CalPERS Long-Term Care: The Rate Hikes, the Lawsuit, and Your Options

If you hold a CalPERS Long-Term Care policy with a lifetime benefit and built-in inflation protection, your premium has not drifted up with medical inflation — it has been deliberately reset twice. First an 85% increase phased in over 2015 and 2016. Then a further 90% cumulative increase — 52% in November 2021 followed by 25% in November 2022 — approved by the CalPERS Board in 2020. The class-action lawsuit that followed did not reverse any of it. It ended in cash settlements while the rate increases stayed in place. This is what actually happened, and what the program left you room to do about it.

The rate-increase timeline

CalPERS runs its Long-Term Care Program as a self-funded trust, not an insurance policy backed by a commercial carrier. Members' premiums and investment returns are the only money paying claims. When the fund's own actuaries concluded the lifetime-benefit plans had been underpriced and were absorbing higher claims and lower lapse rates than assumed, the board raised premiums on the members who held those plans rather than on taxpayers.

Stack the two rounds and a member who bought the richest plan — lifetime coverage with automatic inflation protection — has seen the base premium roughly triple across the decade. CalPERS closed the program to new enrollment in June 2020, so no new premium is flowing in to spread the cost. The remaining pool of roughly 80,000 policyholders is carrying the block by itself.

Why this looks nothing like a private-carrier rate hike

When a commercial insurer wants more premium, it files with a state insurance department through the NAIC SERFF system, and a regulator either approves or trims the request. If that insurer becomes insolvent, a state guaranty association stands behind the policies up to a statutory limit. CalPERS sits outside both of those guardrails. There is no SERFF filing to contest, no insurance commissioner to appeal to, and no guaranty-association backstop — the CalPERS Board of Administration approves its own increases. That structural difference is exactly why the fight moved into a courtroom instead of a rate hearing.

Wedding v. CalPERS: what the lawsuit actually delivered

A class action — Wedding v. CalPERS — was filed in 2013 on behalf of the members hit by the 85% increase. The case took nearly a decade and produced a settlement, not a rollback:

• 2021: A tentative $2.7 billion settlement won preliminary approval.
• April 2022: That settlement collapsed — too many policyholders opted out and no replacement insurance carrier could be secured to make it work.
• July 2023: A second, smaller settlement of approximately $800 million received final approval for the main class of inflation-protection policyholders; distributions to class members began later that year.
• Lifetime-only members: A separate group of roughly 16,000 "lifetime-only" policyholders, whose claims had been dismissed and appealed, reached their own ~$5.1 million settlement to resolve the appeal. As of the most recent public records, the final-approval and distribution status of that smaller settlement was not confirmable.

The load-bearing point for anyone still paying these premiums: the settlements were monetary relief, not a reversal. The 85% and 90% increases remain in effect. A check in the mail does not lower next year's bill.

The options CalPERS gave members — and how each one trades off

Facing an increase this size, most members did not simply pay it or drop the policy. CalPERS offered a menu of benefit reductions that lower the premium by shrinking what the policy will pay. Each one is a different bet:

• Reduce the daily benefit amount. Lowers premium proportionally, but caps what the policy contributes per day of care. In a high-cost state or a memory-care setting, a trimmed daily benefit can leave a large monthly gap you fund out of pocket.
• Shorten the benefit period (for example, from lifetime to two years). This is the biggest premium saver and the biggest risk transfer — most long, expensive claims are the multi-year dementia claims that a two-year cap will not cover.
• Lengthen the elimination period (for example, to 180 days). You self-fund six months of care before benefits start. Cheaper premium, but the elimination period is a deductible you pay at the worst possible moment.
• Drop the built-in inflation protection. Freezes your benefit at today's dollars. Tempting because inflation riders drive premium, but it quietly erodes the policy's real value over the fifteen-to-twenty-year horizon before most people claim. We work the actual math on that trade in whether to drop a compound inflation rider.
• Take the non-forfeiture "paid-up" option. Stop paying premium and keep a reduced, paid-up benefit equal to the total premiums you have paid in. It is the exit that does not walk away empty-handed — the same mechanism we cover in the contingent nonforfeiture benefit.

What a current CalPERS member should check now

The decision is not "pay or cancel." It is "which reduction, if any, preserves the coverage you actually bought this for." Three questions do most of the work:

• What is your realistic claim scenario? If your family history points to a long dementia claim, protect the benefit period above all else — a shortened period is the reduction that fails exactly when you need the policy most.
• Can you self-fund the front end? If yes, a longer elimination period buys premium relief with the least damage to catastrophic coverage.
• Is the paid-up floor worth more than the freed-up premium? For members close to the point where dropping the policy is on the table, the non-forfeiture floor is usually a better exit than a full lapse. Our framework for that call is in should you drop your LTC policy, and the self-funding comparison is in self-insure vs. LTC math.

If you are working from a printed increase notice with a response deadline, the mechanics of that decision window — and the trap of letting it lapse by default — are the same ones we walk through for commercial policies in the LTC rate-hike letter.

Where the program is heading

In March 2026, CalPERS presented market research to its Pension & Health Benefits Committee on partnering with commercial insurers to offer fully insured, stand-alone LTC products to members — an acknowledgment that the self-funded model has reached the limit of what its members will absorb. The existing self-funded program remains closed to new enrollment. For current policyholders, nothing about that exploration changes the plan you hold today; it is a signal about the next generation of coverage, not a lifeline for this one.

Frequently asked questions

Does the Wedding settlement lower my premium? No. The settlements paid cash to eligible class members. The 85% and 90% rate increases remain in effect, and future increases are not ruled out.

Is my CalPERS policy protected by a state guaranty association? No. Because the program is a self-funded CalPERS trust rather than a commercial insurance policy, the state guaranty-association safety net that backs private LTC insurers does not apply.

Can I still buy a CalPERS LTC policy? No. The program closed to new enrollment in June 2020 and has not reopened.

If I take a benefit reduction, can I add the coverage back later? Generally no — a reduction is a permanent change to the policy, and with the program closed there is no re-underwriting path back to the original benefit.