CAPF LTD Plan Determined to Be Actuarially Sound
By Erick Mattson, CAPF President
Late last year, CAPF began the process of conducting an actuarial review following the passage of AB 1072 (Daly), which required that Firefighter Benefit Relief Associations, such as CAPF, submit a report to the California Department of Insurance by July 1, 2016 to show that they are financially sound enough to provide the benefits they have promised to Plan members.
I am very pleased to tell you that the recently completed CAPF LTD actuarial report confirmed what we already knew: Our Plan is financially strong and our members can count on it being there for them when they need it.
Immediately after AB 1072 passed, the CAPF Executive Board initiated a nationwide Request for Proposal and interview process in order to select a firm that we believed to be the most qualified to conduct the actuarial review we were seeking. As a result of this interview process, United Health Actuarial Services (UHAS) was selected to conduct the review. UHAS is one of the most respected actuarial firms in the nation, and the California Department of Insurance welcomed our selection because it knew of UHAS' outstanding reputation and competency.
CAPF supported the intent behind AB 1072, which was to ensure that firefighters throughout California could make an informed and confident choice when choosing long-term disability coverage. We worked with the author of the bill, Assembly Member Tom Daly, to craft the legislation with language that best achieved that purpose. Once the actuarial review process began, members of our Executive Board, our Plan Administrators and our Plan Counsel worked diligently with the actuary to provide the data needed to conduct their valuation and answer questions that arose.
The soundness of our Plan has now been verified not only by providing more than 30 years of benefits amounting to over $64 million, but also by highly regarded actuaries. Among the findings in the report by UHAS are that 2016 premiums are not only more than sufficient to pay current claims and expenses but are also expected to contribute to a modest increase in surplus.
While the actuarial process has been long and complex, I believe it has been invaluable to ensuring that our members and potential members can be confident in the strength of our Plan. CAPF appreciates the effort Assembly Member Daly made to work with us, often in the face of opposition from our competitors, to develop reporting requirements that were fair and led to our support for his bill.
Since we were founded in 1985, CAPF has repeatedly proven that it is possible to provide the best value in LTD coverage while maintaining our business model of operating as a financially sound association exclusively serving, and managed by, firefighters. I want to personally thank everyone who worked so hard to bring the actuarial process to a successful completion. We filed our report to the California Department of Insurance prior to the July 1 deadline.
For more than 30 years, CAPF has been the overwhelming leading choice among California's firefighters for LTD coverage, paying over $64 million in benefits to firefighters and their families.
New CPF LTD Plan Introduced
Recently the California Professional Firefighters (CPF) Health Benefit Trust (HBT) introduced another "new" Long Term Disability (LTD) Plan — their 3rd new Plan in the past 15 years. Their new plan has moved from a fully self-funded plan to a fully insured, stockholder owned plan through Reliance Standard Life Insurance Company. While CAPF is still the leader in LTD coverage for professional firefighters in California, we wanted to make you are aware of the competitor's plan as your association may be solicited to consider the new CPF HBT Plan. On a side note, the Los Angeles City Firefighters insurance trustees moved to a Reliance Standard Life Insurance Company LTD plan last year and over 500 of their members have already re-enrolled back into the CAPF Individual Plan after having the opportunity to compare the benefits.
CAPF has shown that an insurance company's "fully insured" plan does NOT provide better benefits or more stability. For over 31 years, CAPF has been the leader in LTD coverage for professional firefighters in California. From the very beginning, CAPF changed the world of LTD benefits and coverage by creating a non-profit, mutual benefit trust. Firefighters up and down the state (over 150 unions and associations including 120 CPF affiliates) were able to save thousands of dollars on the cost of LTD plans. We have shown that self-funding works and to be "fully insured" is not necessary; primarily, due to the tremendous offsets created by legislated benefits such as Safety Retirement Systems, Labor Code 4850 pay and Labor Code 3212 coverage for presumptive disabilities. CAPF has paid over $63 million dollars in LTD claims and death benefits to over 4,000 thousands of our fellow firefighters and their families. It is important to point out that this is OUR plan. OUR plan is managed and controlled by union firefighters whose sole interest is to provide the best LTD benefits at the lowest cost.
CAPF is proud of our long history of paying benefits to firefighters in California. Our plan is designed to be flexible in the application of eligible benefits because every firefighter's situation is unique. CAPF offers a Minimum Benefit ($750 / $500 per month) while you are still using leave balances or catastrophic benefits. Also, CAPF offers a Sick Leave Integration Option where you can double your leave balances in order to maintain department benefits. CAPF will also provide LTD benefits when there is a challenged Workers' Compensation case by helping cover 70% of your paycheck while your case is decided. CAPF representatives even go as far as attending Workers' Comp. hearings to insure that our members receive the benefits that they are entitled to receive. In the worst-case scenario where you have to take a medical leave of absence due to a disability, CAPF offers a 30-day waiting period where you can receive 80% of your salary including all your pay incentives - tax-free.
CAPF is member controlled so it allows us to build a plan that works best for firefighters. By doing this, CAPF only has to charge what is necessary to pay claims and not worry about profits to satisfy shareholders. We have over $5 million in reserves and the 31 years we have been operating successfully have proven that we have a time-tested, financially stable model. Because we are member controlled, should a claim be appealed, the appeal board is comprised of 5 firefighters from throughout the state who will determine the outcome of the claim. CAPF prides itself on its focus on providing benefits to firefighters and their families in their time of need.
CAPF has seen many LTD plans come and go in the California fire service. As with any plan on the market, the devil is in the details. The CAPF Plan stands on its own merits and 31 years of fulfilling every promise made to every member. When CAPF is FAIRLY COMPARED with any other LTD plan, CAPF has consistently proven to be the best, most reliable and generous plan for California professional firefighters.
CAPF wants to address some significantly distorted misinformation that is being circulated by CAPF detractors, which seems to be spurred by CAPF competitors. CAPF’s “pay as you go” system is completely lawful, solvent, and far more economical for firefighters than the alternative plans offered by for-profit insurance companies. Those insurance companies, whose mission is to enrich their executives and shareholders, simply cannot compete with CAPF, especially given the high premiums they have to charge to turn a profit on the inferior benefits they offer. As a result, it is not surprising that they would try to mislead firefighters regarding CAPF’s long-standing ability to pay superior benefits.
One way that CAPF detractors try to mislead firefighters is by comparing “pay as you go” disability plans with pension plans. Because almost every firefighter is going to retire at some point in the future, the pension account for each one of them has to be fully funded for when that day comes. On the other hand, it is wasteful and uneconomical to “reserve” or fully fund a disability account for each firefighter for life, as very few firefighters will become so severely disabled that they cannot work for more than two years. A “pay as you go” system makes the necessary adjustments to pay its claims as they arise. Because the active and retired firefighters who run CAPF grasp that reality, CAPF’s “pay as you go” system has provided superior long-term disability benefits at the lowest possible cost to thousands of firefighters for over 30 years — and CAPF has always been able to pay the claims of its members during those three decades.
Another way that CAPF competitors try to mislead firefighters is by talking about actuarial reviews. The law does not require such reviews for “pay as you go” plans, although it does require insurance companies to undergo actuarial scrutiny. Keep in mind that “pay as you go” plans typically are mutual benefit associations that are not in business to get rich but merely looking to provide benefits to their members at the lowest possible cost. By contrast, insurance plans typically are offered by for-profit companies that are trying to turn as fast and as big of a profit as possible — historically without regard to whether they would be able to pay benefits after paying high salaries to their executives and generous returns to their owners.
Even though the law did not require it, CAPF had an actuary review its plan and prepare a report annually for many years. Between 2006 and 2008, CAPF’s actuary had health problems that prevented him from completing his report; nevertheless, he performed a cumulative report in 2009 that showed (just like his previous reports) that CAPF maintained adequate reserves to pay its claims. After independent accounting audits consistently showed that the CAPF plan was sound, CAPF recently decided that the cost of an annual actuarial report was unwarranted.
Nonetheless, CAPF continues to have an independent accountant audit the plan every year, and its administrators and fiduciaries consistently monitor claims and assets to ensure that CAPF can continue to pay benefits as it always has. In fact, because CAPF is confident in the soundness of its plan, it has been working with legislators on a bill that would require firefighters’ and police officers’ benefit and relief associations to file an actuarial opinion with the California Insurance Commissioner that meets specified standards.
Perhaps sensing that such actuarial opinions will confirm CAPF’s soundness, the plan’s detractors have turned to distorting the facts to make the inferior benefits offered by CAPF competitors appear comparable to CAPF’s superior benefits. For example, they have misrepresented that a claimant must wait until after his or her relief association stops paying benefits before any CAPF benefits start. While some competitor plans sputter along in that manner, a CAPF claimant does not have to wait for relief-association benefits to end before getting CAPF benefits.
CAPF detractors also try to mislead firefighters by implying that CAPF is “insufficiently funded” or words to that effect. In so doing, they cannot explain how CAPF has managed to fully pay all of its claims over more than 30 years if it is underfunded. In fact, in 2011, a federal court dismissed a claim alleging that CAPF was underfunded (a decision that CAPF expects the trial court will reaffirm post-appeal in the coming months).
Erick Mattson, CAPF President
To All Plan Participants:
On behalf of the CAPF executive board, I am pleased to provide you with an update on the state of our LTD Plan and to tell you that our Plan continues to be financially strong and the overwhelming choice among professional firefighters in California for long-term disability (LTD) coverage.
As you know, our competitors have made major changes to the structure of their LTD plans. Both CPF and CSFA have essentially turned over their long term disability liability and claims processing to stockholder owned, for-profit insurance companies with respective rate increases.
CAPF, unlike our competitors, remains a fully self-funded, participant-owned plan with a sustainable reserve that now exceeds $6.1 million. Three out of four firefighters with LTD coverage in California are CAPF Plan participants; our list of participants includes nearly 150 unions (116 CPF affiliates) and other association groups with a growing number of Cal Fire participants. In total, our Plan serves over 18,000 professional firefighters throughout California.
The reason for our continued success is simple: For nearly 30 years, we have provided significantly better benefits than our competitors for a lower monthly cost. Our competitors' plans do not provide lifetime coverage or 80% of wages for disability benefits, as we do, and have numerous other limitations to their schedule of benefits. From the start, our primary goal has been to provide unparalleled value to professional firefighters in California and it is clear we are continuing to successfully fulfill that mission.
Our financial strength is bolstered by our success recovering claim dollars from employers who have initially denied Workers' Compensation benefits to our participants. Since inception, we have recovered over $9.4 million and we are aggressively pursuing an additional $2.3 million in outstanding recoverable claims. Through this process, we ensure our participants' financial needs are covered even when employers initially reject their claims. In over 90% of cases, however, we are successful in helping to prove the employer's responsibility for coverage and receive reimbursement for advanced benefit payments provided to our participants. To the best of our knowledge, neither of our competing plans has ever achieved this level of success in recoveries.
Since our inception in 1985, CAPF has paid over $58 million in claims to its participants and their families. We are proud that our claims decisions are made by a committee of firefighters, not insurance company employees who may not put your best interests first. A growing number of our participants are celebrating relationships of 15, 20, 25 years and this year, some have reached the 30th year of participation. CAPF continues its commitment in providing the finest value and benefits as the #1
self-funded plan managed by firefighters for firefighters.
Thank you for your continued support of CAPF and I invite you to contact me with any questions you may have.
We are pleased to announce that California Administration Insurance Services, Inc. (Cal Admin.) has just celebrated its 30th anniversary as the Plan Administrator for California Law Enforcement Association (CLEA), California Association of Professional Firefighters (CAPF) and National Peace Officers and Fire Fighters Benefit Association (NPFBA).
This is truly a milestone event since CLEA, CAPF and NPFBA now exceed 40,000 participants from over 300 different unions and associations from within the state. Additionally, the three Plans have paid in excess of $110 million in benefits to disabled and deceased law enforcement and fire service personnel.
According to Jim Floyd, founding principal of Cal Admin., “it has been one of the most rewarding tasks of my life helping Cal Admin. serve thousands of our first responders and their families in their time of financial need due to job-related and non-job related disabilities and death. Cal Admin. and its staff are truly honored to have worked with so many dedicated people for all these years.”
Floyd goes on the say the secret in Cal Admin’s 30 year success story has been the ability of each Plan to self-fund and self-manage the most comprehensive level of benefits through its representative board of directors and trustees with the fervent objective “to take care of each other” in the event of disabling illnesses, injuries and death.
CAPF: Financially Strong and Serving its Plan Participants
Is CAPF's Long Term Disability (LTD) Plan financially sound?
Yes. The Plan's $5 million in current assets provide strong backing for its Participants. CAPF has paid more than $52 million in claims over its 28-year history, and it continues to serve Plan Participants with benefits that exceed those of competing plans.
Why do competitors claim the Plan is in financial trouble?
Because they can't match our benefits or value. CAPF's Plan is fiscally sound and serves 76% of the market. Despite claims by competitors that they are the "union" plan, 98% percent of CAPF Plan Participants are California IAFF union members.
How many firefighters are Plan Participants?
Over 18,000 firefighters statewide in group and individual plans rely on CAPF for LTD coverage. Our membership currently includes over 150 groups that are IAFF union locals and associations.
How does CAPF ensure its assets are strong enough to cover claims?
CAPF is carefully run by and for firefighters as a nonprofit mutual benefit corporation under the laws of the California Department of Insurance. To ensure that assets are secure and benefits are managed properly, CAPF uses highly qualified financial advisors to manage investments, an independent CPA firm performs annual audits, and we have a medical doctor on staff to review and verify claims. In addition, the Plan is administered by California Administration Insurance Services, Inc., which has over 40 years of experience handling employee benefit plans for public safety employees in California.
How is it possible to provide greater benefits than competing plans, usually at a lower cost per Participant, without risking financial stability?
Through experience, strength in numbers and a commitment to do all we can to support our fellow firefighters. First, we have a 28-year record of managing claims and assets successfully to the benefit of firefighters. Secondly, because we serve far more Participants than the nearest competitor and over 150 group associations -- 98% of our Participants are IAFF union members in California -- CAPF's Plan offers more stability than others can provide.
A representative from another plan told me an expert said CAPF would be out of business within 90 days. Why shouldn't I believe him?
That line has been heard by CAPF Participants for the entire 28 years the Plan has been in existence and providing service. Those false claims have no relationship to our actual financial state: Our assets are strong, our Plan is safe, we have paid out over $52 million in claims since our inception, and we continue to be the trusted choice of more than 18,000 firefighters who rely on us for long term disability coverage.