January 2014 Retiree Report
CDF Historical Society & Museum
Currently there are 157 retirees and 118 active members contributing to our history. This is our history;
this is who we are and what we do. Please go to the web site and help Jerry and the volunteers.
http://www.cdfmuseum.org/
Frequently Asked Questions on CalPERS and the Affordable Care Act
http://www.calpers.ca.gov/index.jsp?bc=/member/health/health-care-reform/healthcare-reformfaqs.xml&pst=ACT&pca=ST
CalPERS Fact Sheet
http://www.calpers.ca.gov/index.jsp?bc=/member/health/health-care-reform/healthcare-reformfacts.xml
CalPERS National Health Care Reform Facts
The Affordable Care Act (ACA) affects CalPERS program areas, members, employers, stakeholders and
systems in various ways.
Provisions Already in Place
The provisions within the law have various effective dates. The most significant provisions that are
already in effect for CalPERS employers and members include:

Extension of Dependent Coverage up to age 26

Elimination of Lifetime Limits and Restrictions on Annual Limits

Early Retiree Reinsurance Program (ERRP)

Prohibition on Rescissions
Extension of Dependent Coverage
Under federal law, the extension of dependent coverage requirements became effective in plan years
that began on or after September 23, 2010. For CalPERS the changes took effect January 1, 2011.
Adult children of CalPERS health benefit subscribers, whether previously on their parents' plans or not,
are now eligible for CalPERS health coverage up to age 26, regardless of their marital, housing, student
or employment status. Coverage does not extend to spouses or children of these adult children.
Elimination of Lifetime Limits and Restrictions on Annual Limits
Under the ACA, health plans may no longer impose lifetime limits on the dollar value of benefits for
participants or beneficiaries. Until 2014, plans may impose restricted annual limits on the dollar value of
“essential health benefits.” CalPERS plans do not impose annual or lifetime limits on the dollar value of
benefits.
January 2014 Retiree Report
We will analyze the impact of regulations defining “essential health benefits” when they are available.
Prohibition on Rescissions
CalPERS no longer allows employers to rescind health coverage based on a reduction of hours worked.
Generally, the ACA defines a rescission as a retroactive cancellation of health coverage. A cancellation or
discontinuance of health coverage with a prospective effective date is not considered a rescission.
More to Come
We will continue to examine and implement federal ACA-related laws and regulations as additional HHS
guidance is provided and will continue to provide information to our members as it becomes available.
CalPERS Information
EXTENSION OF PHARMACY BENEFIT PROGRAM MANAGER CONTRACT
Kathy Donneson, Chief, Health Plan Administration Division, presented staff’s recommendation for a
two year extension to the CVS Caremark Pharmacy Benefit Manager (PBM) contract. The current
contract term will expire on December 31, 2014.
POLICY ENGAGEMENT ON NATIONAL PENSION ISSUES
As an information item, Robert Glazier, Deputy Executive Officer, External Affairs, and Tom Lussier of
Lussier, Gregor, Vienna & Associates, Inc., presented information on an engagement strategy to mitigate
and address threats to CalPERS and other public retirement systems.
CUSTOMER SERVICES AND SUPPORT PERFORMANCE UPDATE
As an information item, Donna Lum, Deputy Executive Officer, Customer Services and Support, provided
an update on the status of program performance within the Customer Service and Support Group.
CAL PERS LEGISLATIVE PROPOSALS
State Legislative Proposal: Policy and Technical Amendments to the Public Employees' Retirement
System Law
LONG-TERM CARE NEW PRODUCT UPDATE
As an information item, Kathy Donneson, Chief, Health Plan Administration Division, provided an update
on the pricing methodology used for the new CalPERS long-term care product (LTC4) and provided
sample rates.
LONG-TERM CARE FINANCING OPTIONS
As an information item, Kathy Donneson, Chief, Health Plan Administration Division, presented options
for consideration to preserve the Long-Term Care Fund’s sustainability and stabilize premium rates for
current members.
January 2014 Retiree Report
Long-Term Care Program
The California Public Employees’ Retirement System (CalPERS) has opened its Long-Term Care (LTC)
Program to new applicants, offering a new generation of LTC products designed to meet individual
needs.
The program is available to all current California public employees, retirees, their spouses, parents,
parents-in-law, adult children and adult siblings, between the ages of 18 and 79. California public
employees include, but are not limited to, those employed by the State of California and all state
departments, state assembly and senate, judicial systems, school districts, cities, counties and special
districts.
This is the first time since 2008 that CalPERS is accepting LTC applications, and is the beginning of
continuous open enrollment, with no closing date.
The new LTC Program is designed to provide innovative, contemporary coverage with the flexibility to
meet a variety of participants’ needs, including:
•
•
•
Plan options that allow applicants to tailor coverage to suit their needs and budget,
Affordable options to help keep pace with the rising costs of receiving long-term care,
Benefits that make it easier to stay receive home care or care outside the United States.
Interested applicants can download an Application Kit and information on the Open Application process
by going to the CalPERS Long-Term Care Page at www.calpers.ca.gov and clicking on the link to the
Long-Term Care website. They may also request a kit by calling (800) 908-9119.
Hard copies of the Application Kit will be available in January. Individuals who have already requested
information about how to apply for LTC coverage will be contacted by CalPERS in early 2014.
CalPERS is the largest public pension fund in the U.S., with more than $276 billion in assets. We
administer the CalPERS Long-Term Care Program for more nearly 145,000 participants. The Long-Term
Care Fund has more than $3.7 billion in assets. For more information about CalPERS visit
www.CalPERS.ca.gov.
FAQ’S ON LONG-TERM CARE
When will the increase become effective?
July 1, 2015
Who will the 2015 premium increase impact?
The premium rate increases will affect policies issued from 1995-2004 with lifetime coverage and builtin inflation protection, lifetime policies without inflation protection, as well as 3-year and 6-year policies
with inflation protection.
January 2014 Retiree Report
Who will be excluded from the 2015 premium increase?
Policies with three years or six years of benefits without built-in inflation protection are excluded from
the proposed 2015 increase.
All California Partnership policies and policies purchased in 2005 or later are excluded from the 2015
increase.
Policies issued 1995-2004 with inflation protection that convert to defined benefit period (e.g., 10-, 6- or
3-year) coverage with RI would also avoid the 2015 premium increase.
What is a California Partnership long-term care policy?
The California Partnership policies fall under the guidelines of the California Partnership for Long-Term
Care, directed by the California Department of Health Care Services. These policies provide an additional
benefit for policyholders who have exhausted their long-term care insurance benefits and must qualify
for Medi-Cal benefits to pay for their continued care. Rather than having to spend down their
accumulated wealth and savings to meet Medi-Cal requirements, the partnership policies allow
policyholders to keep an amount of their assets equal to what they received in long-term care insurance
benefits. Partnership policies also include the compound five percent built-in inflation protection, which
policyholders are not allowed to drop, and a 30-day deductible period.
Why is the premium increase necessary, and why 85 percent?
To ensure the long-term solvency of the LTC Fund, the CalPERS Board adopted a more conservative
investment portfolio for the Fund, as well as a revised discount rate of 5.75 percent to match the
portfolio change. The changes necessitated a premium increase in 2015 to offset the reduction in future
investment earnings.
The Board approved a premium increase of 85 percent, applied over a two-year period, beginning in
2015, with an option for the policyholder to select a one-year option of 79 percent. The percentage of
the proposed increase is based on an assumption that 10 percent of people holding policies purchased
between 1995 and 2004 with lifetime coverage and built-in inflation protection will choose to move to a
10-year RI policy no later than July 2013.
However, if more than 10 percent of these policyholders convert to the combined 10-year RI benefit,
the proposed 2015 premium increase could be reduced. Conversely, if less than 10 percent convert to
the new 10-year benefit option, the proposed premium increase could be higher.
What are the options to avoid the 2015 rate increase? What is CalPERS doing to help policyholders
with the impact of these increases?
CalPERS will offer policyholders the following options to convert their policies to help them avoid future
premium increases and maintain adequate benefits for their long-term care needs:
January 2014 Retiree Report
New 10-year Year Plan with Retained Inflation:
This policy conversion option will be offered to policyholders who have lifetime benefit with built-in
inflation policies that were issued from 1995-2004 (excluding California Partnership policies). It allows
the opportunity to drop the built-in inflation protection and retain the increased Daily Benefit Amount
(DBA) they've earned. Without the RI option, if policyholders elect to drop their built-in inflation
protection, their increased DBA drops to the original amount they had at the time of purchase.
Policyholders who elect this option and remove their built-in inflation protection will not be subject to
the 2015 increase.
Retained Inflation Option:
RI will be offered in the new 10-year plan as well as 6-year and 3-year plans. This policy conversion
option will be offered to all policyholders with inflation protection (excluding California Partnership
Plans), regardless of their policy benefit duration. This will allow policyholders to drop their built-in
inflation protection and maintain the higher DBA they accrued and paid for over the years. This option is
new for policyholders. Prior to this, when policyholders dropped their built-in inflation protection they
were reverted to their original DBA. Policyholders who elect this option and remove their built-in
inflation protection will not be subject to the 2015 increase.
Policyholders who drop their built-in inflation protection will be eligible for a Benefit Increase Option
(BIO) allowing them to increase their DBA later on. The BIO is offered every three years to policyholders
who do not have built-in inflation protection. Policyholders accepting the BIO offer will have to pay the
increased premium amount required for the additional coverage.
Optional Daily Benefit Amount:
This option is for policyholders who dropped their built-in inflation protection or decreased their DBA
following the 2010 long-term care premium increase. They will be able to increase their current DBA
under this option, but they will also be required to participate in the RI option. Those taking advantage
of this alternative will have to pay the additional premium costs associated with repurchasing up to 100
percent of the DBA they had at the time they elected to drop their built-in inflation protection or
decreased their DBA. Underwriting will be waived for policyholders who elect this option.
How long is the average long-term care insurance claim?
Long-term care industry findings show that the average long-term care length-of-claim is approximately
3.6 years.
If I reduce from lifetime benefit coverage to a defined fixed year benefit amount (10, 6 or 3 years) and
start receiving benefits, will those benefits stop at the end of the defined fixed year benefit period
(10, 6 or 3 years)?
Not necessarily. Benefits are paid until the total coverage amount of dollars is exhausted.
January 2014 Retiree Report
For example: The total coverage amount of dollars for a 10-year plan is calculated as the DBA maximum
multiplied by the number of days in 10 years (3,650). Therefore, a 10-year plan with a DBA maximum of
$200 would have a total coverage amount of $730,000 ($200 x 365 days x 10 years = $730,000). The
DBA for facility care would be covered at $200 per day. The DBA for home care would be $100, so you
could have coverage longer than 10 years.
Some policyholders are confused about what it means to have a 10-, 6- or 3-year policy benefit. A 10year policy does not mean the policy ends 10 years after purchasing. It also does not mean that the
clock starts on the 10-year period once someone begins using the benefits. The pool of money (i.e., total
coverage amount or total benefit amount) remains available for the policyholder to use for the rest of
their life. It does not have an expiration date. The cost of care will determine how long benefits will last.
Benefits will be available for at least the benefit period selected, or longer if the cost care is less than the
daily benefit amount of the policy.
Policyholders in claim, whose daily paid covered expenses are less than their DBA maximum, are able to
extend their benefit dollars beyond the benefit period, as benefits are paid until the total coverage
amount of dollars is exhausted. If a policyholder used their maximum DBA every day, then they would
exhaust their coverage within the benefit term that was selected.
Why is CalPERS waiting until 2015? What is happening between now and then?
Policyholders who hold comprehensive lifetime with inflation protection coverage have been receiving
an ongoing five percent premium increase since 2011. This ongoing premium increase is scheduled to
continue through 2014.
Between now and 2015, impacted policyholders will be given the opportunity to convert to the 10-, 6- or
3-year RI option. Depending upon the number of policyholders that convert, the percentage of the 2015
rate increase could vary.
CalPERS will be collaborating with constituent groups, such as the Retired Public Employees Association,
Service Employees International Union, California State Employees Association, California State Retirees,
California State University Retired Faculty and others to provide educational materials to help explain
the options available to policyholders.
What are some advantages for policyholders that convert to the 10-, 6- or 3-year Retained Inflation
(RI) plans?

Converting to a RI plan option will reduce premiums.

Stops the ongoing five percent premium increase in 2013 and 2014, and will not be subject to
the 85 percent premium increase scheduled for July 2015.
Policyholders may also increase their DBA and total coverage amount once every three years by
accepting the BIO. Accepting the BIO does result in a premium increase related to coverage increase.
January 2014 Retiree Report
Can I go from a 3-year or 6-year plan to the new 10-year RI plan?
At this time, only policyholders with lifetime and built-in inflation protection, whose policies were issued
from 1995-2004, will be offered the 10-year RI option.
I am a policyholder with lifetime benefit and built-in inflation protection policy issued from 19952004. What is the impact to my monthly premium if I convert to the 10-year RI plan in 2013 or 2014?
Table 1 and 2 below illustrate examples of the expected monthly premiums for members who move
from the lifetime policies with built-in inflation protection plans issued from 1995-2004 to a 10-year
policy with RI plan in 2013 or 2014. Policyholders who select the 10-year RI conversion option in 2013
would have a reduction in monthly premiums, and not be subject to a premium increase of 85 percent,
applied over a two-year period, beginning in 2015. Exact premium amounts will vary by member. For
policies with lifetime benefit and built-in inflation protection issued from 2003 to 2004, the new
premium amount of the 10-year RI plan will not be available until 2014. For other questions related to
the 10-year RI plan, please contact us at (888) 877-4934.
Table 1. Sample monthly premiums before and after migration to 10-year RI plan in 2013 for policies
with lifetime benefit and built-in inflation protection issued from 1995-2002
Policies with Lifetime Benefit and Built-in Inflation Protection Issued from 1995 to 2002
Issue
Age in
1999
Current
Age in
2011
Beginning
Premium
Year 2010
38
48
58
50
60
70
Aggregate Premium After 5% Increases
Migration to 10-year and RI in 2013
Year
2011
Year
2012
Year
2013
$103
$108
$71
$5
$5
($37)
$166
$174
$118
$8
$8
($56)
$260
$273
$259
$12
$13
($14)
$98
Year
2014
$71
$158
$118
$248
$259
January 2014 Retiree Report
Table 2. Sample monthly premiums before and after migration to 10-year RI plan in 2014 for policies
with lifetime benefit and built-in inflation protection issued from 2003-2004
Policies with Lifetime Benefit and Built-in Inflation Protection Issued From 2003-2004
Issue
Age in
2004
Current
Age in
2011
Beginning
Premium
5% Increases – Not Applicable
Migration to 10-year and RI in 2014
Year 2010
Year
2011
Year
2012
Year
2013
$134
$134
$134
$134
Year
2014
$69
43
50
($65)
$112
53
60
$219
$219
$219
$219
($107)
$308
63
70
$345
$345
$345
$345
($37)
Is CalPERS planning to provide additional information related to the proposed rate increase and the
various options?
We will communicate with all policyholders to educate them on the need for the 2015 rate increase, the
options that will be available and the impact we hope these changes will have on the future of the LTC
Fund.
How will the 2015 rate increase impact policyholders currently receiving benefits?
Policyholders who are receiving benefits when the 2015 rate increase is offered will not be impacted as
long as they are receiving benefits and in premium waiver status. However, if they close their claim and
resume paying their monthly premium, they would be offered the 2015 rate increase as part of the
premium reinstatement process.
CalPERS asked for its first premium increase in 2003. Why didn't you realize there would be a problem
with the LTC Fund then and provide a less expensive fix?
At the time, the 2003 premium increase was thought to be sufficient based on projected claims and
investment income. In 2003, long-term care insurance was still relatively new compared to life and
disability insurance products, and there wasn’t as much claims experience or data available to rely upon,
compared to today.
January 2014 Retiree Report
Does CalPERS plan to re-open the LTC Program?
On February 20, 2013, the CalPERS Board of Administration approved an open application period for the
LTC Program beginning December 2013. It will be the first time the LTC Program will be open to new
applicants since 2008. It is also the first time the application period will be continuous with no closing
date.
Can I cancel my plan and get my money back?
You may cancel your coverage at any time; however, there is no return of premiums on a voluntary
cancelation of coverage. In addition, you received the benefit of coverage during the time you paid
premium; had you qualified for benefits during this time your long-term care insurance would have paid.
If your intent is to replace your coverage with other long-term care insurance, it is recommended that
you don't cancel your current coverage until you receive confirmation that you have been approved for
the new coverage. We strongly recommend that you evaluate all of your options before canceling your
coverage. You need to mail a written request, with your signature, to the following address to cancel
your coverage:
CalPERS Long-Term Care Program
P.O. Box 64902
St. Paul, MN 55164-0902
I want to send a complaint to the CalPERS Board. What is their address?
You may write the Board at:
CalPERS Board of Administration
P.O. Box 942719
Sacramento, CA 94229-2719
Who do I contact if I have additional questions about the LTC Program premium increases and benefit
changes, or specific questions about my long-term care policy?
Long-Term Care Customer Service
General questions related to your policy: (800) 982-1775
Questions related to premium increases: (888) 877-4934
Monday - Friday, 8:00 a.m. - 5:00 p.m. (PT)