Third Party Administration of the City’s Workers’ Compensation

 

Recommendation:

That the City Council approve a proposal for third party administration of the City’s Workers’ Compensation claims submitted by Hazelrigg Risk Management Services and authorize the City Manager to negotiate and execute a contract for a three (3) year term commencing January 1, 2001.

 

Background:

The contract with the existing third party administrator, Fleming & Associates expires on December 31, 2000. Staff prepared and solicited a Request for Proposals (RFP). A total of ten (10) responses to the RFP were received. Following a review of the proposals, the Finance Director and Personnel & Risk Management Director interviewed six companies with the following result.

 

Analysis:

In evaluating the proposals staff considered the proposed service fees and the level of service to be provided. Overall, the service fees proposed were considerably less than those proposed three years ago when the City went to bid for these services. Hazelrigg Risk Management Services (HRMS) submitted the lowest service fee quotation. The fees proposed are $25,000 for the first year of the contract and $26,000 and $27,000 per year for the following two years. An additional fee of $650 - $700 would be charged per claim if the City exceed 37 claims reported per year. There are also some additional first year costs for start-up and implementation of the program and an annual software license fee for City access to the claims information system. Currently the City is paying $28,000 per year for claims administration services. Staff was impressed with the firm’s qualifications and level of service proposed. In particular, the detail, documentation and organization of claim files appear to be outstanding. In addition, the company’s internal procedures for managing the files appears to be sound. These are key elements in ensuring the files are properly managed and costs controlled as much as possible. HRMS is well versed in providing TPA services to full service municipal clients with 21 public sector clients in the southern California area. HRMS has also received very favorable evaluations in independent audits conducted by their clients. In addition, HRMS is one of two third party administrators recommended by the Independent Cities Risk Management Authority.

It is anticipated that a contract can be negotiated with Hazelrigg Risk Management Services that will include provisions for termination should the services provided not be acceptable. A three-year contract is proposed with an option for a two-year renewal based on performance as recommended by the City Manager and Personnel Director.

Copies of each of the proposals submitted are available for review in the Personnel Office.

 

Fiscal Impact:

The fiscal impact of approving the proposal with HRMS will result in a three-year total cost of $84,000 including all start-up costs. Adequate funds are budgeted in the current 2000/2001 budget for all first year costs.

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