Seniors decry CalPERS long-term care rate hikes

long term careMay 10, 2013

By Dave Roberts

If you’re curious what health care insurance might be like when the government takes it over, a preview was provided on Tuesday at an informational hearing of the Assembly Committee on Aging and Long-Term Care. State Capitol Room 127 was packed with seniors angry about the false promises, mismanagement and exorbitant rate increases of the long-term care insurance program provided by the California Public Employees Retirement System.

The retirees are among the 150,000 state employees who thought they were doing the right thing for themselves and their families by agreeing to pay monthly premiums for the rest of their lives to ensure that they would be taken care of should they become incapacitated in their old age. About 119,000 of them signed up when the insurance was first offered in 1995. Many of them bought policies providing lifetime coverage and inflation protection. They believed that rate increases would not occur or would be modest if they did.

But CalPERS, which had no experience providing long-term coverage, over-promised and under-delivered. Officials failed to do the underwriting necessary to ensure that only the better risks would be allowed to purchase insurance. They failed to invest the premiums wisely and safely, and the fund was hit hard by the Great Recession. They failed to anticipate that people are living longer. And they didn’t recognize how expensive it would be to care for patients for those extra years.

As a result, just eight years after the long-term insurance program was launched, it was nearly broke.

“The margin in the fund had begun to decrease and was down to about 2 percent,” CalPERS Deputy Executive Officer Ann Boynton told the committee. “In 2003, the board then began the difficult process of implementing premium increases to address the shortfall.” But those increases were so inadequate, only four years later “the fund was in serious trouble.”

Rate increase Hell

Since then, policy holders have been in rate-increase hell with many suffering annual 5 percent hikes. And in 2015-16, they will be hit with a whopping 85 percent increase. Letters informing them of the bad news were sent out at the end of April. The only way to avoid the hike is either to drop coverage, thereby losing the tens of thousands of dollars already paid into the program with nothing to show for it, or to opt for lesser coverage in the form of a 3-, 6- or 10-year benefit plan.

But there’s no guarantee that these will be the last rate hikes.

“We believe, but cannot guarantee, that this [85 percent rate hike] action will avoid the need for further rate increase in the future,” said Boynton.

That statement was met with groans by many in the audience, prompting a call for civility by committee chair Mariko Yamada, D-Davis.

Earlier in her remarks, Boynton acknowledged, “We know this has been an incredibly difficult time” for the policy holders.

Tales of woe

That might be an understatement. Dozens of retirees on fixed incomes told the committee their tales of woe, complained about feeling ripped off and pleaded for help.

One Bay Area woman, who is 68 and her husband 74, said they have already invested more than $50,000 in their policies and now are “facing dropping our policies and losing our investment. We are victims of circumstances and consequences by an agency that has had no oversight or regulation [by government]. There is no guarantee that after 2015 there won’t be additional consequences. There has been 400 percent of increases. That is a violation of public trust. Why would we continue to invest one more dollar in this program? This must stop. We have done our part to protect ourselves in our desire not to be a burden to our society. The increases need to be halted.”

Another woman complained, “I feel I was the victim of fraudulent practices. Where is the honesty and integrity? When I first enrolled I was paying $40 a month. Now my premiums will go close to $200 a month. How many people can afford that. Is that fair?”

Ivonne Ramos Richardson, who said she had been a negotiator in the administration of Gov. George Deukmejian, is one of those who signed up for long-term insurance in 1995.

“I did it because my Mom died of cancer and Dad became caretaker,” she said. “That will not happen to us. We started at $42 per month and are now paying $142. It will go to $588 a month. Money that we don’t have. In my family there is dementia, Parkinson’s, Lou Gehrig’s disease. It frightens me to leave that lifetime and inflation protection [benefit].”

Richardson complained that the CalPERS letter she had received a few days earlier specified a May 29 deadline to decide whether she wants to exchange her current benefit plan for a shorter-term option in order to avoid the 85 percent rate hike.

“That is not enough time,” she said. CalPERS officials need to provide more education on the various options through “dog and pony shows” around the state, she added.

Boynton, who is as well versed in the program as anyone, acknowledged that it can be confusing.

“I’ve had a long-term care representative come to my house, and it makes no sense when trying to understand it,” she said. “Most people, until they have someone in a claim circumstance, don’t really understand the nuances of what’s going on when you talk about long-term care insurance. People carrying insurance may not know what they purchased, they may not know what the real value of what they currently have in their hand is worth.”

Legislature’s hands are tied

Although the policy holders are seeking help in stopping the rate hikes, Yamada told them the state Legislature’s hands are tied.

“The Committee on Aging and Long-Term Care does not have jurisdiction,” she said in her opening remarks. “CalPERS has its own independent board. We are bringing this hearing forward today in an effort to get at some of the facts. I know there is a lot of concern and fear and anger, quite frankly, about these issues.”

The one thing Yamada offered to do was to author a letter to CalPERS signed by other legislators asking that the May 29 deadline for switching benefits be moved back to allow more time for policy holders to consider their options.

“At our very minimum, I think in the strongest terms that we can articulate to the president of the CalPERS board there’s insufficient time for retirees to process this information and these kinds of changes,” she said. “I will start a sign-on letter to get an extension on the time for these life-changing elections. It takes time and effort. We do have to address this immediately as well as on a mid-term and long-term basis.”

Although there is widespread concern about losing lifetime benefit coverage, Boynton indicated that those fears are overblown for the vast majority. Fewer than 1 percent of policy holders require care for longer than nine years, she said. The average length of care is about 3.6 years.

Nearly one-third of those needing long-term care do so as a result of dementia, followed by cancer (18 percent), stroke (13) and fractures and injuries (9).

The highest rate of recovery , 17 percent, is for those with fractures and injuries, followed by stroke (11 percent), cancer (10) and dementia (9).

How long will it last?

In terms of how long benefits last for those with limited coverage, it matters where the care is received. A five-year policy actually may not last five years if the person is in the most expensive option, a skilled nursing facility. But it may last longer than five years if the patient is cared for at home with nursing support.

In 2012, only 7,300 of the 59,000 CalPERS benefit claims were used in skilled nursing facilities. The cost for those claims totaled $34 million. In contrast, more than three times that number of claims, 26,000, were used for home health care. But the cost, $59 million, was less than double the cost of the skilled nursing facility claims.

It’s estimated that about 70 percent of people who reach 65 will require long-term care at some point, but few have prepared for that contingency, according to The SCAN Foundation. That could result in a crisis as the Baby Boomers age, decline and become debilitated.

Currently, older Americans comprise 12 percent of the population. By 2030, they will make up 19 percent of the population, a cohort of 72 million.

15 comments

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  1. eleanor bender
    eleanor bender 10 May, 2013, 14:55

    If there is a class action suit I would like to add my name to the suit. I am trying to decide if it is best to bail out and forget the $55000 that has disappeared. I have received no information since the letter of the increase arrived. It is really a terrible situation.

    Reply this comment
  2. outofcal
    outofcal 10 May, 2013, 18:12

    The ‘Scan Foundation’ says 70% of the elderly will need long-term care? Over the years I have known 40-to-50 people of retirement age, most of whom are now dead, and only three needed any kind of care that lasted over one month. Common sense should tell everyone that this is a bogus study.

    Reply this comment
  3. Bad Karma
    Bad Karma 12 May, 2013, 13:26

    Welcome to Hotel California. It’s called Jerry-care, if you don’t like it, you can’t leave.

    Reply this comment
  4. Bryan Doles
    Bryan Doles 19 May, 2013, 20:32

    Well, that’s long term care. However, if you’re still asking, “long term care insurance is it worth it?” the answer is yes. Because long term care is considered as one tough weapon for the aging days. In spite of the rise of LTC, we still need it.

    Reply this comment
  5. Joyce Jenainati
    Joyce Jenainati 21 May, 2013, 23:03

    There are 2 options:
    1. CalPERS should fund the short fall. If this goes bankrupt all these people will end up on MediCal and will cost the state more. Then the Dept. of Ins. should audit the plan from beginning until now. The Dept. of Ins. should have oversight about how it is run. Any administration on a daily basis should be done by State Employees in a Bureau within CalPers.
    2. Let it go bankrupt. What money is left should be divided among the current policy holders according the a % of the level they have paid in.

    I have no family to take care of me and thought I was planning for my old age. I have paid in over $50,000. This is total mis-management. Cutting off new membership in 2008 is criminal.
    In Jan. I had a bad accident and wanted to use my 90 day deductible. It was impossible to be accepted as a new patient. Very scarey.

    Reply this comment
  6. Pamela Ellis
    Pamela Ellis 4 June, 2013, 12:56

    I also want to be a part of the class action suit. I have invested $20,000 + into my long term care. I have contacted the CA insurance commissioner but have yet to receive a response. I agree that our funds should be returned or Cal Pers needs to honor the policy they sold to us.

    Reply this comment
  7. Tracey
    Tracey 13 June, 2013, 15:11

    Its to bad that we can not arrange a class action law suit.

    Reply this comment
  8. Julie
    Julie 22 June, 2013, 21:10

    My husband is 91 and has Alzheimer’s Disease. I filed a claim for him in February, 2013. It is now nearing the end of
    June and CalPERS is still stalling on approval of the claim. Meanwhile, I have paid for 120 days of care for him. We
    have about $70,000 invested in his account alone. CalPERS sends me letters stating that they have not received
    requested information. But, when I call the parties that are to provide the information, I find that it has been sent
    no less than three times. Our medical plan said CalPERS was to send a prepayment of $15. When it was not received,
    the medical plan closed it out. Now CalPERS just made another request. When I followed up with the medical plan, I
    was told that when they get a check for $15 from CalPERS they will send the records. New letter from CalPERS states
    they have not received the requested information and are threatening to deny the claim. Since we have no recourse
    through the Insurance Commissioner, who can we turn to? The California Attorney General maybe? This sounds more
    and more like fraud.

    Reply this comment
  9. Jan
    Jan 26 June, 2013, 15:18

    Has the audit of CalPERS been completed?

    Reply this comment
  10. Dolores Manning
    Dolores Manning 1 July, 2013, 10:41

    CalPERS Long Term Care is 100% member funded and no other source backs up the fund. That makes it different form CalPERS pension and health insurance funds. Since it is 100% our money, I don’t see why we can’t ask for and get regulation, audits and whatever else is needed for real accountability and real responsibility to the people, like me, who have put their money into the LTC program. I trusted CalPERS. NO MORE!!!

    Reply this comment
  11. Jan
    Jan 22 July, 2013, 07:25

    June 18th, 2013 update

    Reply this comment
  12. Peggy Nadin, Frank Nadin
    Peggy Nadin, Frank Nadin 18 August, 2013, 13:31

    I would like to be included in the class action lawsuit against PERS in regard to the pending 85% premium increase. My husband and I have invested over $60,000 in our CalPERS long-term care insurance. We were supposed to be protected from inflation increases and other drastic increases in premiums. That has been a joke! We simply cannot afford to lose our investment, and cannot afford major increases in premiums, either.

    Reply this comment
  13. N. Johnson
    N. Johnson 22 September, 2013, 21:53

    Please send my name in for any class action suite. I do not believe premiums can be refunded because it is an insurance policy. Buy CALPERS should be held responsible for this obvious criminal activity involving misrepresentation of the program and violation of the pubic trust.

    Reply this comment
  14. Staten Johnston
    Staten Johnston 15 May, 2014, 18:48

    Long-Term Care as a Casino
    At the Casinos in Los Vegas the managers know that the odds are always with the house.
    For example, in a game of dice there are twelve options. The Casino knows what the odds are for any one number to show. With this knowledge, a Casino can make billions of dollars each year.
    A customer though has to bet it all on the possibility that just one of the numbers will show on the next roll. The customer is at a great disadvantage – twelve to one.
    CalPERS Long-Term Care (or the CALPERS Board of Directors) knows what the odds are concerning how long segments of the 130,000 members will live. They know the current ages of the members and, in some cases, even their medical conditions. They can predict with great accuracy how long members will live. The CalPERS Board does nothing to advise the members about the odds or even to caution the elderly members about the consequences of betting on the wrong number.
    The member though has to bet on one number. This is exactly like throwing the dice but with more then twelve possibilities. The member enrolls in a new plan betting their very life on an option number like: three years, five years, ten years and such. If they choose wrong, they will spend the remainder of their life in unimaginably horrible conditions.
    Long-Term Care has to be provided for life. Any thing else is too much to lose!
    CalPERS cannot lose because they know the odds of how long portions of the members will live. They even know when there will not be any of the existing members still alive. Like the gamming businesses, the CalPERS Board of Directors cannot lose.
    But, the CalPERS Board of Directors can win much more if they can persuade the members to take huge bets on their life. They do this by offering options that trick members into taking the obscene gamble.
    CalPERS must not be allowed to do this with people’s lives. CalPERS must not be allowed to harvest the meager wealth of seniors like a cash crop in an almond orchard. CalPERS must not be allowed to force seniors to bet on how long they might live in need of care.
    The CalPERS Board of Directors must be held accountable.
    The CalPERS Board of Directors created a business (or maybe a fund) called CalPERS Long-Term Care. They knew the trust that government employees had in their CalPERS Retirement Fund. They knew the Retirement Fund had been managed with great care for eighty (80) years and they knew the general public is resolved to protect this promise.
    The CalPERS Board of Directors used the CalPERS name to create a gambling fund.
    They told people “You can trust us. Have we ever let you down?” The Fund Salesmen made promises that the costs would never increase if you enrolled in the early years (20 years ago). The CalPERS Board of Directors knew this. The CalPERS Board of Directors buried, in the paper work, a small sentence that said the premiums could be raised at any time. The premiums have been raised often and often with large percentages. The CalPERS Board of Directors knew that very old people had paid in thousands upon thousands of dollars during last twenty years. These very old members, CSEA Seniors, are now getting near to the time they will actually need the care they were promised. These older people retired on fixed incomes. These fixed incomes have been robbed by inflation to the point that the retirees struggle just to meet the everyday needs of food and shelter
    The CalPERS Board of Directors recognized that these people do not have wealth or power. So the BOD forced upon these elderly people options to drop out and give away their many years of premiums or bet everything on how long they will live.
    Monsters play these kinds of games. People serving on the CalPERS Board of Directors are supposed to have pledged to act in everyway to protect the members.
    Who stands to benefit from the “remainder funds?”
    The CalPERS Long-Term Care program, I understand, has about 130,000 enrollees. This number is probably much larger if the ones who dropped out or died, during the last twenty years were counted.
    With the current offering I imagine that many more will decide that they can no longer afford the premiums and they will just drop out. During the next few years many of the enrollees will die.
    Who gets the remainder money? Has money already been deducted from the fund in recognition of the drop-outs or deaths? If there was not some sort of a remainder benefit (profit) for someone then why did the CalPERS Board of Directors decide to create a new fund of just new younger enrollees. Without new members, the remainder fund will materialize sooner. If the older crop is to be harvested for maximum profit then it is essential to know when it is ripe.
    The Public Needs to Know
    The public needs to know what it appears the CalPERS Board of Directors has done. The new fund enrollees need to know what the CalPERS Board of Directors is doing to the older enrollees. In a few years from now, the new fund enrollees will be offered unthinkable options they must choose or refuse. The new enrollees also must be led to understand that they also can attain the age of care and then find out it is not going to be there.
    What’s Covered?
    I noticed in recent publications about the CalPERS Long-Term Care coverage that in addition to the need to meet three criteria for coverage the CalPERS Board of Directors will inquire to find out if there is someone living in your home that can provide the care. This someone would be a spouse who is of similar age. This is crazy!
    The administration of the benefits has been contracted to an out-of-state company. Collecting benefits has become so complicated that a law firm, Access My Benefits LLC regularly advertises in the CSEA monthly newspaper that they can help members get benefits for a fee. The CalPERS Board of Directors is aware of this law firm’s offer of assistance.
    LONG TERM CARE implies – until death
    Once we become infirm, to the degree that we are in need of long-term care with the conditions required to obtain benefits, we need the care to be provided until we die. Something like, “Well you only signed up for the three year option” is not even thinkable.
    Long-term care implies that it will be from the date we become infirm until we die with dignity.

    Reply this comment
  15. Marilyn L. Ditty
    Marilyn L. Ditty 10 August, 2015, 16:10

    A class action suit should be filed immediately to protect people who have been paying in for years. Their funds will be used for those applying for care now and there won’t be any money left for those who will need care in the next five – ten years. Surely there is a public lawyer who would take this on. Over 117,000 people have paid into this fund and there has to be money left. Let me know if I can help, I am not an attorney.

    Reply this comment

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