Big rate hike for care is closer

dkasler@sacbee.com

Published Wednesday, Oct. 17, 2012 - The Sacramento Bee

The retirees spoke of the potential hardships. CalPERS officials said they had to act.

The result is a likely 85 percent rate hike in the long-term care insurance program run by the California Public Employees' Retirement System.

Despite protests from policyholders, a CalPERS committee voted reluctantly but unanimously Tuesday to raise rates in the pension fund's troubled long-term care program. The insurance covers stays in nursing homes and convalescent homes.

The increase would affect 112,000 public employees and retirees who have the coverage, or about three-quarters of all the policyholders. It would be phased in over two years starting in 2015. Policyholders would have the option of getting a 79 percent increase – if they agree to absorb it in one year.

The 9-0 vote by the pension and health benefits committee must be ratified by the full CalPERS board, which will vote today.

Policyholders pay $1,400 to $2,400 a year in premiums; the proposed increase would cost them hundreds or even thousands more, depending on age and type of coverage.

The 17-year-old program is suffering from inadequate investment gains and higher-than-expected claims. While it's currently solvent, it faces big shortfalls in future years if rates don't rise. Unlike CalPERS' pensions, the long-term care program doesn't get taxpayer support.

"Not doing this will cause the plan to fail," said committee member Tricia Wynne, representing state Treasurer Bill Lockyer.

Added committee member J.J. Jelincic: "We've got nothing but bad choices."

Retirees told the committee the rate hikes would be a major burden.

"It represents a threat to the retirement security of many of the retirees," said Phil Sherwood, executive director of California State Retirees.

The CalPERS committee also voted to create a less comprehensive benefit package that's designed to cost no more than the current plan. Instead of lifetime benefits, the plan would cover 10 years. CalPERS officials said only 1 percent of policyholders need more than 10 years' worth of benefits.