A possible settlement agreement has fallen through in a suit between CalPERS and a group of policyholders over a 2013 proposed 85 percent rate hike. The agreement would have covered approximately 60,000 policyholders.
The suit was filed by California policyholders that elected to pay for inflation protection benefits in their long-term care insurance (LTCi) policies, ranging from policies purchased in the 1990s through 2004. The Plaintiffs alleged that CalPERS proposed rate hike violated their policy agreements. They contended that CalPERS marketing materials promised that the policies’ optional benefit would not increase their premiums, while CalPERS asserted that it had the authority to raise rates to keep plans funded.
The parties reached this settlement in July 2021. The putative $2.7 billion agreement gave policyholders a choice between giving up plans and receiving a refund of premiums paid up to a certain limit or opting out of the settlement and paying higher premiums to keep their coverage. However, if more than 10 percent of policyholders opted out, the settlement agreement allowed CalPERS to renounce the agreement.
Plaintiffs’ attorneys recently revealed that 30 percent of policyholders decided to retain their coverage. As a result, the parties are no longer bound by the settlement agreement, though they have resumed negotiations in pursuit of a new settlement.
Last year, CalPERS imposed an additional rate increase of 52 percent, and plans a second increase of 25 percent in November 2022.
Read a recent article describing the history of the settlement agreement here.
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