CalPERS to Raise Premiums for Long-Term Care Insurance

Due to lower-than-expected investment returns and higher-than-normal claims volume, the California Public Employees’ Retirement Board of Administration (Board) this week approved an 85 percent increase in premium rates for its long-term care (LTC) insurance program that will affect roughly three-fourths of all CalPERS LTC policy holders. CalPERS’ LTC insurance covers costs related to, among other things, stays in convalescent homes and nursing facilities and is open to all California public employees, retirees, spouses, parents, parents-in-law and adult siblings aged 18 to 79 years, although no applications for the insurance are being accepted at this time. 

The increase will be phased in over two years, beginning in 2015; however, policyholders will have the option of a one-time, 79 percent rate hike if they absorb the increase in one year instead of two. While CalPERS initiated previous rate hikes in 2004 and 2006, those increases did not sufficiently reduce the large deficit in the program. For more information, please click here.

CalPERS to Conduct Health Benefits Audit

CalPERS, in January 2011, launched its Health Benefits Purchasing Review Project (Project), with the goal of developing strategies to ensure the sustainability of its health benefits program and evaluate purchasing strategies and health benefits design. After conducting a market scan later that year to examine market trends and the cost drivers associated with delivering health care benefits, CalPERS conducted employer and employee surveys to evaluate their perspectives. These actions led to the Board, in March 2012, adopting initiatives based on the outcomes of the Project, which includes conducting an audit to verify the eligibility of policy member dependents for CalPERS health care coverage. After researching similar audits of other states, universities and public agencies, CalPERS found that those audits revealed about four to eight percent of dependents on employer-sponsored health plans may not be eligible; CalPERS staff conservatively estimates about $40 million savings by performing the audit.

The Board on Wednesday approved regulations to grant amnesty to employees and annuitants who voluntarily terminate enrollment of ineligible dependents on or before June 30, 2013. The dependent eligibility audits would then begin after that amnesty period ends and CalPERS and an outside vendor agree on an audit plan. The audit will first be conducted of the state, with public agencies being audited beginning in January 2014.

CalPERS and the vendor will communicate directly with policy holders regarding eligibility, amnesty, COBRA eligibility for dependents found to be ineligible, and documentation of eligibility submission/late submission, etc. However, counties are encouraged to communicate with their employees regarding the impending audit and encourage termination of ineligible dependents during the amnesty period. Additionally, CalPERS has stated that results of the audit are prospective and it will not seek reimbursements on claims it has paid for dependents found to be ineligible for health benefits; however, CalPERS will alert policy holders that employers may choose to collect paid premiums for such dependents.

CSAC will keep counties apprised of the ongoing process of the ineligible dependents audit.