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CalPERS’ Ailing Long-Term Care Plan
SEPT. 16, 2010 By ANTHONY PIGNATARO For a long-term care benefit plan, the news has mostly been bad. Last year saw a huge budget deficit of more than $800 million, the biggest since 2007. Eight of the last 10 years have been in the red. The plan’s investment portfolio lost 16.2 percent of its value last year; over the previous five years, it’s grown an anemic 1.9 percent. It’s been more than two years since people could join. Though there have been three big rate hikes since 2003 – the most recent, in 2009, was 22 percent – operating revenues have either stagnated or dropped. Beyond that, not much is known. That’s because the benefit plan in question is run by the California Public Employees’ Retirement System (CalPERS), and it’s not subject to any substantial public oversight. In fact – and unlike private insurance plans operated in other states by companies like John Hancock or Met Life – the CalPERS long-term care benefit program is not regulated by the state Department of Insurance. “We’re self-insured, so there’s no oversight, just as if you were self-insured,” said Bill Madison, a CalPERS spokesman. Madison compared CalPERS’ long-term care benefit to a driver who posts a bond to satisfy the state’s auto-insurance requirement. “He’s self-insured, and there’s no oversight of him.” California is the only state in the U.S. that has gone the self-funded route for its public employee long-term care benefit plan. And that makes some officials very nervous. “You can do whatever you want when you don’t have oversight,” said one state official who requested anonymity because he’s not authorized to speak about CalPERS. “Oversight has a cost, and they probably thought that getting rid of it meant they could deliver services cheaper. But that hasn’t been the case.” The long-term care benefit dates to January 1995. “Long-term care is fast emerging as a critical need for our members,” then-CalPERS Board President Dr. William D. Crist said at the time. “Our attempt is to offer members the most cost-effective, high-quality plan possible at the lowest premiums.” It was a laudable goal, but CalPERS went about it in a strange way. “This all came from legislation signed by Gov. Pete Wilson,” said one California insurance company official familiar with the CalPERS benefit program. “It was a breakthrough – a very consumer-friendly policy. No other state had this. It was revolutionary.” CalPERS offered three benefit plans. The Comprehensive Plan provides for adult day care, home care, assisted living facilities and nursing homes with a one-time 90-day deductible period. The Facilities-Only Plan was similar to the Comprehensive Plan except that it lacked home and community-based care. The last, the Partnership Plan, offered home care, adult day care, assisted living facilities and nursing homes with a one-time 30-day deductible. There’s also optional inflation protection and the benefit is “fully portable.” What’s more, the program was open to “all California public employees, retirees, their spouses, parents, parents-in-law, and adult siblings” aged 18-79 (same-sex spouses aren’t eligible, and there’s a class action lawsuit on that very subject pending in U.S. District Court in San Francisco). To receive benefits, a person “must be unable to perform any two activities of daily living – for example, eating, bathing or dressing – without help, or have a severe cognitive impairment,” states a 2008 CalPERS press release. The latest figures from CalPERS show that the long-term care program has 165,023 enrolled members, making it one of the largest such benefits in the nation. But for a program that survives on recruiting new policy holders, it’s odd that CalPERS hasn’t had an open application period since June 2008. “In 2009 and 2010 the board didn’t establish one because it wanted to make sure the fund was self-sufficient,” Madison said. “They wanted to keep things at a level they could support those who are insured.” Madison added that the “stability of the fund” was the board’s highest priority. Whereas most states put such a benefit program out for bid with the big insurance companies, California rejected the bids it solicited and decided to run the program in-house. Doing so meant the state insurance commissioner would have no say in how the program operated. CalPERS sold the plan to prospective customers as a consumer-friendly choice: “Because there is no insurance company involved and because of the size of the CalPERS purchasing pool, the premiums for the long-term care insurance program will be 20 percent to 25 percent less than a comparable program offered by an insurance company,” stated a July 14, 1994 CalPERS press release. But it didn’t work out that way. For reasons that aren’t clearly stated in CalPERS’ publicly available financial statements (the long-term care benefit appears on just six of the 2009 CalPERS Comprehensive Annual Financial Report’s 198 pages), the benefit in the last few years has accumulated sky-rocketing claims, massive investment losses and ballooning deficits, even in the face of three large premium hikes. The most recent program deficit is so large that even the CalPERS annual report can’t gloss over it. “The unrestricted net deficits of the Long-Term Care Program increased by $676.9 million to $811.6 million during the 2009 fiscal year primarily as a result of the increase in the long-term estimated liability and the unfavorable fiscal year 2008-09 investment experience,” states the report. “The fund’s management is evaluating the results to determine if additional mitigating action is necessary.” That “additional mitigating action” turned out to be a substantial rate hike. CalPERS previously instituted rate hikes in 2003 and 2006, but the long-term care fund’s 10-year review included in the annual report shows the resulting revenue growth from the hikes did little to offset the already considerable budget deficits. “We’ve had a few rate increases,” CalPERS’ Madison said, “but our rates are still competitive.” A 17 percent hike in 2003 seemed to work, raising operating revenues from $186.6 million to $200.9 million, which helped turn 2002’s $261.8 million budget deficit into a $20.3 million surplus. But that was the last year CalPERS’ long-term benefit was in the black. In 2006, a 33 percent rate hike translated into barely $2 million more in operating revenue which did nothing to help with the year’s ending $771.5 million deficit. Three years later, a 22 percent rate hike hit all policies issued prior to 2005 (those applying 2005 received a 15 percent hike). “This premium increase comes during economic hard times for many of our members and their families and, at the same time, we have an obligation to our members using and needing this coverage to maintain this program’s stability,” CalPERS Board of Administration President Rob Feckner said in a Dec. 16, 2009 statement. How that rate hike affected the fund’s balance sheet is unknown, but the 2009 annual report shows that the long-term benefit fund was having an exceptionally bad shape that year, with revenue nearly $3 million less than the previous year and a budget $800 million in the red. Claims are at least part of the reason for the massive deficits. Since 2000, claims increased by an order of magnitude, from $10.6 million to $116.2 million in 2009. Investment income over the same period has also been volatile. The best year was 2007, which $281.1 million in revenue, but that was erased by 2009, which saw $369 million in losses. The annual report blames this on “poorly performing equity markets.” A fund breakdown shows 18.3 percent of the fund is in international stocks, 28 percent in domestic stocks, 48.8 percent in domestic debt securities (mortgage debt and so forth) and the remaining 4.9 percent in real estate. “That’s pretty volatile,” said the insurance company official. “They shouldn’t even be in equity. And that $800 million deficit – how do they survive that? Is there no way to do an audit of them? If they had to put their finances on the table for scrutiny like any other insurance company, what would their rating be? I’ve got a bad feeling that this is a ticking time bomb.” Photo of CalPERS headquarters courtesy of CalPERS.
Comments(34) |
May 22, 2012
Until we require action by NAMED elected officials to fix this mess, or else they do not get our endorsements, forget about it. Nothing is going to change until it blows up.
It is time to start naming names, one at a time.
Seems like it is time to change the rules about the management of CalPERS. The CEO of a public company would have been let go – long ago. Since the state of CA is the #1 source of new funds, there is no reason that the money should not have some strings attached.
Accountability in government is not a bad thing. Only those who would be exposed will be against it. It sounds like it is time to get some adults in charge.
There needs to be a class-action suit holding CalPERS accountable. Check Goyette and Associates, Attorneys as Law’s blog on CalPERS Long Term Care Insurance. I spoke with the firm’s representative on the blog and unfortunately, this is not the sort of law that they practice so they most likely will not pursue it. We need to find a law firm that is up to doing this,
I have been in the program almost since its inception and have seen my rates almost quadruple since I started. Unfortunately, I have paid a lot into this program and feel I need to get out. Due to my increased age, it is likely I cannot afford to get insurance.
A person named W. Grimes who posted on the Goyette blog says that he/she has all the promotional literature that clearly shows that CalPERS has been very dishonest with its members. At a minimum, those earlier members who have the most into the system should be grandfathered and their rates should reflect what was promised. Apparently other LTC insurers have done this and it is only fair.
My mother has paid many years of high premiums into this account and now, when meeting ALL of the requirements for disability for long term care, she cannot get any reimbusements, they keep asking for more paperwork, etc. It is an outrage.
J. Lebsack, sorry about your mother’s situation. This is another reason why one should stay away from everything that is State run. The powers that be just do not know what they are doing.
Yeah right,
All the long term care insurance companies have the
same trading practices. All of them have the same
attitude towards the middle class workers. Raise the
premiums and suck the lifeblood out of us. Just
like everything else. The cost of things goes up but your
paycheck doesn’t. That is why the rich get richer and the
middle class get screwed. Pure greed.
Should I just cut my loses and stop paying for this CalPers long term insurance. I am 68 years old and have paid in about $13,000. I don’t want to pay for the next 10 or 20 years and not have any coverage when I need it. I am paying about $1500 a year. We know that amount will go up and the coverage will shrink. Anyone out there feel the same way as I do or have already stopped paying?
From Mary Arthur:
This situation of CalPers selling us LTC insurance with inflation proofing that is never given, guaranteed premiums that they told us historically were not raised nor ever would be – now with steadily increasing premiums in a time of economic hardship is clearly an issue that needs to be addressed as elder abuse in a class action lawsuit. Why we can’t find an attorney to take this on? Is it possible that the reason must be because CalPers can afford to use extensive money to hire the best and fight the longest and it simply seems that attorneys cannot afford the financial risk to fight CalPers?? Does anyone know an attorney who can help us as this situation is serious and we depended on CalPers for years and now what do we do??? Since we are all in the same situation as senior citizens. Is there any chance at all to fight this issue and this agency help us by finding a way to examine this further and by locating someone in the state to examine this issue for us. Most of us simply do not know what to do and it seems Martha above has said what we all feel but we all feel stuck and do not know what to do after paying all this money individually and in some cases as couples.
Please help us further with the situation – we simply cannot seem to locate anyone to represent us and most of us have been looking at this issue for over a year if you read the postings online.
I am not a client of Cal Pers, but i work for one. I am on the other side of the fence and as a independent provider i believe that the longterm care system is a mess. As an “IP” i was prompted to fill out the ip package along with the assignment of benefits, which will give Cal Pers approval from the client to pay the independent provider directly for services rendered. Well that was faxed mid feburary and i ve been working ever since. They denied the first three claims submitted stating i did not have a assignment of benefits on file. After calling for days and even weeks on end they found there error and expedited two weeks of payments for march.6th-20th, which was fed-exed to my home and received on the 23rd. the chk for Feb.25-26 was received march.29th. I have not received anymore payments and they failed to pay me for Feb.27th-Mar.5th which i called on 4/4/2011. Can u believe it they denied the claim for the same exact error they made earlier what is it going to take for their employees to pay better attention to important docs. I and my client are now going thru hardships with my finances and her health. Corry from Cal Pers reassured me that i would get a call back today 4/8/2011 in regards to all these errors but they have failed again, and there was no chk in the mail, no comformation for direct deposit or issuance of the chk from feburary. This is not fair in any way and me and my client believe justice will be served.
I’ve been in CalPers for 14 years and my husband has been in for 10. Both of our premiums have tripled since we joined. First in 2001 due to “down turns in the stock market” and then every 2 years or so. They even went up in 2007 when the stock market was booming, so clearly the stock market is not the culprit. There is no way we can get our money back unless we die before age 75. We are also talking about cutting our losses and getting out. We’ll take our chances-especially after reading all the posts about claims being refused etc.. I am really sorry I was suckered in. I thought I was doing the responsible thing. My fear is that the costs will become so astronomical that we will no longer be able to afford the premiums and we’ll really have been screwed. Something is wrong here. They need to be investigated by consumer protection. Maybe Joel Grover of NBC would be interested in exposing them. Since our representatives are useless (I’ve written and complained) I would be more than open to joining a class action lawsuit. Maybe we could get one going…
I just received another notice of a 5% premium increase that will take effect July 1, 2011 unless I contact them and choose another option before then. I have been calling them for the last three days, but I can only get a recording saying that they can’t take my call due to extremely heavy call volume, and I should try again later. This kind of behavior on their part only increases my feelings that something is wrong. Despite have paid into the program for 15 years, I feel that it is time to cut the losses. If there were ever a class action suit won against them, I feel we would only gain “pennies on the dollar” winnings.
Tell your employee association or union to go to this website: http://www.caltc.net to see what other agencies and unions are doing about the CalPERS long-term care program.
Like Ann, my wife and I have been members 14 years. CalPers LTC representatives came to the County of Ventura, CA and made a pitch to over a hundred people the day I was there. Their reps. told attendees that if they selected the “inflation protection benefit option” that the LTC purchaser would never see an increase in the premium because of choosing this high option. I didn’t quite believe it so, like a many others, I waited till the question and answer period to double check them on this never an increase issue. The reps. insisted this was factual, so I took the forms home and immediately enrolled my wife and I. Now, combined, we have $35K tied up in this program with our monthly premium rate now almost tripled. We feel victimized, and now program administrators appear to be trying to smooth over previous administrators huge mismanagement errors by offering benefit period changes which would of limit their liability and substantially penalize members.
Like others, we ponder whether based on our premium history, whether we will be able to even afford the premium in a few short years since our annuity structured pension has no cost of living increase provision. Had I known that the CalPers LTC program was just another Ponzi scheme that was just too good to be true…but we placed our trust in Calpers. They can hardly claim ignorance since they had adequate resources to do the proper due diligence research before offering such a program to their members and others. No wonder the American people are losing all respect for their elected representatives. A sad outcome only accentuated by a less than honest CalPers program that apparently without honest checks and balances of Board actions.
Reading these posts and those at http://blog.goyetteassociates.com/?p=126
is so depressing as evidently we have all been take for a ride and there doesn’t seem to be any legal interest or activity toward a much deserved class action suit.
As a 76 year old single woman, with a small CalPers pension and a severely dwidling investment “portfolio” I am very insecure about my future and can no longer afford to continue paying the ever rising premisum for the CalPers LTC “inflation protected” policy that I have been paying since July 1996.
Where can we look for help? What can we do? Who is watching the store?
I am a long time member of the CalPERS Long-Term Care Program and have, like all of you, stuck it out through the rate increases because of the money I have already invested. I have reently been trying to get updated information on the status of the investment fund, relevant Board actions and any investifations that have taken place (as with CalPERS). So far, I have gone through the CalPers web site to no avail, contacted the 1-800 982 1776 number – they know nothing, been referred to the administration telephone numbers in Sacramento and get nothing buy voice mails, etc… Can anyone of you please tell me how to get current information about the status of this program?
I’m ready for a class action suit too! They told us we could avoid this latest premium hike if we were willing to forego inflation protection, so I wrote them that I would do that. THEN they told me that the result of doing that would be to slash my benefits by 45%. When I asked why that had not been revealed when the option was offered us, one telephone representative said, “They don’t like to put too much in writing”! Yet another telephone rep said, “It was in your contract that if you dropped inflation protection, your benefits would go back to your “base rate”. After re-reading my contract and NOT finding this there, I called yet a third time. This rep acknowledged it was not in the contact but said they just do this anyway. I’m going to include my e-address here because I want to hear from others who are ready to file a class action suit.
Ooops! I said I’d include my e-address and didn’t! It’s edandjoan@roadrunner.com
Dear Joan,
I am also furious with Calpers. I no longer have insurance with them because they are too expensive and I have had a very bad experience, I’m involved in an appeal of their claiming I owe them over three thousand for Kaiser insurance which I cancelled at the time of my retirement.
It’s a long story of at least 40 hours on the phone with Calpers, stress, outrage, waiting etc. etc. etc.
They are creating a lot of anger, outrage, and frustration in my otherwise blissful retirement.
I thought I was e-mailing Joan. I’ve never blogged before.
Anyway, I would certainly join a class-action suit against Calpers–this sounds like another Enron–I couldn’t believe those high-rises on J and K Streets in Sacramento.
I’m calling two attorneys today and see what is involved. My e-mail is:susannes_bader@hotmail.com.
Thank you to everyone who has posted a blog! After talking to the CalPers LTC reps. and having difficulty getting information about the different coverage options, I decided to check the Internet for LTC policies in general. What
a disturbing and depressing discovery to find out about the possible insolvency, especially after having had the policy since its inception and believing that I could depend on it! I still have my STRS Bulletin from Winter 1994 that strongly recommended the purchase of LTC insurance. I feel that STRS also carries responsibility in that there has been no information, that I know of, that has been given its members regarding lack of oversight re. CalPers LTC policies, etc. I called CalPers to try to get a written statement of its financial stability and was given a number that cycled me back to the customer reps. who “had no information” beyond giving me the address of the CalPers Website! I am seriously considering discontinuing the insurance, despite the fact that this will leave me with no LTC insurance as I cannot afford the premiums which would be based on my present age. This situation is egregious for all those who have policies and expect to have financial help when it will most be needed. I would definitely be willing to be part of a class action law suit.
I count 12 people on this blog ready to participate in a class action lawsuit against CalPERS. Me too. Please get in touch with me at edandjoan@roadrunner.com
Im retired from the COunty of San Diego, single, and sinking over $200 per month into CalPERS LTC and am fearful of not being able to afford other things I need now because of the premiums and then not getting the care Im paying for in the future. Please keep me posted on your progress. THANK YOU for spearheading this.
Pat
My understanding was that CALPERS would cover both IADL and ADL needs as long as they were based on some underlying medical conditions. Now CALPERS wants to negate its responsibilities for IADL coverage. If this is the case, we should file a class action lawsuit to get all the money we have paid into CALPERS.
Where are class action lawsuit lawyers who could go after CALPERS Long Term Care for its bad faith insurance practices? Please let me know at cyruspak@sbcglobal.net.
It has been very informative reading all the comments above. I have just started to research my parents calpers policies and came upon this article. Very disturbing to say the least but I have to say not unexpected. I recently watched an internet program, hosted by Max Keiser and Stacey Herbert. I found the program to be very informative and after what I have just read, right on the money trail. He talks specifically about calpers, and doesn’t pull any punches. If you watch more of “The Keiser Report” you may start to see a pattern that makes sense. Look for episode http://www.youtube.com/watch?v=JP5Hs6cj7M0 there is much more about calpers on the Max Keiser Report. I have yet to contact my parents calpers representative about a recent invoice and would appreciate any input.
One more thing, has anyone called Erin Brockovich? She was doing a class action in Perth Western Australia against ALCOA. She might very well be interested.
http://articles.latimes.com/2011/jun/28/business/la-fi-calpers-khinda-20110628
My husband and I were long time members of CalPERS until this September when I received a letter from Juline Diers the Director of Customer Service terminating my coverage in the CalPERS Long-Term Care Program due to non-payment of premiums for the period of July through October. By the way, I am paid tenthly and CalPers payments were automatically deducted from my pay check at the time of enrollment in the program. The pattern was the same, at the end of the summer I would get a letter from CalPERS letting me know that payment for the summer months was due. Payments were made. The CalPERS representative and the favorable endorsement of STRS made the program seem an ideal way of ensuring that our children would not be burdened with our long-term health care issues. Like many of you, my husband and I feel we were misled from the beginning. We asked the same questions as Lorenzo and got the same answers. We enrolled in CalPERS Long-Term Care thinking we were investing in a health care program that would be affordable, reliable, and protected from inflation. It is interesting that when the rates were raised we were told to discard the old information and replace it with the new. Vague as it was I wish I had kept all the paper work. Perhaps 60 Minutes would be interested in exposing the fallacies. Looking on the bright side, Juline may have done us a favor.
My uncle had an open claim after recovering from surgery and needed to change facilities. I had previously sent 3 emails regarding the claim and received no response, so I tried them on their website. I received an automated response that I would receive a reply in 10 days. I called the main customer service number and was on hold for 1 hour without speaking to a human before my call was disconnected. I tried the local assistance number and the message indicated a wait time of 2 hours and 50 minutes. I tried calling their partner company Univita Health three times: 1) I was transferred into the same queue that I was holding on for 6 minutes already. 2) Called back and was put on indefinite hold. 3) Called again and after holding for 10 minutes the call was disconnected. 4) I finally received a person who could give me the information I needed. With the unemployment rate s it is, I am sure there a re lots of competent call center people out there who would love a job!
My mother and I both have CalPers long term care insurance. We have had it since the beginning of the program which is now 16 years. That’s alot of premiums paid in. I’m contemplating quitting the program, but my Mom who is 86 years old is not likely to get insured at the same current price. She currently has a claim in which was approved about two weeks ago. I was told that claims take ten days to approve. We have sent in the direct deposit information and waited the proper amount of time. Now, we’re going on twenty business days waiting to receive the moneys that we have submitted for claim. I’ve been told that a supervisor will call me back. Something tells me that this isn’t likely to happen soon. Has anyone else had similar problems with getting their approved claims paid???
So sorry to hear of all these issues. I would recommend contacting http://www.cahealthadvocates.org/ and see if they can coordinate complaints and get some action on them. Unfortunately, CalPERS was never an official “insurance” in the first place, so was allowed to do as wished. I have spoken to teachers already diagnosed w/ MS who say they were able to get the CalPERS policy in the early years. Laudable, but not a good business model with the long tail of claims predicted for 70% of folks over 65 one day. For those of you w/ longstanding policies, do the math. If you got the inflation rider, the number of days of care even years from now should pay all your premium within a few months when needed. If premiums are too high and unsustainable, downsize first on length of coverage–say unlimited to the 3 yr option. The only other moving part is the inflation, and that is why they are doing the increases. If you bought $120 a day–15 years later, that is now $240 and will be $480 in 15 more yrs. Cost for care is definitely going up 5% annually, so consider carefully whether to drop back down to the original benefit. With good monthly income, it may still work if you can make up that difference. More disturbing is the customer service issue. CANHR is a group of legal advocates who may be able to help. Consumer Hotline: (800) 474-1116 http://www.canhr.org
Joyce-once the claim is rolling, I believe your mother’s premium will be waived as long as she is on claim. Depending on your age and health, you may or may not be well advised to switch to other coverage. You will definitely want to speak with someone who specializes in this coverage to get the best advice. Never drop your LTC coverage until you have been approved for a replacement policy. Revisit why you got it in the first place. If replaced, be sure you are filling in the Replacement notice on the new application. If an agent says to stop paying the policy before applying, run. They are ethically challenged, and you may become uninsurable or be denied coverage and not be able to get ANY LTC insurance-ever.
Maybe dropping the inflation and adding a small policy that pays cash would be good. Even if CalPERS is slow to help get folks information, they are still subject to audit, and if a claim is legitimate, they will eventually pay it. Customer service challenged? Maybe. Crooks? Certainly not.
When evaluating long term care protection, verify the company is controlled by your State Department of Insurance. The California Department of Insurance will only allow a rate increase with “with proper notification and approval from the Department of Insurance”.
California Department of Insurance Commissioner Dave Jones has sponsored Assembly Bill 999. Created by Mariko Yamada (Assemblymember and Chair of the Assembly Committee on Aging and Long-Term Care), Assembly Bill 999 is designed to further restrict long term care insurance rate increases.
Long term care insurance policies certified under the California Partnership for Long-Term Care allow you to protect assets equal to what your Partnership policy paid for long term care services in addition to the amount Medi-Cal would normally allow. These protected assets will be disregarded if you apply for the Medi-Cal program.
Importantly, policies certified under the California Partnership for Long-Term Care have stricter limits on any future rate increase than policies not certified under the Partnership.
See: http://www.skloff.com/Articles/CAPartnershipProgram-LTCU-071510.pdf
Aaron Skloff, AIF, CFA, MBA
CEO – Skloff Financial Group
http://www.skloff.com/services-ltci.htm
I distinctly remember being told at the time I signed up for the program that I would never have to worry about the premiums going up. I also recall a much younger co-worker with a history of family medical issues who decide to sign up in her twenties in order to lock in the premium price. Her premium was almost one-third my rate. That was an excellent LONG-TERM investment for her at the time…until the honeymoon ended…for all of us. The idea that CalPers Long-Term care is not soliciting new members inevitably puts the burden on current members, essentially, to hold their breath waiting for a life raft that does not appear to be coming.