The following information has been provided to us by one of the law firms involved in the CalPERS LTC class-action lawsuit:
On July 9, 2020 CalPERS announced that it had reached a settlement in the 8 year long legal battle involving its Long Term Care insurance program. The case, Wedding, et al. v. California Public Employees’ Retirement System, et al. was originally filed in 2013 and generally alleged that the 85% premium increase CalPERS announced in February 2013 (and implemented in 2015-2016) was not permitted under the Long-Term Care Insurance contracts between CalPERS and Class Members. This was the seventh increase since the CalPERS Long-Term Care Insurance Program was started in 1995.
Recently, CalPERS announced yet another premium increase. The combined impact of this most recent increase could result in future premiums going up by as much as 90% over the next two years. CalPERS has also indicated that this may not be the last premium increase it will impose. (For more information about the rate increase please visit www.CalPERSLTCClassAction.com.)
The announced settlement will resolve the claims of approximately 80,000 individuals who 1) were California citizens at the time the 85% rate increase was announced; and 2) had a LTC policy with CalPERS that included automatic inflation protection benefits at the time of the premiums increase. For California citizens who were hit with the premium increase and did not have automatic inflation protection, the lawsuit will continue on their behalf.
Under the terms of the settlement, Class Members who are current policy holders will be able to extract themselves from the Long Term Care program by surrendering their policies in exchange for a full refund of all premiums paid by Class Members from the policies’ inception through the date the settlement is finally approved by the court. Additionally, the attorneys representing the class have retained insurance brokers who believe it may be possible to use premium refunds to purchase replacement Long Term Care policies once it is determined how many class members would prefer this option. It is anticipated that the replacement LTC policies would be issued without any underwriting and be backed by a large A-rated insurance company that is regulated by the California Department of Insurance. And, although the replacement policies may not provide as much coverage as the CalPERS policies, they will likely not require the payment of any future premiums. Instead the policies will be paid for entirely by the premium refunds that class members are to receive under the settlement. Whether replacement policies will be available, and their terms will depend largely on how many individuals select this option.
In addition to relief for current policy holders, the settlement also provides compensation for individuals who let their policies lapse, who became deceased, and who are currently on-claim.
The process by which the settlement will go forward is as follows: Notice of the settlement is expected to be sent to Class Members the week of August 13, 2021. For current policy holders, the notice will provide all information about the settlement and the amount of their individual premium refund. The notice will also contain three options that can be selected by class members: 1) obtain a premium refund and surrender your policy; 2) have your premium refund applied to the purchase of a replacement Long Term Care policy; or 3) exclude yourself from the settlement and keep your policy with CalPERS. Anyone selecting a replacement policy must do so within 40 days.
After it is determined how many class members desire a replacement policy, the brokers working for the class will have 35 days to obtain the best policy they can for this group of individuals. At that point, class members will be provided information about the replacement policy or told that one could not be obtained. Class Members will then be given an additional 45 days to decide whether to purchase the replacement policy (assuming one is available), obtain a premium refund, or exclude themselves from the settlement.
The final step in the process is a Final Approval Hearing. At this hearing, the court will consider the reaction of class members to the settlement and will make a final decision as to whether the settlement should be approved.
The attorneys have advised us that there are three things to keep in mind while the court is considering whether to approve the settlement. First, it is important for class members who are current policy holders to continue paying premiums until the settlement is final. This will ensure they stay insured until the settlement is final and any premiums paid in the interim will be added to the class members’ premium refund. Second, the settlement agreement provides that the type of relief class members receive will be determined on the date the settlement is finally approved by the court. This means that if class members let their policies lapse between now and final approval, they will receive substantially less than a full refund of premiums. Third, there is always a chance the settlement may not be approved by the court or will not go forward for other reasons. Hence, class members should make all decisions concerning their policy as if there was no settlement at all.
The attorneys representing the class have advised us that the settlement was reached in response to numerous comments from Class Member who felt trapped in an unsustainable insurance program that was plagued by never ending premium increases. The attorneys were also concerned about the risk of not prevailing in the case and the length of time it would take until a final resolution could be obtained. In fact, they estimate that if the case was tried to a jury and appealed, it could potentially be another 3-5 years before any relief could be provided to the class. This time delay coupled with the fact that more than 16,000 class members have died since the case started 8 years ago, were important factors in the decision to settle.
If you are in the Settlement Class, more information concerning the settlement should be arriving within the next month. The attorneys for the Class advise us they will have a large call center set up to help handle questions from class members and will be providing extensive details concerning the settlement in the class notice. The website for the settlement will be hosted at www.CalpersLTCClassAction.com.