LTCA:LongTermCare Action
LTCA:LongTermCare Action
Vol 1, No. 5
Well, for some CalPERS LTC policy holders, their increases
since purchase may be as high as 400%
85% is deceptive. The increases since purchase vary for each individual. One individual who purchased in 1997 has already witnessed a137% increase. The 85% increase jumps this person to 380%. She is 74. We have policy holders in their 80's who also purchased in the 1990's. Some of these people are single
females. Women are a major target of these changes, as most people needing care in their older years are women. Also women are frequently the caregiver for their spouse. These increases impact women on both fronts.
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Committee on Aging and Long-Term Care
Did you know there is an Assembly Committee on Aging and Long-Term Care? It is located in the Legislative Office Building,1020 N Street, Room 360A and the phone number is (916) 319-3990 (FAX: 916-319-3884). Assembly Member Mariko Yamada is Chair and Assembly Member Donald P. Wagner is Vice Chair. Send them your concerns about the CalPERS increases. Locate them on the web at http://altc.assembly.ca.gov/
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Is it a gamble?
Well, we know the rate hike is targeted at those who purchased polices between 1995 and 2004 that provide three-year, six-year or lifetime benefits with inflation protection, or policies with lifetime benefits without inflation
protection. This is well over the majority of the more than148,000 LTC policy holders. Supposedly one can avoid the rate hike by reducing coverage to a maximum of 10 years of benefits without inflation protection. The 85 percent rate hike was calculated based on the assumption that 10 percent of those with lifetime benefits will switch to the 10 year maximum plan. IF more than 10 percent switch, the rate hike might be reduced. BUT IF fewer than 10 percent switch, the rate hike could be greater than 85 percent.
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CalPERS Letters sent in March
For those whose coverage includes Lifetime Benefits and Built-in Inflation Protection, you should have received an informational letter from CalPERS in March. It outlines the average and range of cost of care in California per Univita, the underwriter. Be aware that costs vary within the state, and a stay for one person can be considerably less expensive as compared to another. (Is that the average facility rate or the actual
average cost paid in the previous year by policy holders?) It also doesn't predict the cost in 10, 20 or 30 years. Keep that in mind. The only way to avoid the 2013 and 2014 5% increases, and the 2015 85% increase (Oh, are we past 85% already???) is to choose option 5,6, or 7 and drop the built-in inflation
protection. There is a Benefit Increase Option offered every 3 years. (There is probably a cost for this rider.) The cost of the increase is determined by the additional amount, current premium rates and your age at the time of the offer. So you purchase a 3 year policy. What does that mean? A daily benefit of $257 gives you a maximum of $281,415. Well, depending on your current age and the length of your life that could be
reasonable. You are 70 and you live only 10 years more and will need the care for only 3 years. But what if you are 70 and you live 25 years more and you'll need the care? Think inflation, the very thing they want eliminated.
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Recommended Actions
1. A halt to the so called 85% increase (since purchase far exceeds 85%);
2.
Legislative oversight of CalPERS LTC activities;
happened to the former advisory board?)
4. Paid-up policies for people who want to cancel their LTC Insurance policies now;
5.
Oversight and regulation of CalPERS LTC Insurance program by the CA Dept of
Insurance (broaden the scope of the Commissioner's responsibilities to include
self-insured programs);
[Note: currently there is no substantial oversight]
6. A public CalPERS Board meeting to which everyone is notified and invited;
7. Immediate release to policy holders of the options being offered to us with costs.
8.
An independent audit of the program since its inception.
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AB 999-effective January 2013
In September 2012, Governor Jerry Brown signed AB999, authored by Assembly Aging and Long-Term Care Committee Chair Mariko Yamada. The bill was sponsored by Commissioner Jones and the California
Department of Insurance. AB 999 protects consumers from excessive premium rate volatility by modifying the long-term care insurance premium rate development process. CalPERS is self-insured and has gotten under the radar screen of the Department of Insurance. That means seniors are threatened, especially those on fixed incomes, in their ability to maintain the CalPERS long-term insurance which they purchased.
We need you Governor Brown and Chairperson Mariko Yamada!
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Will CalPERS LTC Insurance be there for YOU and at what
cost???
Ann Boynton from CalPERS stated in response to a member's complaint given at the Oct. 17,2012 CalPERS Board meeting: "If we ever for whatever reason should need to come before you again to look at a premium increase, we will work that issue with you well in advance apprising you of all of the circumstances that might
lead to that."
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In 2012, the following companies were offering Long-Term
Care in California:
This information is on the Dept of Insurance website. They were all actively writing new business in California in 2012. The rate history is given on the website: http://www.insurance.ca.gov/
Bankers Life & Cas Co., Continental Cas Co., Genworth Life Ins Co, John Hancock Life Ins Co, Knights of Columbus, LifeSecure Insurance Co., Massachusetts Mut Life Ins Co.,MedAmerica Ins Co., Mutual of Omaha Ins. Co., New York Life Ins Co., Northwestern Long Term Care, Physicians Mut Ins. Co.,Prudential Ins Co of America, State Farm Mut Auto Ins Co., Transamerica Life Ins Co.
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Questions of CalPERS?
The Underwriter Univita
CalPERS Third-Party Administrator completes the underwriting for the LTC Program. At this time, Univita is the Third-Party Administrator. (The California Dept. of Insurance has no jurisdiction?)
The Premium increases
Remember we were told there would never be premium increases? Remember Crist, CalPERS Board President n l995: "Our attempt is to offer members the most cost-effective, high-quality plan possible at the lowest premiums.?" Well CalPERS states that The Evidence of Coverage (EOC) is our contract with the member. Each member is issued a copy of an EOC . The l995 EOC has the following regarding premium increases:
Your Coverage Is Guaranteed Renewable
We cannot cancel or refuse to renew Your coverage until benefits have been exhausted as long as You pay premiums on time. Your premiums will never increase due solely to a change in Your age or health. CalPERS can, however, change Your
premiums, but only if We change the premium schedule on an issue-age basis for all similar coverage issued in Your state on the same form as this coverage. We must give You at least 60 days written notice before We change Your premiums.
The premium for any increases in coverage which You voluntarily elect will be based on Your age at the time You elect the increase.
Can Premium Rates Ever Change?
The premium rates shown in the Schedule of Benefits may be changed on the anniversary of Your Coverage Effective Date and on any premium due date thereafter. Any changes made will be on an issue age basis for all similar coverage issued in Your state on the same form as this coverage and made by action of the CalPERS Board of Administration, according to the criteria they
establish.
What Are Your Options if Premium Rates Change?
If premium rates are increased on a class basis, You will have the option of:
maintaining Your current benefits at the increased premium rate; or electing a decrease in coverage to a coverage amount We offer that maintains or reduces Your current premium.
Regarding public outreach
No notices of meetings are sent to policy holders. Many policy holders do not belong to the groups listed, particularly if they are widowed from which the policy was obtained by the spouse. This applies also to other family members who are policy holders.
CalPERS holds monthly Health Benefits Constituent Meetings at the Sacramento Office on the Thursday preceding the Pension and Health Benefits Committee Meeting. These meetings are open for anyone to
attend in person or by phone. Long-Term Care agenda items are including in these meetings. Representatives from organizations such as California State Retirees, Retired Public Employees' Association of California, CDF Firefighters Retirees Organization, California State University Emeritus and Retired Faculty Association and others attend these meetings as well. Special LTC Constituent Meetings were also held at various times throughout the year. To be added to list to receive future notification of these meetings, members may contact Henrietta Washington by telephone at 916-795-1426 or by email at: Henrietta.Washington@calpers.ca.gov
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Know what CalPERS is stating:
(By request this is printed again)When will the increases become effective? July 1, 2015
Who will the 2015 premium increases impact?
The premium rate increases will affect LTC1 and LTC2 policies-policies purchased between 1995 and 2004 with lifetime coverage and built-in inflation protection, lifetime policies without inflation protection, as well as 6-year and 3-6-year policies with inflation protection.
Who will be excluded from the 2015 premium increase?
LTC1 and LTC2 policies (issued 1995-2004) with 6 years or 3 years of benefits without built-in inflation protection are excluded from the proposed 2015 increase. All 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 coverage with Retained Inflation would also avoid the 2015 premium increase. What is a California Partnership long-term care policy?
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 5 percent built-in inflation protection, which policyholders are not allowed to drop, and a 30-day deductible period.
Why is the premium increase necessary, and why 85 percent?
To ensure the long-term solvency of the Long-Term Care 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 2-year period, beginning in 2015, with an option for the policyholder to select a 1-year option of 79 percent. The percentage of the proposed increase is based on an assumption that 10 percent of people holding policies purchased
10-year/Retained Inflation policy no later than July 2013. However, if more than 10 percent of these policyholders convert to the combined 10-year/Retained Inflation 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 in its Long-Term Care Insurance Program the following options to convert their policies to help them avoid future premium increases and maintain adequate benefits for their long-term care needs:
Combined 10-year/Retained Inflation (RI) Plan:
This policy conversion option will be offered to LTC1 and LTC2 policyholders who have lifetime benefit with built-in inflation policies (excluding California Partnership polices). It allows the opportunity to drop the built-in inflation protection and retain the increased Daily Benefit Amount (DBA) they've earned. Without the RI option, if policyholders elect to drop their built-in inflation protection, their increased DBA drops to the original amount they had at the time of purchase.
Retained Inflation (RI) Option:
This policy conversion option will be offered to all policyholders with inflation protection (excluding California Partnership Plans), regardless of their policy benefit duration. This will allow policyholders to drop their built-in inflation protection and maintain the higher Daily Benefit Amount (DBA) they accrued and paid for over the years. This option is new for policyholders. Prior to this, when policyholders dropped their built-in inflation protection they were reverted to their original Daily Benefit Amount. Policyholders who elect this option and remove their built-in inflation protection will not be subject to the 2015 increase. Policyholders who drop their built-in inflation protection will be eligible for a Benefit Increase Option (BIO) allowing them to increase their DBA later on. The BIO is offered every three years to policyholders who do not have built-in inflation protection. Policyholders accepting the BIO offer will have to pay the increased premium amount required for the
additional coverage.
Optional Daily Benefit Amount:
Amount (DBA) following the 2010 Long-Term Care premium increase. They will be able to increase their current DBA under this option, but they will also be required to participate in the RI option. Those taking
advantage of this alternative will have to pay the additional premium costs associated with repurchasing up to 100 percent of the DBA they had at the time they elected to drop their built-in inflation protection or decreased their DBA. Underwriting will be waived for policyholders who elect this option.
How long is the average long-term care insurance claim?
Statistics 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 Daily Benefit
Amount Maximum multiplied by the number of days in 10 years (3,650). Therefore, a 10-year plan with a Daily Benefit Amount maximum of $200 would have a total coverage amount of $730,000. The Daily Benefit Amount for facility care would be covered at $200 per day. The Daily Benefit Amount for home care would be $100, so you could have coverage longer than 10 years.
Experience has shown that policyholders in claim, whose daily paid covered expenses are less than their Daily Benefit Amount maximum, are able to extend their benefits beyond the defined fixed year benefit period, as benefits are paid until the Total Coverage Amount of dollars is exhausted. If a policyholder used their maximum Daily Benefit Amount every day in a nursing home setting, then they would exhaust their coverage within the defined term of their coverage, in this case 10 years.
Why is CalPERS waiting until 2015? What is happening between now and then?
The LTC1 comprehensive lifetime policyholders with inflation protection have been receiving an ongoing 5 percent premium increase since 2011. This ongoing premium increase is scheduled to continue through 2014. Between now and 2015 those LTC1 policyholders will be given the opportunity to convert to the 10-year
Retained Inflation option. Depending upon the number of policyholders that convert, the percentage of the 2015 rate increase could vary.
Pros:
• Converting to a fixed year policy with no inflation protection may reduce premiums.
• Converting to the new option stops the ongoing 5 percent premium increase in 2013 (for LTC1 lifetime with inflation protection policyholders).
• Policyholders who convert will not be subject to the 79 to 85 percent premium increase projected for July 2015.
• Policyholders may also increase their Daily Benefit Amount and total coverage amount once every three years by accepting the Benefit Increase Option. Accepting the Benefit Increase Option does result in a premium increase related to coverage increase.
Cons:
• While the average time in claim is less than four years, some people can spend significantly more time
receiving long-term care. It isn't possible for us to predict who might need extensive coverage, and some policyholders may exhaust even a 10-year policy.
Can I go from a 3-year or 6-year plan to the new 10-year RI plan?
No, at this time, only LTC1 and LTC2 policyholders with lifetime and built-in inflation protection will be offered the 10-year RI option.
When will the new options be available?
The new options will be offered as part of the 2013 ongoing 5 percent rate increase offering to the LTC1
policyholders with lifetime coverage with inflation protection. Policyholders will receive early notification of their general options in December 2012. More detailed information on specific options will be mailed to policyholders in April/May 2013. Policy conversion changes will be effective July 1, 2013.
Is CalPERS planning to provide additional information related to the proposed rate increase and the various options?
Yes, 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. In April/May 2013 LTC1 policyholders who are impacted by the ongoing 5 percent premium increase will receive a letter outlining specific options and related premium changes. Additional communication letters and articles will be circulated for other impacted policyholders.
How will the 2015 rate increase impact policyholders currently receiving benefits?
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. Does CalPERS plan to re-open the LTC Program?
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.
Can I cancel my plan and get my money back?
You may cancel your coverage at any time; however, there is no return of premiums on a voluntary
cancellation 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
File a complaint with the California State Insurance Department. Also write to your state legislators, and send them a copy of your complaint.
To file a complaint:
1. go to: /http://www.insurance.ca.gov/contact-us/0200-file-complaint
2. Click on "Printable RFA"
3. The complaint form will come up on the screen. You can type right onto the form on your computer. 4. Then print your complaint & sign it. The address for where to send it is on the first page of the form. It is very important that you write or call your State Assembly Member and State Senator in addition to filing the complaint. The Insurance Commissioner does NOT have jurisdiction over the CalPERS long- term care premiums.
Locate your state legislators by your address then click on legislators' name for website and contact information:
http://findyourrep.legislature.ca.gov
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This year the average age of the baby boomers is 65!
The average age of a CalPERS policy holder is 65!
Ponder This
:CalPERS states the 85 percent increase "is necessary to offset the effect of higher-than-expected claims, lower-than-expected investment income, the Board's adoption of a more conservative LTC Fund investment mix, and a lowering of the Fund's investment discount rate to 5.75 percent to align with the more conservative investment portfolio."
So how did they invest OUR money? In 2009, $369 million in losses occurred due to "poorly performing equity markets." A fund breakdown shows 18.3 % if in international stocks, 28% in domestic stocks, 48.8% in domestic debt securities (mortgage debt. etc.), and the remaining 4.9 % in real estate. What is the real
story? How are liabilities to policy holders booked? LTC Action
1716 Rose Street Berkeley, CA 95703
Our work and our people are regularly covered in publications around the world.
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