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8.7 Workers Compensation Third Party ServicesCITY OF SALINA REQUEST FOR CITY COMMISSION ACTION DATE TIME 4/23/2007 4:00 P.M. AGENDA SECTION ORIGINATING DEPARTMENT: APPROVED FOR NO: 8 AGENDA: HUMAN RESOURCES ITEM NO. 7 BY: BY: Natalie Fischer Page 1 ITEM:Resolution No. 07-6389 Resolution No. 07-6389 authorizing the Mayor to enter into an agreement for Workers Compensation Third Party Administrator (TPA) Services with Berkley Risk Administrators Company, LLC. BACKGROUND: Since 1991, the City of Salina has managed a self-insured workers compensation program for its employees. As a result, practically all claim costs are paid directly by the City through a budgeted workers compensation reserve fund rather than from a private insurance disbursement. Taken from this fund are costs for third party claims administration, payments for direct medical costs, State regulated compensation to employees unable to work due to a work-related injury, and an excess insurance policy for costs per accident in excess of $300,000. This self-insured program allows the City to retain savings that occur as a result of sound safety policies, a reduction in on-the-job injuries, and effective claims management. By self-insuring claims versus purchasing comprehensive workers compensation insurance, we have saved the local taxpayers an average of over $100,000 per year, resulting in total savings of over $1,600,000 since 1991. The City has contracted with Berkley Administrators fo r third party claims administration (TPA) of our self insured workers compensation program since 1998. The TPA processes and manages all of the City’s workers compensation claims and any medical and/or indemnity costs associated with the claims in accordance with State law. They also serve as our excess insurance broker, provide professional claims handling advice, and assist with various reports for the State of Kansas. Over the past several years, Staff has worked closely with Berkley Administrators and is very satisfied with the overall performance. Berkley has proposed a renewal agreement with an option of renewals for up to two additional years. Below is a brief proposal overview: Term: One-year agreement with annual renewal option for up to two additional years (with a 4% increase) unless notice is provided otherwise Outlines specific TPA services to be provided, including optional insurance brokerage services Establishes competitive unit rates for administering the various workers compensation claims types Provides sufficient indemnification language and liability insurance Outlines specific claim administration practices and case reporting requirements FISCAL NOTE: Although the actual cost for the services are contingent upon volume and type of claim, Berkley offered the City of Salina the minimum annual cost for the upcoming year of $15,185 due to our excellent record of controlling Workers Compensation costs. Some expense will also be incurred based on specific services outlined separately in the Scope of Services, but the additional expenses are not anticipated to make a budgetary impact. The optional renewal for two years would include a 4% increase each succeeding year, totaling $15,792 in 2008, and $16,426 in 2009. Upon recommendation from Bob Charlesworth of Charlesworth & Associates, L.C., an independent insurance consultant for the City of Salina, the minimum quotation received from competitors would be at least $16,325, in addition to fees on “open” claims that would likely be incurred as a result of changing the TPA. Our proposed renewal rate is approximately 7% below current market cost. CITY OF SALINA REQUEST FOR CITY COMMISSION ACTION DATE TIME 4/23/2007 4:00 P.M. AGENDA SECTION ORIGINATING DEPARTMENT: APPROVED FOR NO: 8 AGENDA: HUMAN RESOURCES ITEM NO. 7 BY: BY: Natalie Fischer Page 2 COMFORMANCE WITH STRATEGIC PLAN: GOAL #3: The City will provide the highest quality of services, consistent with governing body direction, available resources and staff commitment to quality. Staff believes that the workers compensation TPA provides the City of Salina and its employees with high quality, specialized services at a reasonable cost. RECOMMENDED ACTION: Approval of Resolution No. 07-6389, which authorizes Mayor to enter into agreement for worker’s compensation third party administrator (TPA) services with Berkley Risk Administrators Company, LLC. Attachments: Berkley Third Party Administration Scope of Services Agreement for Workers Compensation Third Party Administration Services Resolution No. 07-6389 SCOPE OF THIRD PARTY ADMINISTRATION (TPA) SERVICES I.Berkley Risk Administrators may be named broker (agent) of record for the City’s excess insurance program. This is at the City’s sole discretion. Berkley Risk Administrators agrees that a 7.5% commission of the excess insurance premium is acceptable and Berkley Risk Administrators will complete the mandatory monthly experience reports along with all renewal applications. If named broker, brokerage duties and services provided by TPA to City shall include, but not be limited to: Obtain renewal information from the City and/or the City’s designee. Formulate a marketing strategy at the direction of the City. Produce insurance quotation solicitation information with the assistance and approval of City, and formally present insurance solicitation submission to the market. Negotiate on the City’s behalf with the City’s insurance company(s) and keep the City informed of significant developments in those negotiations which are likely to have a bearing on the City’s insurance program. Provide the City with pricing and coverage information. Place coverage as instructed by the City. Prepare and distribute binders of insurance to the City prior to policy inception. Prior to new policy commencement date, file State of Kansas Form K-WC 129 “Certificate of Excess Insurance” Issue certificates of insurance, as requested by the City. Prepare and deliver premium invoices to the City. Insure a copy of the policy is distributed to the City within 30 days of receipt of the policy from insurer. Provide technical assistance regarding coverage questions and workers compensation financing. Within 90 days of policy expiration date provide an annual overview of the financial condition of the insurance company underwriting City excess insurance policy, information regarding current insurance market, future market and pricing expectations, and recommendations for insurance program. II.Berkley Risk Administrators is currently an approved third party administrator (TPA) by Midwest Employers Casualty. Both Berkley Risk Administrators and Midwest Employer Casualty are wholly owned subsidiaries of the W. R. Berkley Corporation, Greenwich, Connecticut. Berkley Risk Administrators is a licensed Kansas Insurance Agency and is licensed to write for Midwest Employers Casualty Company. III.The cost of services as provided by Berkley Risk Administrators shall be as follows: A.Minimum Annual Fee - $15,185.00 with a 4% escalator each succeeding year, 2008 $15,792.00, 2009 $16,426.00 B.Service Fees or Other Miscellaneous Costs – See below -1- 1. Loss Control - $125.00 per hour plus mileage at approved IRS rate. 2. Safety Seminars – Berkley Risk Ad ministrators conducts annual seminars in Wichita, Kansas for the benefit of its insured/clients. Attendance is free. It is an all day seminar featuring speakers on various workers’ compensation related issues. 3. Case Management- Stubbe & Associ ates is $75 per hour with a 2% increase each year. Mileage is at the IRS rate. 4. Medical Fee Scheduling – Provided by Corvel at a rate of $1.10 per line; 25% Professional Review Savings; 25% PPO Savings with no charge for supplying CPT report to Kansas Division of Workers’ Compensation. 5. Birth, Marriage, Death, etc. Certificates – actual cost 6. Police, Highway Patrol Reports – actual cost 7. Surveillance – Actual cost per hou r plus mileage at IRS approved rate, actual cost of videotape and license tag or driver’s license check charge. Surveillance will be conducted by licensed private investigators that are not employees of Berkley Risk Administrators. They will be fully bonded and insured. 8. Other – actual cost IV. Berkley will continue to provide Monthly Loss Run Reports a Monthly Disbursement/ Fund Reports in the same or similar format as in previous agreements. V. Berkley Risk Administrators proposes to contract with Corvel Corporation to do Managed Care on City of Salina Workers’ Compensation claims. The cost for these serves is set out in subsection III.H.3 as contained herein. VI. Payment for third party administration fees shall be as follows: Monthly or quarterly billing based on minimum annual fee as set out in III. City will th make payment on monthly invoices by the 15 day of the month following the month of the invoice. If applicable, balance to meet Minimum Annual Fee shall be included in final invoice of contract year. VII. Annually, Berkley Risk Administrators shall file with the City Clerk’s office a Certificate of Insurance confirming the following coverages and minimum limits for the duration of the agreement. Each insured is rated A-10 or better by A.M. Best Company. General Liability: $1.000.000 each occurrence $1,000,000 aggregate Automobile Liability $1,000,000 CSL BI/PD Workers’ Compensation “A” Statutory “B” $100,000/$500,000/$100,000 Fidelity Bond $50.000 limit -2- Professional Liability $1,000,000 each occurrence $1,000,000 aggregate VIII. Berkley shall include the resumes of those individuals who will be assigned to the City’s account. IX. Berkley Risk Administrators shall provide the City’s designated representative with “on- line” or secure Internet access regarding claims status review on a “read only” basis and with no additional fee when these information technologies become available. The City shall be responsible for obtaining the necessary equipment and on-line or Internet account to access this information. X. Berkley Risk Administrators will provide repricing service as per the Kansas Workers’ Compensation Fee Schedule as part of our proposal.. This service will be provided by Corvel Corporation’s Wichita, Kansas office at the price set out in subsection III.H.4 as contained herein. This charge will be billed to each respective file to which the fee is applicable. XI. Berkley Risk Administrators will assist the City of Salina in completion of the State of Kansas annual renewal reports. XII Berkley Administrators acknowledges that it is mandatory that the following procedures will be utilized by Berkley Risk Administrators and we hereby confirm that these procedures are acceptable: A. Reporting Procedures: 1. Verification regarding each lost tim e claim will provided to the designated City representative in the form of a photocopy of the standard benefit letter which is sent to the claimant. 2. Reporting to the Kansas Division of Workers’ Compensation will be made by Berkley Risk Administrators when needed and in a timely manner as required by law. 3. A monthly report will be submitted to the City of Salina as soon after the st 1 of the month as possible. These reports will list all claims whether open or closed. 4. Contact will be made as necessary with the Assistant Human Resources Director or his/her designee by telephone to discuss any potential problems or issues needing attention. A pager number or other means of immediate direct contact is to be made available by Berkley Risk Administrators. 5. Representative of the City and Be rkley Risk Administrators will meet semi-annually, or as needed, to address areas of concern. B. Adjusting Procedures: All claims will be initially inve stigated according to Berkley Administrators standards and procedures as included in subsection C. -3- 1. Medical Bills a. On bills totaling $250.00 or less, payment will be made within (30) days of receipt of the bill by Berkley Risk Administrators, without regard to receipt of supporting documentation. Each bill will be carefully reviewed prior to payment for relatedness and accuracy. If a question exists, the City’s designated representative will be contacted for discussion. b. Bills received which are mo re than $250 will be paid following TPA’s receipt of records. 2. Temporary Total Disability Payments a. All temporary total disability checks are to be sent to the City’s designated representative. b. Temporary total disability checks are given to Payroll which will adjust City checks accordingly. c. An employee on temporary total disability will report to the Human Resources Department to receive his/her check and sign an acknowledgement on regularly scheduled paydays or, the City may mail the checks. d. No checks for temporary tota l disability will be mailed directly from Berkley Risk Administrators to the employee’s residence unless instructed by the City’s designated representative. 3. In cases where malingering or fraud may exist, Berkley Risk Administrators will discuss and determine the appropriate course of action with the City. 4. Fund Transfers a. Berkley Risk Administrato rs will be responsible for opening and maintaining a bank account which will be used solely for the purpose of paying claims filed against the City’s workers’ compensation fund. b. The City will deposit an amount to be determined into this account which will be used as operating capital to pay claims as they occur. This contract is canceled or non- renewed, Berkley Risk Administrators will close the account and remit payment to the City for the account balance. c. Once a week (Friday by noon at the latest), a check register will be faxed to the City detailing the checks produced that -4- week and the amount of money that needs to be replaced in the bank account. For any week in which there is a single check in excess of $7,500 or a combination of checks written in excess of $10,000, Berkley Risk Administrators will call the City to ensure the funds are available. TPA will secure City’s approval for any check to be drafted in an amount equal to or greater than $7,500. d. The appropriate funds will be deposited as soon as administratively possible after the fax request is made to the City. If Electronic Funds Transfer is available, the City will explore the use of it as the means to replenish the workers’ compensation account. At no time will TPA use its own funds to pay claims, allocate loss adjustment expenses or any other expenses of City. e. Although Berkley Administ rators maintains the bank account, detailed copies of bank statements are to be provided to the City at intervals no less than monthly. These statements can be delivered by the bank or Berkley Risk Administrators, but they must be original or exact copies of original bank statements. Delivery of these statements will be made to the City’s designated representative. C. Claim Handling Procedures TPA will perform the following claims handling function in accordance with usual and customary business practices of the industry: Uninsured/Employer Relationship 1. Personal contact with insured following policy inception. a. Personal contact with pers onnel responsible for reporting claims. b. Establish reporting procedures and standards. c. Establish a medical referral program. d. Emphasize/initiate return to work program. Operational 1. Procedures a. Supervisory review of all new claims. b. All reported claims assigned within two working days of receipt. c. Minimum quarterly supervisory review of all claims. d. Examiner to review all claims at least every 60 days. -5- Claims Administration Procedure 1. Investigation a. Claimant contact within 24 working hours on all lost time files. b. Employer contact within 24 working hours on all lost time files. c. Contact with medical provi der within 48 working hours on all lost time files. d. Recorded interview of claimant and witnesses on all claims that are: 1) Controverted 2) Those of questionable compensability 3) Involve third party or Second Injury Fund recovery 4) Those losses of a catastrophic nature and multiple injuries accident 5) Claims involving quest ions of medical cause relationship e. Investigation of assigned claims will be completed within 30 working days of assignment. f. Third party and Second Inju ry Fund identified perusal. g. Verified of average weekly wage. h. Report to Index Bureau i. Obtain prior claim information. 2. Acceptance or Denial a. If claim is compensable, issue first payment on or before statutory required date. b. Prompt denial to all appropriate parties if denial of liability is in order. 3. Medical Management a. Arrange for the best medical care necessary to treat and cure the injury or illness. b. Prompt referral to a medical case manager when appropriate. c. Referral for an independent medical exam when warranted. d. Review updated medical information as available. e. Continued contact with injured employee and physician at intervals consistent with the injury and disability until claimant has returned to work or reached maximum medical improvement. -6- 4. Reserves a. Establish timely medical and indemnity loss estimates at on-set of claims. b. Claims in excess of $25,000 will be reviewed by the Branch Manager on a periodic basis. c. Reserve to ultimate exposure whenever developments occur that change the ultimate loss exposure, but avoid stair stepping practices. d. Establish timely permanency or settlement loss cost estimates. e. Regular use of Reserve Worksheet. 5. Medical Cost Control a. Fee Schedule all medical bills per the statutes. b. Utilize medical bill reviews a nd utilization reviews when appropriate. c. Pay all appropriate bills within 30 days of receipt. d. When reasonable questions exist regarding treatment or charges, notify the medical vendor to obtain further information or investigation. 6. Claim Resolution a. Prompt evaluation of return to work possibilities. b. Continued monitoring of medical treatment. c. Maintain aggressive settlement practices. 7. Legal Management a. Minimize defense attorney activity by controlling additional investigations and settlement negotiations. b. Insure that all cases are promptly prepared prior to conference, hearing or trial. c. Base all settlements of permanency or compromise settlements on sound claims judgment consistent with liability and medical evidence in accordance with the law and benefits structure. d. All benefits payments will be made timely, in accordance with applicable statues, rules and regulations. 8. File Reporting a. All file activity will be fully documented. -7- D. Litigation and Settlement Procedures: 1. Settlements will be paid by check from the City’s operating bank account and charged to the Workers’ Compensation Fund. Each check for settlement will be delivered to the City’s Legal Department by the City Manager’s Office. 2. Settlements will be negotiated by Berkley Risk Administrators when the employee is not represented; however, final settlement authorization shall be obtained from the City’s Legal Department. 3. Applications for Hearings received by Berkley Risk Administrators will be reviewed and sent to the City’s designated representative if prior notification cannot be verified. 4. When a letter of representati on is received, Berkley Risk Administrators will forward the necessary information so the City’s designated representative for the handling of settlements. Berkley Risk Administrators will continue case handling according to the procedures set forth herein. E. Subrogation/Recovery 1. Claims with subrogation potential will be designated by letter from Berkley Risk Administrators to the City’s designated representative. All check copies, bills and other necessary records will be forwarded by Berkley Risk Administrators to the City when requested. 2. When a file with subrogation poten tial is closed, it will be so noted on the monthly report. -8-