The class-action lawsuit claims the
"These people were completely, completely misled," said
CalPERS contends it had the legal authority to raise the premiums.
"We raised rates to sustain the plan and we believe they were properly increased in accordance with our contract," CalPERS General Counsel
Seniors who paid the increase or who reduced their coverage to avoid it are members of the suit's class, excepting those who opted out. The suit is known as
The trial, taking place in
Attorneys representing seniors with the plans filed the lawsuit in 2013, after CalPERS notified the seniors of the premium hikes to come, according to court documents.
CalPERS started selling the plans, which cover care in nursing homes and other settings, in 1995, according to court documents. The fund advertised them as 30 percent cheaper than similar plans and indicated they would be prudently managed, according to the complaint filed in the case.
From the start, the long term care program was "grossly underfunded" and was engaging in overly risky investment strategies that resulted in losses the fund didn't tell policyholders about, according to the complaint.
The complaint says the state advertised to employees that by enrolling, they could lock in premiums for the life of their policies.
"What happened was they over-promised and under-priced the products they were selling," said Bidart, the plaintiffs' attorney.
CalPERS' struggles with long-term care insurance aren't unique. While many insurers offered the plans in the 1990s, premium increases and insurer losses drove most out of that line of business, according to the
If the suit proceeds from there, it will move on to statute of limitations issues. CalPERS argues that since it increased premiums by lesser percentages in 2003, 2007, 2010, 2011, 2012 and 2013, seniors who wanted to file a lawsuit should have done so earlier.
"Plaintiffs paid these increases for years without complaint before the initiation of this lawsuit," CalPERS attorneys argued in a court filing.
The judge could decide in favor of the plaintiffs on that issue, or he could send that piece to a jury trial, Bidart said.
If plaintiffs prevail on the contract of limitations issue, the lawsuit -- absent a settlement -- would proceed to a jury trial related to the potential breach of contract. Any damages would be determined in that phase.
CalPERS has said that since the long-term care insurance fund is separate from its pension fund and other programs, the only way for it to pay damages in the trial would be to raise long-term care insurance premiums.
"The long-term care fund is self-supporting," Jacobs said in an email. "Any monetary judgment seriously threatens its viability going forward."
More information, including court documents, is available at a website Bidart set up: http://www.calpersclassactionlawsuit.com.
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