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HomeMy WebLinkAboutMinutes - Minutes - Risk Management and Worker's Compensation Trust Board - Meeting Date: 4/29/2015 (3) Minutes Workers' Compensation Trust Fund Wednesday, April 29, 2015 — 7:00 PM City Hall - Council Chambers, Room B5 5850 W. Glendale Avenue Glendale, AZ 85301 Members Present Tom Duensing, Trustee Gary Sherwood, Council Member John Stern, Chairman Julie Stiak, Trustee Ken Wixon, Trustee Staff Present Dianne Shoemake, Risk Manager Lorena Sanchez, Risk& Safety Analyst Nick DiPiazza, Deputy City Attorney Jim Brown, Director, Human Resources & Risk Management 1. Call to Order John Stern called the meeting to order at 7:40 PM. 2. Approval of November 12, 2014 Workers' Compensation Trust Fund Board Meeting Minutes The minutes were provided to the Trustees. Julie Stiak moved to approve the minutes as written and it was seconded by Tom Duensing. Motion passed. 3. Executive Session Gary Sherwood moved to enter executive session and it was seconded by Julie Stiak. Motion passed. Lorena Sanchez updated the Board on the status of workers' compensation claims. No action taken. Tom Duensing moved to exit executive session and return to open session, which was seconded by Gary Sherwood. Motion passed. 4. Execution of Loyalty Oath Staff advised that Mr. Sherwood was sworn in to serve on the Risk Management and Workers' Compensation Trust Fund Boards at the January 27, 2015 Council. Meeting. It was noted that Mr. Sherwood was presented with his Loyalty Oath which was executed in the Risk Management Trust Fund Board meeting. 5. Annual Report of the Workers' Compensation Trust fund for period ending July 1, 2014 Staff presented the Risk Management and Workers' Compensation Trust Fund Annual Report to Council for period ending July 1, 2014. Trustees were asked for comments to be submitted to Risk Management by May 1, 2015. If none are received, the report can be finalized. No motion needed. 6. Discussion of Workers' Compensation Trust Fund 2014/15 Revenue and Expenses Staff provided a spreadsheet of the Workers' Compensation Trust Fund 2560 for fiscal year 7/1/2014 through 7/1/2015 is attached. Staff reported the following information. As of April 23, 2015 total revenue deposited is $1,675,256. Of that amount $28,806 is from stadium security fees, $18,203 from interest income, $49,789 from miscellaneous revenues and $1,578,458 from department self-insurance premiums. The total expenses paid from the Fund are $1,153,218. Of that amount, $801,013 is for payment of claims, $352,102 for payment of professional and contractual fees (TPA fees, insurance premiums, taxes, ICA fees, actuarial, exposure testing) and $103 for administrative fees. The Professional and Contractual expenses have already exceeded the budgeted amount. This is due to the cost of third party claims administration services and an increase in ICA fees and taxes. The City's current ending fund balance is $7,226,685. The 2015 ICA estimate of $125% of the city's liabilities is $3,815,989. The fund balance is $3,410,696 above that amount. The actuarial 55% confidence level is less at $3,706,023. Our minimum balance must stay above the ICA estimate of liabilities since it is greater. The actuary projected that we would pay $1,510,686 in claims this fiscal year. The ICA recommends that your fund balance include the minimum 125% of liabilities and the projected claims or $5,326,675. The ICA also recommends the balance include at least 2X your Self-Insured Retention (SIR). Our SIR is $800,000. The balance above that amount is $1,900,010. We are in a good position to remain above the ICA minimum and have funds to pay claims this fiscal year and have money to pay claims in the event of a large or catastrophic loss. The actuary's analysis should be completed 5/1/2015. It will provide projections for the 2015/16 and 2016/17 fiscal years. No Action taken. 7. Discussion of Industrial Commission of Arizona Self-insurance Renewals Staff reported annually the city is required to submit a renewal request to the ICA for continuation of self-insurance and to request an exemption to post a security deposit. Staff submitted to the ICA documentation on 12/10/2014 for the 1/1/15 renewal. The ICA sent a renewal letter on 1/1/15 advising that we were approved to continue our self-insurance status without providing a security deposit unless revoked. On March 4, 2015, the ICA self-insurance board reviewed our renewal request and the ICA formally approved our request. There were no questions from the ICA and we were approved on the consent agenda. The ICA calculated the minimum security deposit needed to be held in our workers' compensation trust fund, which is 125% of your net liability (reserved claims). See the attached workers' compensation liability form. The ICA minimum deposit required is $3,815,988.88. The ICA's requires the balance to be held in our trust fund to be the greater of 125% of our liabilities or the actuary's 55% confidence level. The actuarial report completed from data extrapolated to June 30, 2014. recommended a minimum Fund balance at a 55% confidence level totaling $3,706,023. Therefore, moving forward the minimum amount to be held in our workers' compensation trust fund is the ICA calculation or$3,815,989. Risk Management continues to monitor the balance on a monthly basis to ensure that it does not drop below the required minimum and will continue to provide updates to the Trustees no less than quarterly. No action taken. 8. Status of Medical Provider for Occupational. Health Clinic—Strength Training, Inc. Staff has been working with the provider on complying with the tet ins of the RFP and Contract for approval to re-open the clinic. Since we are in the middle of contract compliance issues, we cannot discuss the issues in detail at this time. Risk Management will provide a full report at a later date when the issues are resolved. 9. Status of Third Party Administrator for Workers' Compensation Claims Staff reported on the past 12 month performance of the WC TPA, including rising costs, poor claims handling and staff turnover. CorVel Corporation took over management of the workers' compensation claims for the City on April 1, 2014. We have had a number of issues with the claims management of the City's workers' compensation program. We previously reported the number of issues we experienced with the transition during our board meeting on June 4, 2014; and with CorVel's claim handling practices during the board meeting on September 4, 2014. We continue to experience problems with the claim handling and a rising cost to the City's workers' compensation claims program. Recently, in January 2015, the Claim Supervisor resigned her position with CorVel. Unbeknownst to the City, the Senior Claims Examiner assigned to the City's account was also filling in for the Claims Supervisor. Since then, we have experienced inattention to active indemnity claims. In some cases, claim files are not reviewed for close to 90 days. In late February 2015, we were advised the Senior Claims Examiner assigned to the City's account was officially promoted to the Claims Supervisor position, and CorVel would be actively seeking a replacement for the City's account. In March 2015, we received notice from CorVel that they had hired a Senior Claims Examiner for the City's account. After review of her resume and experience, coupled with the fact we received complaints from our injured workers, we declined the new Claims Examiner and asked for a seasoned CorVel Claims Examiner(as promised in their response to the City's proposal)to be assigned to the City's account. They have not met this request, and recently, this month, they advised they would not be able to provide a seasoned CorVel Claims Examiner, as this would impact and disrupt other CorVel accounts. They propose to assign a Senior Claims Examiner with five years' experience to our account, until they fill the position. Since 2011, the city experienced a decline in the total number of claims reported. In the past three years, claims have averaged around 133 total claims annually. Based on the current claim count for 2015, we do not see a declining trend. The chart below shows our claim count by TPA for the past five years, beginning in Fiscal Year 2010. Total Claims by Fiscal Year Fiscal Matrix CorVel Total Year 2010/2011 191 191 2011/2012 176 176 2012/2013 135 135 2013/2014 * 51 82 133 2014/2015 ** 110 110 * CorVel effective 04/01/2014 **As of 04/24/2015 Staff provided a chart of total workers' compensation claims cost by Fiscal Year and TPA. The average cost for claims administration with Matrix was $61,915.80, currently with CorVel, we are averaging $80,500. We have met with. CorVel regarding the claims handling issues and will continue to work with them. We wanted to keep the Trustees apprised of the issues. Staff recommended we would like to begin discussions with leadership and the departments that have a majority of the injuries to obtain feedback regarding services provided by the TPA. With that information, we would make a recommendation to the Trustees on potentially rebidding the program. Trustees directed staff to survey employees and obtain feedback on the services provided and to discuss with leadership going back out to bid. 10. Approval of CorVel Workers' Compensation Third Party Administrator for Workers' Compensation Claims increase in contract. Staff reported the approved estimated cost for the contract's duration was $120,000 which may be exceeded after the first fiscal year. Staff requested an increase in fees to be paid not to exceed $515,000 for the contract duration (5 years) if extended annually. In addition the checking account set up to pay claims is replenished monthly. The prefund is $150,000 which has not been enough to cover a full month of workers' compensation claims payments. Staff requested an additional $100,000 to be placed into the account. Gary Sherwood moved to recommend Council approve increasing the total contract cost from $102,000 to $515,000 and to increase the checking account pre- fund by an additional $100,000. The motion was seconded by Julie Stiak. Motion passed. 11. Fiscal Year 2015/16 Workers' Compensation Insurance Renewals Staff reported the following information. City of Glendale Ordinance, Administration, Workers' Compensation Trust Fund, Section 2-219 Insurance provides that "The city risk manager, acting for the city manager, is authorized to enter into, on behalf of the city, any appropriate commercial insurance or alternative risk financing to be in the best interests of the city". Our broker, Alliant Insurance has been placing insurance for cities for over 25 years. Their insurance placements include all lines of coverage placed through a proprietary group purchase program for public entities across the United States. Placement is underwritten and priced on a group basis without sharing the risks of the entire group. Alliant obtained quotations for excess workers' compensation insurance with the same coverage terms and $800,000 self-insured retention(SIR). The not-to-exceed cost to purchase the insurance for FY 2015-16 is $217,083. The expiring premium was $182,393 (which included $15,000 for training). Excess Workers' Compensation. The city purchases statutory excess workers' compensation with an $800,000 SIR and employer's liability insurance with $2,000,000 limits. Safety National advised during last year's renewal that it would be the last year they would be able to offer the $800,000 retention. We were surprised that Safety National provided us with a quote at the $800,000. This is attributed to our lower than expected claims. There are only a handful of carriers that will underwrite public entity workers' compensation programs. We went to market and received responses from Midwest, Arch and US Specialties. All declined to provide a quote indicating that they could not be competitive and beat the current rate. We asked Safety National to provide quotes for the following self- insured retentions: • $800,000 retention - $217,083 premium • $850,000 retention - $207,549 premium • $900,000 retention - $198,014 premium We are still working with. Safety National on finalizing the proposed premiums and to see what additional reductions, if any, can be provided. The expiring FY 2014-15 premium was $182,393. After conducting an analysis, Risk Management recommends staying with the $800,000 SIR at $217,083. If we move to an $850,000 SIR, we will increase claims payments by $50,000 but only incur a savings of$9,534 (if we do not have any loss that exceeds our SIR). Moving to a $900,000 SIR increases claims payments by $100,000 but saving only $19,069. Why increase claims payments without saving more than the total cost of claims. If we were to incur a claim greater than our SIR, there would be no savings, but a negative cost to the City. A deductible analysis spreadsheet was provided. The actuary is currently finalizing his analysis. We have asked him to provide the amount that would be needed for claims payments at an $850,000 SIR and a$900,000 SIR to confirm. As you know, effective 7/1/2014 the City changed the Workers' Compensation Ordinance to include payments for workers' compensation expenses, salaries and other administrative costs. Currently these expenses are being paid by the general fund. Risk Management will submit a request to Finance to move the expenses out of the general fund and into the Workers' Compensation Trust Fund during the last quarter of this fiscal year. Safety National included $15,000 for training and safety programs in last fiscal year's premium. We have a balance of$13,100 which will roll over into this upcoming 2015/16 fiscal year. We have the loss control representative working with our Safety Security & Alliance on emergency evacuation procedures and safety inspections of high value, high occupancy facilities. The workers' compensation insurance premiums are paid from the Workers' Compensation Trust Fund. The total cost of renewing the excess workers' compensation and employer's liability insurance shall not exceed $217,083. This amount is included in the current FY 2015/16 budget being proposed to City Council. Julie Stiak moved to recommend City Council approve purchasing the excess insurance for fiscal year 2015/16 not to exceed $217,083. The motion was seconded by Ken Wixon. Motion passed. 12. Safety Security Alliance Update Staff provided an update on the items the Alliance has been working on in the Risk Management Trust Fund Board meeting. No further items discussed and no action taken. 13. Adjournment Julie Stiak moved to adjourn the meeting which was seconded by Tom Duensing. The meeting was adjourned at 8:40 PM. Submitted by: Dianne Shoemake