The California Public Employees' Retirement System (CalPERS) plans to raise its rates for long-term care insurance by a staggering 85 percent in 2015. The announcement followed earlier news that medical insurance premiums for CalPERS policyholders would increase as well—9.6 percent higher for 2013.
The premium rate increases will affect CalPERS’ LTC1 and LTC2 policies—“policies purchased between 1995 and 2004 with lifetime coverage and built-in inflation protection, lifetime policies without inflation protection, as well as 6-year and 3-year policies with inflation protection,” according to the CalPERS factsheet on the premium increases. Policies purchased between 1995 and 2004 that do not have built-in inflation protection are exempt from the increase, as are “Partnership policies” purchased after 2005.
The CalPERS board adopted a more conservative investment portfolio and solvency plan, but the key to stabilizing the long-term care fund may be to convince holders of lifetime LTC policies to switch to 10-year/Retained Inflation policies. Those who switch will be exempt from the LTC rate increase proposed for 2015, CalPERS notes.
The switch-or-pay announcement outraged California teachers, especially those who had purchased policies with inflation protection. "They have been absolutely outraged," Bonnie Burns, a policy specialist with California Health Advocates, told the San Francisco Chronicle. "They feel the promises that were made to them when they bought these products have been violated."
The 85 percent rate increase is still considered an estimate, based on CalPERS’ goal of getting 10 percent of policyholders to switch to a 10-year/Retained Inflation policy by July 2013. Depending on how many policyholders switch, the rate increase could be smaller—or larger—than 85 percent, CalPERS explains.
CalPERS is the third largest purchaser of health benefits in the country, behind only the federal government and General Motors.