees, and their immediate family with policyholders paying premiums for expensive comprehensive care. In 2009, CalPERS closed its LTC program to new member applications due to higher than expected program costs resulting from costly underwriting practices and high unanticipated claim volume. CalPERS officials closed program enrollment to address the high cost issue; however, the program continued to flirt with insolvency as it was contractually obligated to continue covering previously enrolled members.
To ensure long-term solvency, the CalPERS board readjusted the LTC Fund’s investment portfolio and approved an 85 percent LTC premium rate increase
last year on specific early purchasers of LTC policies. Policyholders were notified in February of the rate increase and its 2015 effective date. In November 2012, the CalPERS Board of Administration directed CalPERS staff to prepare to hold a new open application period by December 2013. In February, the Board approved a new LTC product offering and a continuous open period beginning December 2013. The LTC program
will offer cheaper comprehensive coverage options and expand enrollment eligibility to include immediate family members of public employees and their adult children, pending legislative approval, when it opens in December.
In response to February’s premium increase announcement, policyholders and consumer groups immediately criticized the board’s action and began questioning the legality of such a drastic premium increase. To combat the increase, opponents filed a lawsuit
this week over the premium increase in Los Angeles Superior Court. The suit, filed on behalf of over 100,000 CalPERS members, claims CalPERS mislead policyholders into buying LTC policies based on false promises that premiums would remain fixed and reasonably priced. Click here to read (LINK) the complaint filed by the opponents.