The State Worker

Chronicling civil-service life for California state workers

April 29, 2013
New CalPERS letters detail long-term care rate hikes, options

Thumbnail image for CALPERS_COURTYARD_JAY_MATHER_2005.JPGThe California Public Employees' Retirement System today is mailing some 60,000 official notices to long-term care insurance policyholders that a rate hike is coming.

The letter explains that CalPERS is raising premiums 5 percent this year on the plan's costliest policies, which offer lifetime coverage and daily benefit payouts that keep up with inflation.

Policyholders can avoid the premium increases by moving into plans that offer up to 10 years of benefits without automatically inflation-adjusted coverage. The deadline to opt into another plan varies by policyholder.

CalPERS' letter also flags a 5 percent increase planned for 2014 and another 85 percent jump in 2015 spread over two years. All the rate hikes apply to policies offering inflation-protected, lifetime coverage for things like nursing home services and in-home care.

The letter represents the next step in a multi-year overhaul that has angered many policyholders in the privately-financed insurance program.

Many of them recall promises when they bought their plans that the premiums wouldn't increase. They're also angry at the prospect of paying years of premiums on a high-end benefit that they won't receive if they switch coverage.

CalPERS is trying to allay those concerns by highlighting the total value of the lower-cost defined-benefit plan in the letters that will start hitting mailboxes on Tuesday:

"For example," the CalPERS' letter mentions in a footnote, "a $257 Daily Benefit Amount
will provide coverage up to $938,050 when you reduce to a Ten-Year Benefit Period."

CalPERS also emailed several real-life scenarios to The State Worker that compare the premiums and payouts of the lifetime claims to those for 10-year plans.

A 76-year-old for example, would have to make 182 years of $4,450 in annual premium payments to equal the $830,000 maximum cash value of a 10-year plan. Most long-term care claims don't run that long.

"The scale (of the defined benefit) is still enormous," said Ann Boynton, CalPERS' deputy executive officer over benefit program planning. "That's really the message we want people to understand."

CalPERS has also said that policyholders who shift into plans without inflation protection will maintain their current daily-benefit coverage. In the past, downgrading to lesser plans meant losing the higher daily benefits that built up over time with the automatically adjusted policies.

Like many insurers who jumped into the nascent long-term care insurance industry in the 1990s, CalPERS' program fell victim to loose underwriting standards, a high number of claims and poor investment returns.

In response, it has raised premiums periodically and even closed enrollment for several years.

Many policyholders with high-end policies suspect that the rate hikes are intended to force them out of the program. CalPERS says that's not true.

"We're not trying to drive anyone out of the program," Boynton said.

Here's the template of the letter that's in the mail:

CalPERS long-term care letter to members

Editors's note, April, 30, 2013: This post has been corrected to correctly reflect the number of letters issued to long-term care policyholders with inflation-protected, lifetime benefits plans.

PHOTO CREDIT: CalPERS' headquarters. Jay Mather / Sacramento Bee file 2005

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About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at


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