CalPERS Pays $800 Million to Settle Class Action Over Long-Term Care Premium Hikes

When California public employees and retirees enrolled in CalPERS long-term care insurance in the 1990s, many paid as little as $60 a month for plans marketed with inflation-protection features. CalPERS presented those features as a shield against dramatic rate swings. For more than a decade, policyholders had little reason to doubt that promise.

In 2012, CalPERS raised premiums 85 percent in a single step. The agency followed with a 52 percent increase in November 2021 and a 25 percent increase in November 2022. By 2023, the average monthly premium had climbed to $280.41. For retirees on fixed incomes, many of them in their mid-70s, the compounding hikes created an impossible choice: absorb costs far beyond what they had planned for, or drop coverage they had paid into for years.

Plaintiffs filed suit in Los Angeles Superior Court, arguing CalPERS had misled policyholders when it sold inflation-protected plans. The case was coordinated under JCCP 4936 (case BC517444) before Judge William Highberger. Stuart Talley of Sacramento-based Kershaw Talley Barlow represented the plaintiff class.

Negotiations had produced a first settlement valued at up to $2.7 billion, but that agreement required policyholders to surrender their coverage, and the majority of class members rejected it, unwilling to give up the insurance itself. A second round of negotiations produced a structure that let members choose: policyholders who kept their coverage received a $1,000 cash payment and a commitment that rates would not rise again before November 2024; those who cancelled received a refund of 80 percent of all premiums paid, with no cap on the refund amount.

In March 2023, Judge Highberger granted preliminary approval to the second settlement. On July 28, 2023, the court granted final approval. The settlement became final on September 28, 2023. Of the total $800 million value, approximately $740 million flows to the nearly 79,000 households in the class, with the remainder covering attorneys' fees and administration. At the time of final approval, 14,846 class members had died since the litigation began.