The often-maligned long-term care insurance industry could be in line for another major blackeye soon in a California courtroom.
The California Public Employees’ Retirement System violated its long-term care insurance policy terms when it increased premiums by 85%, first implemented in 2015, according to plaintiffs in a class-action lawsuit. The lawsuit does not address rate increases in 2003, 2007, 2010, 2011, 2012, 2013 and 2014.
The trial, which could affect up to 100,000 seniors who had the CalPERS plan, began Monday. While CalPERS General Counsel says the system’s contract allowed it to raise the rates, the plaintiffs allege the seniors sustained around $1.2 billion in costs from damages from the increased premiums and other costs associated with the increases, the Fresno Bee reported Sunday. Class members are California citizens who purchased an LTC policy from CalPERs between 1995 and 2004 and subjected to the 85% increase.
“These people were completely, completely misled,” Michael Bidart, an attorney representing the plaintiffs, told the newspaper.
Providers are generally in favor of a more robust LTC insurance presence because of its ability to bring in non-public funding.
Attorneys representing the seniors first filed in 2013, after CalPERS notified about the rate hikes. CalPERS began selling the plans, which include nursing home coverage, in 1995, and advertised them as 30% cheaper than similar plans, the newspaper reported.
CalPERS isn’t alone in its apparent financial struggles. Genworth said this year it has lost about $3.1 billion from its long-term care policies, and the market for long-term care insurance plans has dropped dramatically. Around 100 companies offered standalone policies in 2002, and today the number is around 17.