HomeMy WebLinkAbout4.a. Discuss East Bay Times Article Regarding CalPERS Lawsuit as requested at the November 6, 2018 Meeting Page 1 of 3
Item 4.a.
CENTRAL SAN
December 11, 2018
TO: ADMINISTRATION COMMITTEE
FROM: ANN K. SASAKI, DEPUTY GENERAL MANAGER
REVIEWED BY: ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: DISCUSS EAST BAYTIMES ARTICLE REGARDING CALPERS LAWSUIT,
AS REQUESTED AT THE NOVEMBER 6, 2018 MEETING
At the November 6, 2018 Administration Committee meeting, Chair McGill referenced an article in the
East Bay Times entitled, 11 Billion Lawsuit Over CaIPERS Insurance Rates Moves Forward with Trial
Date." He questioned whether this lawsuit would have any impact on Central San's transition to CalPERS
for health coverage.
We have conferred with our labor attorneys at Hanson Bridgett LLP. This lawsuit involves the CalPERS
Long-Term Care Program, which is set forth in the Public Employees Retirement Law and is administered
by CalPERS but is separate from the CalPERS pension and health programs. Public employees can
generally enroll in the Long-Term Care Program regardless of whether they participate in the CaIPERS
pension or health programs. This lawsuit should not affect Central San's transition to CalPERS.
ATTACHMENTS:
1. East Bay Times Article
December 11, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 23 of 30
11/28/2018 $1 billion lawsuit over CaIPERS insurance rates moves forward with trial date—East Bay Times
BREAKING NEWS As settle on a ballpark site and a futuristic stadium
Business
$1 billion lawsuit over Ca1PERS
insurance rates moves forward
with trial date
By ADAM ASHTON I McClatchy-Tribune
PUBLISHED:November 5,2018 at 10:42 am I UPDATED:November 5,2018 at 11:23 am
A class-action lawsuit that could cost Ca1PERS $1 billion is headed to trial in
June, and many of the 122,000 retirees who bought an insurance plan at the
center of the case are receiving small checks from an agreement that settled a
portion of the claims.
A Los Angeles County Superior Court judge on Friday set a date for the main
trial,known as Sanchez.vs. CalPERS.The three- to four-week trial is scheduled
to begin on June 10.
Michael Bidart, the attorney representing Ca1PERS members who allege the
pension fund carried out a contract-breaking rate hike on their long-term health
care plans five years ago, anticipates that the trial will go forward as scheduled.
He estimated the plaintiffs could receive as much as $1 billion in damages from
the case. "There are just so many people,"he said.
The California Public Employees' Retirement System, meanwhile,has asked a
state appeals court to decertify the class of plaintiffs in the lawsuit,which would
greatly limit its financial exposure.
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11/28/2018 $1 billion lawsuit over CalPERS insurance rates moves forward with trial date—East Bay Times
Ca1PERS says in its petition to the 2nd District Court of Appeal that winning the
case would actually harm people who bought the plan because the pension fund
would be compelled to more than double the rates it charges for long-term care
insurance.
"There is no source of funds to pay a judgment other than the long-term care
fund itself. Should the fund come up short because of a judgment,we would
have to raise rates significantly," Ca1PERS spokesman Wayne Davis said.
The lawsuit stems from a series of rate increases that CaIPERS adopted for long-
term care insurance beginning in 2013, peaking with an 85 percent rate hike in
2015.
Ca1PERS says in its most recent appeal that it would raise rates on the plan by
124 percent if it loses the lawsuit.
Bidart contends that the structure of the rate increases breached the contracts
people signed when they bought the policies beginning in 2003.Those
agreements included assurances that rate hikes would be spread among those
who bought long-term care insurance, and that people who bought inflation
protection policies would not see their rates increase because of expanded
benefits, according to court documents.
Bidart criticized CAPERS' argument that winning the case would harm plaintiffs
in the lawsuit.
"When they make that argument, it takes your breath away,"he said. "Your
defense is you can do whatever you want,you can create harm, that the harm
you create is so great that you cannot carry on your program without sticking it
to the people you stuck it to once."
In July, people who bought the long-term health insurance plan began receiving
checks worth about$80. The money came from a settlement that CAPERS
consultant Towers Watson reached in late 2017. The settlement separated the
firm from the case,but did not resolve the bigger claims against Ca1PERS.
About 20,000 people had not cashed their checks by September, according to an
update Bidart's team posted to a website it created for the case,
calpersclassactionlawsuit.com.
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