Why purchase long-term care insurance?

Long-term care insurance offers benefits for support services if you become unable to perform activities of daily living on your own. The services covered by long-term care insurance are generally not covered by Medicare or other medical plans.

As with purchasing any insurance product, it is important to assess your personal financial situation and level of risk tolerance before deciding whether to buy long-term care insurance. Here are a few sources that offer useful information as you make your decision:

Why does UC offer the CalPERS Long-Term Care Program?

In reviewing long-term care insurance products, UC has found that CalPERS’ program offers stronger benefits and broader eligibility at a lower price than the one other company that currently offers group long-term care coverage.

UC first offered long-term care insurance to its employees through CalPERS many years ago, when insurers had little experience with this kind of coverage. Over the years, there was considerable volatility in the long-term care insurance marketplace. Many carriers left the marketplace when their plans became unsustainable, and others raised premiums significantly to keep their plans viable. Systemwide Human Resources (HR) made the decision to cease promoting the CalPERS program to employees during this period of volatility.

More recently, UC has received a steady demand for long-term care coverage. Following an evaluation of long-term care insurance options currently on the market, Systemwide HR found that the CalPERS program offers the best available value. To meet demand, UC reintroduced the CalPERS Long-Term Care program.

How stable is the CalPERS Long-Term Care program?

The CalPERS Long-Term Care website, www.calperslongtermcare.com, provides complete information about the plan’s financial position, including comprehensive annual CalPERS Long-Term Care Fund Valuations.

Following the financial volatility in the long-term care market referred to above, the CalPERS board approved the Stabilization and Open Application Project (SOAP), an initiative designed to address the wide variety of factors which affected all long-term care insurance programs at that time. Since the SOAP initiative the Long-Term Care program is fully-funded, with an average funded status of 116 percent, above the program’s target of 110 percent. This target was set to allow a reasonable margin for adverse developments. Note that the LTC fund has a completely separate funding status from other CalPERS programs such as pensions and medical plans.

The SOAP initiative, launched in 2012 and completed in 2016, sought to address challenges including the duration of claims, the rapid rise in the cost of long-term care services, low policy lapse rate, low interest rates, and investment losses stemming from the economic crisis of 2008. The Long-Term Care Group, the CalPERS LTC plan administrator, conducted extensive actuarial analysis in order to stabilize the program for current participants and future generations. Corrective actions included the revision of underwriting standards, premium increases, a revised investment discount rate, the development of new conversion options to help participants avoid the premium increases, and the reopening of the Long-Term Care program to new participants at the end of 2013.

Will my CalPERS Long-Term Care premiums increase in the future?

There is no way to predict with absolute certainty that current rates and underwriting will be sufficient to avoid future rate increases. As CalPERS notes in the Long-Term Care policy document, your premiums will never increase due solely to a change in your age or health but CalPERS can change the premium schedule (based on age) for all similar coverage issued in your state, if a change is needed to maintain the security of the program.

When long-term care insurance was first introduced in California in the 1980s, over 100 insurers offered coverage. Fewer than a dozen of those insurers have remained in the marketplace, with most raising premiums significantly. Long-term care insurers, including CalPERS, have worked to incorporate lessons learned to ensure their plans’ financial security and lower the risk of future rate increases. The success of the CalPERS Long-Term Care Program in maintaining their target level of funding (over 110 percent) offers the best evidence available that their rates are now sufficient to support the program.