Santa Monica Council Set to Hire Contractor to Help with Workers' Compensation Cases

By Jorge Casuso

July 25, 2017 -- With the City of Santa Monica's workers’ compensation costs growing at an accelerated pace, the City Council on Tuesday will consider hiring a third party to help manage the claims.

In the current fiscal year, which began July 1, the City’s contributions to the Workers’ Compensation Self-Insurance Fund increased by 50 percent and is projected to rise by another 10 percent a year if current claims trends continue, City staff said.

Under the proposed plan, the City would pay Intercare Holdings Insurance Services, Inc. an amount not to exceed $1,699,509 over a five-year period to administer claims filed by Big Blue Bus (BBB) employees under a pilot program.

Transit workers, who make up roughly a quarter of the City's workforce, file between 90 and 100 new claims per year and represent a good sample of the claims filed by municipal workers across the board, according to City staff.

"(BBB) receives claims from a cross-section of workers that mirrors the City’s total inventory of claims (i.e., claims from workers performing sedentary jobs and physically demanding jobs)," staff wrote in its report to Council.

"These characteristics, coupled with the BBB’s keen desire to be more involved in managing its workers’ compensation claims, make it the ideal test group in the City for the pilot program."

If successful, the three-year pilot program could be expanded to include a larger segment of the City’s workers’ compensation claims.

The City's Risk Management Division would continue to handle the rest of the claims, with staff currently devoted to claims filed by BBB workers redeployed to tackle other cases.

"This will bring down internal staff caseloads to approximately 110 claims per examiner, which is equivalent to the TPA (Third Party Administrator) examiner caseload requirements set out in the RFP (Request for Proposal) and considered an industry best practice."

The City has been using its own staff to manage workers' compensation claims since 2001 in hopes of improving program outcomes, staff said. Since then "TPAs have made advancements in the quality, sophistication, and breadth of services offered to their clients."

Collectively, these advancements and advantages over an in-house program like the City’s "have positioned TPAs to provide very cost-effective claims administration services," staff said.

The City spent approximately $9.3 million on medical treatment and indemnity payments for injured employees in the 2015-2016 fiscal year, according to the City Finance Director Gigi Decallaves final report last year ("Top Finance Official Warns of Sharp Rise in Santa Monica Workers’ Compensation Costs," January 3, 2017).

That was a 22 percent increase from the previous fiscal year, when the City spent $7.6 million on disabilities, mostly due to the aging of its workforce, especially in its police and fire departments and its bus system.

Seven contractors responded to the City's RFP, officials said. California-based Intercare Holdings Insurance Services offered "the best combination of staffing, transit claim experience, references, and price."