What is Long-term Care insurance, and why isn't it available through the CPF?

Long-term Care insurance is a rapidly growing, and very profitable offshoot of the Insurance industry. Its primary function is to offset the potentially devastating costs of nursing home care by collecting premium dollars well in advance of the need.

The theory is, that the funds collected TODAY from long-term care participants can be used to pay the future cost of nursing home care.

The CPF's Insurance Directors URGE you to be careful when evaluating long-term care insurance.

The essence of any insurance policy is the GUARANTEE that funds will be available when needed. This GUARANTEE is provided through a basic financial concept known as "reserving." Done correctly, an insurance program maintains sufficient cash reserves to pay predicted claims regardless of whether future premiums are collected.

With long-term care, you are asked to pay big premiums NOW, against the promise that the funds will be there when you need them. So ask yourself: WHO is making that promise? And how do you know they’re setting aside sufficient reserves?

The potential for abuse is appalling. An unscrupulous provider could collect decades of premium before claims come in and overwhelm reserves. And by that time, the provider is rich, the claimant is sick, and there is nothing that forces payment of the claim, except a lawsuit.

So look out. In the opinion of the CPF Insurance Directors, members who purchase long term care insurance – particularly at the bargain basement prices offered through non-union “associations” – may be setting themselves up for disaster.

Some Questions to ask before you commit to a long-term care contract: 1) If this program were to stop collecting funds TODAY, how long would it take until benefits could no longer be paid? 2) What recourse will I have in the event I pay into this program for many years, only to discover that funds are not available at my time of need? 3) What assurance do I have that the premiums I pay for this coverage won't increase to the point where I can't afford to pay them? 4) If rates go up, and participants drop out, what keeps that process from becoming a vicious circle, with fewer and fewer participants asked to contribute more and more premium to provide benefits they may never see?

To have a more thorough understanding of reliable Long Term Care coverage, particularly the premium cost in relation to benefit, the CPF Insurance Directors urge you to view the additional links to long-term care resources below.

California Department of Personnel Administration
The Consumer Law Page