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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Human Resources
Meeting Date: March 24, 2025
Report #:2410-3664
TITLE
Approval of Professional Services Contract C25187148 with Innovative Claims Solutions (ICS) in an Amount Not-To-Exceed Amount of $760,886 to provide Third-Party Administration of Workers’ Compensation Benefits for a Period of One Year with an Option to Renew for up to Five Years Term. CEQA status - Not a Project
RECOMMENDATION
Staff recommends that Council:
1. Approve and authorize the City Manager or their designee to execute Contract No.
C25187148 (Attachment A) with Innovative Claims Solutions (ICS) to provide third-party administration services for the City’s workers‘ compensation program for a term of one (1) year; and
2. Approve and authorize the City Manager to negotiate and execute renewal options for Contract No. C25187148 for ICS to continue to provide third-party administration services for the workers‘ compensation program for up to four additional years, without increasing not to exceed $760,886 over the five (5)-year term. The total Not-to-Exceed (NTE) contract amount of $760,886 includes an annual rate structure and one-time conversion fee of $15,000. The NTE amounts for each year are as follows: Year 1 is $239,060, Year 2 is $248,504, and Year 3 is $258,322. If the contract is renewed for Years 4 and 5, the rates and NTE amounts will be determined at that time.
BACKGROUND
Workers’ compensation is a state-mandated benefit program that provides medical care and disability benefits to employees injured on the job. It ensures that employees receive necessary medical treatment and financial support for work-related injuries. Additionally, this program protects the City from legal liability and lawsuits related to workplace injuries and ensures compliance with state laws and labor code. An effective workers compensation program ensures employees get the services, treatment, and diagnosis they need for a healthy recovery to return to their jobs providing services to our community.
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The work to be performed under this contract is for third-party claims administration services for City employee workers’ compensation benefits. These services include: the processing of all workers’ compensation claims in accordance with applicable Labor Code regulations; engaging services related to the investigation and defense of claims; engaging the services of appropriate medical providers; reviewing and paying for the applicable benefits and medical treatment; handling all the necessary State-required forms for each reported claim; completing settlement negotiations; Medicare payment processing; and performing all tasks in a timely manner as required under California workers’ compensation laws. All the above-mentioned services are essential to ensure Workers’ Compensation benefits are provided for employees as required by State law. These services are currently provided by Sedgwick Claims Management Services.
ANALYSIS
Procurement Process
An RFP for the project was posted on the PlanetBids, the City’s eProcurement platform at that time, and 742 service providers were notified. The solicitation period was posted for 27 days, and 6 proposals were received. The solicitation closed on January 17, 2023. Following a competitive evaluation process of the 6 proposals received, 3 service providers were determined to best support the City’s needs and were interviewed in person.
Table 1: Summary of Request for Proposal
Proposal Description Workers Compensation Program
Administration
Proposed Length of Project One (1 year) w/ optional 4-year renewals (up to 5 Years)
Number of Providers Notified 742
Number of Proposal Packages
Downloaded
18 Total Days to Respond to Proposal 27
Pre-Proposal Meeting None
Pre-Proposal Meeting Date N/A
Number of Proposals Received 6
Proposal Price Range $306,000 to $1,039,238
Public Link to Solicitation PlanetBids
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The three finalists were selected to be interviewed by a panel including Public Safety department managers and HR staff. The interview panel carefully reviewed the proposals in response to the Request for Proposal relative to the following criteria:
Quality customer service;
Established, reliable, claim system capabilities; as well as advanced reporting technology:
Ability to provide innovative programs and services;
Public agency experience, including public safety officers benefits (California Labor Code 4850 provides injured public safety employees with salary continuation up to one year and requires additional handling and knowledge); and,
High level management and claims examiner experience.
Due to City staffing constraints, the interview scheduling took longer than originally planned; vendor held pricing for the duration of the RFP evaluation period through contract negotiation.
The administration of workers compensation benefits is highly complex and requires deep knowledge of California labor codes, workers compensation law, as well as federal Medicare and Americans with Disabilities Act obligations. In addition to the technical expertise needed, the claims representatives need soft skills and high touch customer service skills to be responsive, to be engaged with the status of each claim to properly administer the claim details and have ability to inform City employees regarding the workers compensation process. With all of this in mind, the panel was focused on selecting a service provider that could effectively provide claims handling services for injured employees and City management. Innovative Claims Solutions (ICS) was the selected service provider.
The customer service model ICS will provide to the City’s workers compensation program will be based on the City’s needs and help our program function at the highest levels to meet the City’s expectations. Their communication approach to interactions with injured workers is what they referred to as their “Employee Advocacy Approach.” This approach is expected to assist employees to be heard, receive their medical treatment in a timely manner and, as a result, expedite an employee’s return back to regular work.
The transition for administration services is estimated to take 60 days from Council contract approval date.
Caseload
Human Resources will work with ICS and the current service provider, Sedgwick, to transition all open claims as well as closed claim files. The total number of claims for FY25 is expected to be lower than prior years. In FY24 claims increased to 86 in comparison to FY23 when there were 76 claims. Claims reported between 2021-2024 has been stable averaging 82 claims annually since the pandemic year of FY20 when there were 105 claims. Open claim inventory fluctuates on a daily basis. The new claims administrator will review all claims during the transition from 5 8
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the prior third-party administrator to determine if any claims can be closed or reach satisfactory resolution.
FISCAL/RESOURCE IMPACT
Funds for Third-Party Administration Services are included in the FY2025 budget in the Workers Compensation Service Fund. Funds for the remaining years will be factored into the development of future operating budgets and subject to Council appropriation of funds.
STAKEHOLDER ENGAGEMENT
As part of the RFP process, key stakeholders including Human Resources, Administrative Services, the City Attorney’s Office, and third-party administrator collaborated to ensure current services have not been interrupted. HR outlined requirements, while Administrative Services directed the contracting process and documentation. Human Resources will work with all departments to transition services to this new provider.
ATTACHMENTS
Attachment A: Professional Services Contract #C25187148 with Innovative Claims Solutions APPROVED BY:
Sandra Blanch, Human Resources Director