FAQs - CalPERS Long-Term Care Program & Premium Increase
Following are commonly asked questions and answers about the CalPERS Long-Term Care Program (LTC) premium increase. These questions and answers will be updated as more details about the premium increase and related program changes become available.
- When will the increase become effective?
- Who will the 2015 premium increase impact?
- Who will be excluded from the 2015 premium increase?
- What is a California Partnership long-term care policy?
- Why is the premium increase necessary, and why 85 percent?
- What are the options to avoid the 2015 rate increase? What is CalPERS doing to help policyholders with the impact of these increases?
- How long is the average long-term care insurance claim?
- If I reduce from lifetime benefit coverage to a defined fixed year benefit amount (10, 6 or 3 years) and start receiving benefits, will those benefits stop at the end of the defined fixed year benefit period (10, 6 or 3 years)?
- Why is CalPERS waiting until 2015? What is happening between now and then?
- What are some advantages for policyholders that convert to the 10-, 6- or 3-year Retained Inflation (RI) plans?
- Can I go from a 3-year or 6-year plan to the new 10-year RI plan?
- I am a policyholder with lifetime benefit and built-in inflation protection policy issued from 1995-2004. What is the impact to my monthly premium if I convert to the 10-year RI plan in 2013 or 2014?
- Is CalPERS planning to provide additional information related to the proposed rate increase and the various options?
- How will the 2015 rate increase impact policyholders currently receiving benefits?
- CalPERS asked for its first premium increase in 2003. Why didn't you realize there would be a problem with the LTC Fund then and provide a less expensive fix?
- Does CalPERS plan to re-open the LTC Program?
- Can I cancel my plan and get my money back?
- I want to send a complaint to the CalPERS Board. What is their address?
- Who do I contact if I have additional questions about the LTC Program premium increases and benefit changes, or specific questions about my long-term care policy?
July 1, 2015
The premium rate increases will affect policies issued from 1995-2004 with lifetime coverage and built-in inflation protection, lifetime policies without inflation protection, as well as 3-year and 6-year policies with inflation protection.
Policies with three years or six years of benefits without built-in inflation protection are excluded from the proposed 2015 increase.
All California Partnership policies and policies purchased in 2005 or later are excluded from the 2015 increase.
Policies issued 1995-2004 with inflation protection that convert to defined benefit period (e.g., 10-, 6- or 3-year) coverage with RI would also avoid the 2015 premium increase.
The California Partnership policies fall under the guidelines of the California Partnership for Long-Term Care, directed by the California Department of Health Care Services. These policies provide an additional benefit for policyholders who have exhausted their long-term care insurance benefits and must qualify for Medi-Cal benefits to pay for their continued care. Rather than having to spend down their accumulated wealth and savings to meet Medi-Cal requirements, the partnership policies allow policyholders to keep an amount of their assets equal to what they received in long-term care insurance benefits. Partnership policies also include the compound five percent built-in inflation protection, which policyholders are not allowed to drop, and a 30-day deductible period.
To ensure the long-term solvency of the LTC Fund, the CalPERS Board adopted a more conservative investment portfolio for the Fund, as well as a revised discount rate of 5.75 percent to match the portfolio change. The changes necessitated a premium increase in 2015 to offset the reduction in future investment earnings.
The Board approved a premium increase of 85 percent, applied over a two-year period, beginning in 2015, with an option for the policyholder to select a one-year option of 79 percent. The percentage of the proposed increase is based on an assumption that 10 percent of people holding policies purchased between 1995 and 2004 with lifetime coverage and built-in inflation protection will choose to move to a 10-year RI policy no later than July 2013.
However, if more than 10 percent of these policyholders convert to the combined 10-year RI benefit, the proposed 2015 premium increase could be reduced. Conversely, if less than 10 percent convert to the new 10-year benefit option, the proposed premium increase could be higher.
What are the options to avoid the 2015 rate increase? What is CalPERS doing to help policyholders with the impact of these increases?
CalPERS will offer policyholders the following options to convert their policies to help them avoid future premium increases and maintain adequate benefits for their long-term care needs:
New 10-year Year Plan with Retained Inflation:
Retained Inflation Option:
Optional Daily Benefit Amount:
Long-term care industry findings show that the average long-term care length-of-claim is approximately 3.6 years.
If I reduce from lifetime benefit coverage to a defined fixed year benefit amount (10, 6 or 3 years) and start receiving benefits, will those benefits stop at the end of the defined fixed year benefit period (10, 6 or 3 years)?
Not necessarily. Benefits are paid until the total coverage amount of dollars is exhausted.
For example: The total coverage amount of dollars for a 10-year plan is calculated as the DBA maximum multiplied by the number of days in 10 years (3,650). Therefore, a 10-year plan with a DBA maximum of $200 would have a total coverage amount of $730,000 ($200 x 365 days x 10 years = $730,000). The DBA for facility care would be covered at $200 per day. The DBA for home care would be $100, so you could have coverage longer than 10 years.
Some policyholders are confused about what it means to have a 10-, 6- or 3-year policy benefit. A 10-year policy does not mean the policy ends 10 years after purchasing. It also does not mean that the clock starts on the 10-year period once someone begins using the benefits. The pool of money (i.e., total coverage amount or total benefit amount) remains available for the policyholder to use for the rest of their life. It does not have an expiration date. The cost of care will determine how long benefits will last. Benefits will be available for at least the benefit period selected, or longer if the cost care is less than the daily benefit amount of the policy.
Policyholders in claim, whose daily paid covered expenses are less than their DBA maximum, are able to extend their benefit dollars beyond the benefit period, as benefits are paid until the total coverage amount of dollars is exhausted. If a policyholder used their maximum DBA every day, then they would exhaust their coverage within the benefit term that was selected.
Policyholders who hold comprehensive lifetime with inflation protection coverage have been receiving an ongoing five percent premium increase since 2011. This ongoing premium increase is scheduled to continue through 2014.
Between now and 2015, impacted policyholders will be given the opportunity to convert to the 10-, 6- or 3-year RI option. Depending upon the number of policyholders that convert, the percentage of the 2015 rate increase could vary.
CalPERS will be collaborating with constituent groups, such as the Retired Public Employees Association, Service Employees International Union, California State Employees Association, California State Retirees, California State University Retired Faculty and others to provide educational materials to help explain the options available to policyholders.
What are some advantages for policyholders that convert to the 10-, 6- or 3-year Retained Inflation (RI) plans?
- Converting to a RI plan option will reduce premiums.
- Stops the ongoing five percent premium increase in 2013 and 2014, and will not be subject to the 85 percent premium increase scheduled for July 2015.
Policyholders may also increase their DBA and total coverage amount once every three years by accepting the BIO. Accepting the BIO does result in a premium increase related to coverage increase.
At this time, only policyholders with lifetime and built-in inflation protection, whose policies were issued from 1995-2004, will be offered the 10-year RI option.
I am a policyholder with lifetime benefit and built-in inflation protection policy issued from 1995-2004. What is the impact to my monthly premium if I convert to the 10-year RI plan in 2013 or 2014?
Table 1 and 2 below illustrate examples of the expected monthly premiums for members who move from the lifetime policies with built-in inflation protection plans issued from 1995-2004 to a 10-year policy with RI plan in 2013 or 2014. Policyholders who select the 10-year RI conversion option in 2013 would have a reduction in monthly premiums, and not be subject to a premium increase of 85 percent, applied over a two-year period, beginning in 2015. Exact premium amounts will vary by member. For policies with lifetime benefit and built-in inflation protection issued from 2003 to 2004, the new premium amount of the 10-year RI plan will not be available until 2014. For other questions related to the 10-year RI plan, please contact us at (888) 877-4934.
Table 1. Sample monthly premiums before and after migration to 10-year RI plan in 2013 for policies with lifetime benefit and built-in inflation protection issued from 1995-2002
|Issue Age in 1999||Current Age in 2011||Beginning Premium||Aggregate Premium After 5% Increases
Migration to 10-year and RI in 2013
|Year 2010||Year 2011||Year 2012||Year 2013||Year 2014|
Table 2. Sample monthly premiums before and after migration to 10-year RI plan in 2014 for policies with lifetime benefit and built-in inflation protection issued from 2003-2004
|Issue Age in 2004||Current Age in 2011||Beginning Premium||5% Increases – Not Applicable
Migration to 10-year and RI in 2014
|Year 2010||Year 2011||Year 2012||Year 2013||Year 2014|
Is CalPERS planning to provide additional information related to the proposed rate increase and the various options?
We will communicate with all policyholders to educate them on the need for the 2015 rate increase, the options that will be available and the impact we hope these changes will have on the future of the LTC Fund.
Policyholders who are receiving benefits when the 2015 rate increase is offered will not be impacted as long as they are receiving benefits and in premium waiver status. However, if they close their claim and resume paying their monthly premium, they would be offered the 2015 rate increase as part of the premium reinstatement process.
CalPERS asked for its first premium increase in 2003. Why didn't you realize there would be a problem with the LTC Fund then and provide a less expensive fix?
At the time, the 2003 premium increase was thought to be sufficient based on projected claims and investment income. In 2003, long-term care insurance was still relatively new compared to life and disability insurance products, and there wasn’t as much claims experience or data available to rely upon, compared to today.
On February 20, 2013, the CalPERS Board of Administration approved an open application period for the LTC Program beginning December 2013. It will be the first time the LTC Program will be open to new applicants since 2008. It is also the first time the application period will be continuous with no closing date.
You may cancel your coverage at any time; however, there is no return of premiums on a voluntary cancelation of coverage. In addition, you received the benefit of coverage during the time you paid premium; had you qualified for benefits during this time your long-term care insurance would have paid.
If your intent is to replace your coverage with other long-term care insurance, it is recommended that you don't cancel your current coverage until you receive confirmation that you have been approved for the new coverage. We strongly recommend that you evaluate all of your options before canceling your coverage. You need to mail a written request, with your signature, to the following address to cancel your coverage:
CalPERS Long-Term Care Program
P.O. Box 64902
St. Paul, MN 55164-0902
You may write the Board at:
CalPERS Board of Administration
P.O. Box 942719
Sacramento, CA 94229-2719
Who do I contact if I have additional questions about the LTC Program premium increases and benefit changes, or specific questions about my long-term care policy?
Long-Term Care Customer Service
General questions related to your policy: (800) 982-1775
Questions related to premium increases: (888) 877-4934
Monday - Friday, 8:00 a.m. - 5:00 p.m. (PT)