Quarterly Report on Workers Compensation

October 1, 1999 through December 31, 1999

 

Recommendation

Receive and File the Quarterly Report on Workers’ Compensation.

 

Background

This is the second quarterly report on the City’s Workers’ Compensation Program for the 1999/00 fiscal year. Prior reports have detailed claims management, training, overall program status, explanations of associated costs, and on the history of the City’s claims expenses. After review of the last quarterly report information was requested regarding the frequency of the City’s claims experience and the cost per claim. This information is detailed below as is the usual information regarding the status of the claim expenditures and reserves.

 

Analysis

Claims expense for the second quarter of the 99/00 fiscal year was 19.5% above the previous quarter. This significant increase in expenditures during the quarter is attributed to the settlement of four long-term claims of previous employees. Settlement of these claims totaled approximately $95,000. Claims expenses for the first half of the 1999/2000 fiscal year are approximately 18% higher than for the same period as last year. As reflected below, this increased claims expense is offset by a slight reduction in the claim reserves for future liability.

Period	Claims Expense
FY 93/94	$308,400
FY 94/95	$535,708
FY 95/96	$535,736
FY 96/97	$492,079
FY 97/98	$608,025
FY 98/99	$521,352
FY 99/00 – First Quarter	$143,234
FY 99/00 – Second Quarter	$171,261

The table below shows the total workers’ comp. reserve for future liability on existing claims. The reserves have decreased by 8% since the beginning of the fiscal year. While the month of January 2000 will be included in the next quarterly report, loss information received to date shows an additional 2% reduction in reserves.

Date	Total Workers’ Comp. Reserve
June 1996	$1,130,925
June 1997	$1,266,861
June 1998	$833,161
June 1999	$770,263
July 1999	$826,602
August 1999	$789,752
September 1999	$770,985
October 1999	$761,689
November 1999	$749,529
December 1999	$704,642

In the last quarterly report we showed how the City of Hermosa Beach compares with nine other cities in the cost of workers compensation claims per $100 of payroll. Another measure of comparison is to look at the incident rates. Incident rates show the number of claims reported per one million dollars of payroll. A high incident rate would indicate

that the employer has a greater frequency of workers’ compensation claims filed by its employees. As shown in the chart above, the City of Hermosa Beach is only slightly above the average of the eleven cities. This indicates that while our claims expenses have appeared to be high, the City of Hermosa Beach has had an average number of claims filed. The incident rates above were determined using the number of claims filed over a five year period as reported by each agency to the State Department of Industrial Relations.

Information was also requested regarding the City’s cost per claim as compared to other cities. Using loss information from the five year period between July 1, 1993 through June 30, 1999, the chart below shows that the City of Hermosa Beach has a lower average cost per claim than the other ten cities shown. The average cost per claim for the ten cities shown was $7,241 compared to the City of Hermosa Beach average cost per claim of $6,241.

The data gathered for this report indicates that the City has an average number of claims filed but has a lower than average cost per claim than the other cities.

As previously reported, one cause for increasing workers’ compensation claims costs has been due to legislative increases in the rates paid for temporary and permanent disability benefits to injured workers. Last legislative session the Governor vetoed a bill that would further increase workers’ compensation benefits. Currently there is bill working its way through the legislative process that would, among other things, increase workers’ compensation benefits beginning in January of 2001.

Efforts to control workers’ compensation claims expenses will continue. In addition to safety training, training will be proposed to better educate supervisors and managers on proper procedures for reporting claims and dealing with their injured workers. The City also should develop an early return to work policy. These policies generally emphasize getting an injured worker back to work, even if only on a temporary modified job assignment, as quickly as possible. Prior to the end of the fiscal year an audit of the claims management services provided by the City’s third party administrator, Fleming & Associates is to be conducted as previously reported. Also, it will be necessary to develop a request for proposals for third party claims administration services, as the existing contract will expire at the end of the calendar year.

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