9/6/2024
TO: PUBLIC SAFETY, FINANCE
AND STRATEGIC SUPPORT
COMMITTEE
FROM: Kim Jackson
SUBJECT: WORKERS’
COMPENSATION PROGRAM
ANNUAL REPORT
DATE: September 6, 2024
Approved Date:
RECOMMENDATION
Accept the annual report on the City’s efforts to contain workers’ compensation costs and reduce claims for the Workers’ Compensation Program by focusing on wellness, health, and safety through the end of Fiscal Year 2023-2024.
BACKGROUND
The Public Safety, Finance and Strategic Support Committee accepted the most recent Annual Report covering Fiscal Year 2022-2023 on September 21, 2023. That Annual Report included a status of the Workers’ Compensation Program. The 2022-2023 memo also included an update on safety initiatives the Human Resources (HR) Department Workers’ Compensation, Health, and Safety Division, in conjunction with City Departments, had implemented to prevent injuries, reduce workers’ compensation costs, and support employee health and wellness. In addition, the report outlined the total number of COVID-19 claims and associated costs the City incurred due to the pandemic.
ANALYSIS
This report to the Public Safety, Finance and Strategic Support Committee serves as the scheduled Annual Report on the status of the City’s Workers’ Compensation Program, providing updates on the performance of the Workers’ Compensation Program for 2023-2024 and an attachment discussing the Workers’ Compensation Program performance, including injury prevention and cost reduction initiatives.
COMMITTEE AGENDA: 919/24
ITEM: (d)2.
PUBLIC SAFETY, FINANCE AND STRATEGIC SUPPORT COMMITTEE
September 6, 2024
Subject: Workers’ Compensation Program Annual Report
Workers’ Compensation Program Status
A. Open Claims
As of June 30, 2024, open workers’ compensation claims provided by the City’s the Third-Party Administrator (TPA), Intercare, totaled 2,456. This represents a decrease of approximately 1.5% since June 30, 2023, when the open claim inventory was 2,491.
Indemnity claims (lost time cases) decreased approximately 3% from 1,363 in June 2023 to 1,320 in June 2024 and medical-only claims, claims resulting in medical treatment but no lost time, were down 6% from 95 in June 2023 to 89 in June 2024.
Future Medical claims increased by approximately 1% from 1,033 in June 2023 to 1,047 in June 2024. Open claim inventory fluctuates daily.
B. Closing Ratios
For the period July 1, 2023, through June 30, 2024, Intercare reported an overall closure rate of 102%. A 102% closing ratio is considered successful as the industry standard for a successful claims closure rate is 100%. A closure ratio greater than 100% is possible as this data factors in claims that were re-opened and subsequently re-closed during the reporting period. Timely claims resolution ensures that future costs are mitigated, and the employee may either return to work or find an alternative resolution.
C. COVID-19 Claims
During 2023-2024, the majority of the temporary disability and medical-only COVID-19 claims occurred in the Fire and Police Departments, 480 claims and 683 claims, respectively. This is due to the nature of both Department’s work and frequent close contact with COVID-19-positive individuals. In comparison, the Fire Department had 408 claims, while the Police Department had 655 claims in 2022-2023. The total paid for all Fire and Police COVID-19 claims was $3,448,047, or 99.2% of the total paid for all COVID-19 claims City-wide ($3,475,058). Total outstanding, which reflects outstanding reserves or anticipated future costs for all open Fire and Police COVID-19 claims, was $146,859.
D. Total Claims Expenditures
Table 1 below provides a breakdown of total Workers’ Compensation claims expenditures by Department and fund type for 2023-2024. Claims expenditures totaled $28,314,006, exceeding the initial forecast assumed for development of the 2023-2024 Adopted Budget ($23,707,500) by $4.56 million, or 19.2%. A series of funding adjustments were approved during the fiscal year as part of the 2023-2024 Mid-Year Budget Review and Year End Budget Adjustments for 2023-2024 to realign funding levels city-wide and address these higher-than-anticipated claims expenditures, as
PUBLIC SAFETY, FINANCE AND STRATEGIC SUPPORT COMMITTEE
September 6, 2024
Subject: Workers’ Compensation Program Annual Report
detailed in Table 1. Final expenditures exceeded Modified Budget levels by $31,506 (0.1%) but varied significantly by department and funding source. Claims expenditures supported by the General Fund exceeded budgeted levels by $813,627 (3.1%).
The primary factor resulting in this overage was the City’s continued focus on reducing future liabilities through resolving open workers’ compensation claims. The Human Resources Workers’ Compensation Division was able to settle a total of 179 open workers’ compensation claims city-wide, including 57 and 80 claims in the Police and Fire Departments, respectively. Workers’ Compensation settlements from the General Fund totaled $4,080,012 for 2023-2024, a 59% increase from the previous year when Workers’ Compensation settlements from the General Fund totaled $2,428,073.
Collectively, the non-public safety departments, including Park, Recreation and Neighborhood Services, Department of Transportation, Public Works, and others, ended the year under budgeted levels by $675,684 relative to the initial 2023-2024 Adopted Budget. Claims expenditures supported by Special Funds also ended the year $672,121 under initial budgeted levels. This aggregate savings of approximately $1.35 million across non-public safety departments and Special Funds speaks to the success of the departments’ health and safety programs and supports the continued focus on proactive hazard identification and mitigation efforts.
Table 1. Workers’ Compensation Claims Expenditures
Department 2023-2024
Adopted Budget
2023-2024
Modified Budget
2023-2024
Actuals
Fire $ 9,000,000 $ 13,250,000 $ 13,467,968
Police $ 9,000,000 $ 9,650,000 $ 10,436,343
Parks, Recreation and
Neighborhood Services $1,500,000 $ 1,050,000 $ 994,932
Department of
Transportation $ 500,000 $ 555,000 $ 539,358
Others $ 1,500,000 $ 1,400,000 $ 1,285,774
Public Works (General
Services)
$ 350,000 $ 360,000 $ 354,252
General Funds Total $ 21,850,000 $ 26,265,000 $ 27,078,627 Special Funds Total $ 1,907,500 $ 2,017,500 $ 1,235,379 Total $ 23,757,500 $ 28,282,500 $ 28,314,006
E. AON Actuarial Study - Projected Ultimate Losses
Projected Ultimate Losses are the accrual value of claims. They are the total amount that is expected to be paid in a particular claim period after all claims are closed. A
PUBLIC SAFETY, FINANCE AND STRATEGIC SUPPORT COMMITTEE
September 6, 2024
Subject: Workers’ Compensation Program Annual Report
closed claim is one in which there is no future cost exposure to the City wherein all medical, indemnity, and expense payments have been made. In some instances, closed claims can be re-opened to allow for additional benefits to the employee.
Over the past several fiscal years, the City has focused on resolving claims through Compromise and Release (C&R) and Stipulated Award (STIP) settlements. To determine the impact of these settlements on the Projected Ultimate Losses, the Division compared AON’s actuarial study from 2018-2019 to AON’s current study for 2022-2023.
For the report, staff compared Projected Ultimate Losses from 2013-2014 through 2023- 2024. The comparison reflects an overall reduction in Projected Ultimate Losses of $8,616,000 or 2.6% over the past ten fiscal years. This reduction in Projected Ultimate Losses supports the City’s focus on closing claims when appropriate, and while it has increased our costs in the short term, the approach is successful in decreasing our costs and future liabilities in the long term.
F. Third-Party Administrator Staffing
Intercare is the City’s third-party administrator (TPA) of workers’ compensation claims.
One indicator of TPA performance is Intercare’s staffing and the ratio of assigned claims to Claims Adjuster staff. As of June 30, 2024, Intercare had ten examiners handling 1,320 indemnity claims and four examiners handling 1,136 medical-only and future medical claims. Industry standard is for Senior Claims Adjusters to manage a caseload of 150-175 claims and up to 300 claims each for medical-only and future medical claims Examiners. Intercare’s staffing is well within industry standards, with Senior Claims Examiners on the City’s account averaging 132 cases, while medical-only and future medical claims Examiners averaging 258 cases.
G. Intercare’s Performance Measures
In the workers’ compensation industry, external auditors conduct statutory audits to rate TPA performance. Intercare provides an overall Adjuster Technical Audit Performance Summary annually, which the HR Workers’ Compensation Division uses to evaluate the TPA. This audit measures performance related to conducting incident causation analysis, creating claims action plans, and compliance with state performance measures such as disability payments and required notices. The overall audit percentage score for 2023-2024 was 98.3%, compared to 97.4% in 2022-2023. An audit score of 90% - 100% is classified as exceeding expectations, Intercare has achieved an average 97.8% or “Exceeds Expectations” score over the past two fiscal years.
The City will continue to closely monitor Intercare’s performance to identify opportunities to further improve service delivery, claims services to injured workers, and efficient workers’ compensation program management for the City.
PUBLIC SAFETY, FINANCE AND STRATEGIC SUPPORT COMMITTEE
September 6, 2024
Subject: Workers’ Compensation Program Annual Report
Conclusion and Follow Up
The HR Department’s Workers’ Compensation, Health, and Safety Division continues to focus on proactive employee safety, health, and injury prevention programs as the most effective means of ensuring employee safety and preventing injury and illness incidents.
The Division will also continue our focus on effectively managing the activities and performance of InterCare to reduce injuries and contain Workers’ Compensation costs.
While Workers’ Compensation expenditures for 2023-2024 exceeded budgeted levels, the impact of the Division’s focus on C&R and STIP settlements over the past five years resulted in a reduction in Projected Ultimate Losses of $8,616,000 over the past ten fiscal years.
In August 2024, the HR Department filled the Workers’ Compensation, Health and Safety Division Manager position that had been vacant since January 2024. Workers’ Compensation budget management and preventing significant overages were identified as immediate objectives for the new Division Manager. To that end, a number of new initiatives are being implemented to meet this objective.
It is also anticipated that the increased focus on proactive safety programs and restructuring of the City Safety Officers to have a dual-reporting relationship with the Division will continue to reduce injuries and support a more robust, comprehensive safety program. This partnership will further promote employee engagement and help to develop a culture of safety.
COORDINATION
This memorandum was coordinated with the City Manager’s Budget Office and the City Attorney’s Office. The Police and Fire Department’s wellness and safety updates were completed in coordination with both Departments.
Kim Jackson
Assistant Director, Human Resources Department
For questions, please contact Joe Gregory, Division Manager – Workers’ Compensation, Health and Safety, Human Resources Department, at [email protected] or (408) 975-1418.
ATTACHMENT
Report of Workers’ Compensation, Employee Health, Safety and Wellness Initiatives.