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CalPERS reports improved long‑term care and retiree health fund balances but warns on claim trends
Summary
Actuarial and benefits staff reported the long‑term care program margin improved to -6.62% and funded ratio to 97%, and the PO retiree health fund improved to 81% of actuarial reserve; staff said premium surcharges and contract guarantees contributed to the improvement but medical cost trends and utilization increased long‑term care costs.
CalPERS staff presented semiannual monitoring updates for the long‑term care and health plan subaccounts and told the committee both programs showed financial improvement but face persistent cost pressures.
Fritzy Day, an actuarial team member, said the long‑term care program’s margin improved from -10.58% to -6.62% and the funded ratio rose to 97% as of June 30, 2025. Day attributed the improvement primarily to investment gains but cautioned that higher claim utilization and increasing medical cost trends raised program costs when actuarial assumptions were revised.
Emily Zong presented the semiannual health plan report. She said the PO (prudent option) fund ratio improved to 81% of actuarial reserves by year‑end 2025 after premium surcharges and stronger than expected pharmacy subsidies for Medicare plans. HMO basic plan metrics also showed a surplus. Staff said contract performance guarantees with vendors and a new pharmacy contract with performance guarantees contributed to the improved position and that staff will evaluate options to reduce the premium surcharge for 2027 if reserves continue to strengthen.
The committee heard questions about the margin definition and how that metric relates to funded ratios and long‑term solvency. Staff explained the margin expresses the percentage increase in premiums that would be needed to return the program to a zero margin and distinguished margin calculations from basic funded‑ratio reporting.
What’s next: Staff will continue monitoring utilization and claim trends, publish the detailed long‑term care report attachment, and present options for premium surcharge adjustments if reserves continue to improve.
