The Wrong Kind of Hike
CalPERS enrollees receive notice of long-term care rate hikes
2/20/13, Sacramento Bee, Jon Ortiz [excerpt]
With an 85 percent premium hike looming, government workers and retirees covered by CalPERS’ costliest long-term care insurance policies face a crucial decision: Swallow the increase or get out of a program they have been paying into for years. The reality of the increase literally came home this week as letters from CalPERS hit the mailboxes of 148,000 policyholders. The fund’s board last year voted to raise premiums for the 90 percent of insured members who bought the top-tier plan – lifetime coverage and inflation protection for things like nursing home and assisted-living care. Half of those policyholders are in the very highest tier and also face two small increases over the next two years before the 85 percent jump kicks in. In all, rates for them will roughly double. CalPERS says it is hiking rates to keep the insurance fund solvent long-term. Losses from higher-than-expected claims, lower-than-expected investment returns and loose underwriting standards early on forced the decision…
Does this matter for UC employees? UC is not part of CalPERS. But as state employees, UC employees at one time were offered the “opportunity” to subscribe to CalPERS’ long-term care plan. There is a larger lesson from this episode. Long-term care policies are essentially a promise to provide resources for what could be an expensive future event. But the premiums you will pay for such policies/promises are not fixed. Moreover, you are depending on some insurance company – which between now and then may be merged, acquired, or who knows what? – to honor the policy when you may not be in a good position to appeal denials of claims.
Long-term care insurance is truly faith-based insurance. But if you believe…
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