Today's news -- "CalPERS enrollees receive notice of long-term care rate hikes" -- underscored CalPERS' decade-long effort to right a struggling program that pays for things like nursing care and in-home health services. Unlike public pensions, the long-term care benefits are a private insurance plan. Claims are paid solely with earnings from policyholders' premium investments. Taxpayers money doesn't backstop shortfalls.
CalPERS program has struggled for many years, falling victim to loose underwriting standards, a high number of claims and poor investment returns. Many private insurers have fell victim to similar trends, but had a larger pool of policyholders to share the risk. CalPERS has struggled more acutely in part because because it restricted its policies to members. About 150,000 of them hold policies.
The fund stopped taking new long-term care insurance applicants in 2009 to stem losses that threatened the program's viability. But officials today said that premium increases, an expected migration to the new, cheaper policy and other factors are strong enough medicine for the ailing program that it can again take applications at the end of this year.
The strategy includes tougher underwriting standards and opening the program to adult children of CalPERS members, assuming that the Legislature changes state law to allow it. Applicants could enroll any time, not just during a specified time of the year.
"We will be getting healthy lives in in these age groups as well as even perhaps younger lives if we open it up to adult children," CalPERS staff member Kathy Donneson told the fund's board this morning. "So we can grow the (risk) pool."
Harvey Robinson, president of the Retired Public Employees' Association of California, asked whether members holding the top-tier policies would get some sort of credit for shifting into cheaper plans.
Nope, said CalPERS' Tyrone Espinoza, assistant division chief of the fund's long-term care procurement and operations unit.
"You know, this is voluntary insurance program and policy, so they did realize the benefit of the program while they were paying premiums," Espinoza said at this morning's meeting. "Therefore, there wouldn't be a credit because they did have the benefit available to them should they have become eligible for a claim."
Figuring out the new policy costs is complex because so many factors can drive prices up or down. So we offer these documents and links, but questions should go to CalPERS' long-term care customer service line at (800) 982-1775.
CalPERS Long-Term Care Program website
Estimated annual premium amounts for new LTC plan
LTC 4 Benefit Plan Design
Pension & Health Benefits Committee agenda item
Long-Term Care Program Stabilization and Open Application Period Project
PHOTO: CalPERS headquarter in Sacramento / 2007 Sacramento Bee file