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SR-08-08-1978-6JSanta Monica, lifornia, July 20, 1978 TO: Mayor and City Council FROM: City Staff ldU1i 1i SUBJECT: Worker's Compensation Claims Administration Services i ao)(C�cf! � a Introduction This report discusses worker's compensation claims administrative services and recommends renewal of the contract with Brown Brothers Adjusters for 1978 -79 at a cost not to exceed $21,236.61. Background On June 22, 1976, the City Council approved an agreement with Brown Brothers Adjusters for claims administration services during 1976 -77. This was the first year of the City's worker's compensation self- insurance program. The agreement was in the amount of $13,500 and provided a second year re- newal option at $14,114 which the City subsequently exercised. Brown Brothers Performance During the past two years, Brown Brothers has represented the interests of the City in a very competent manner. Through May, 1978, the firm has processed 769 claims, handled payments to employees and physicians, provided monthly claims control reports and advised the City staff re- garding various aspects of claims administration and control, Two areas which exemplify Brown Brothers high level of performance are the processing and payment of claims. With regard to the processing of claims, by law an employee must be notified of the status of his claim within 14 days after it has been filed. Brown Brothers responds on the J AUG � 997fl TO; Mayor and Ciuy Council -2- July 20, 1978 City's behalf within 7 days, The employee is informed of acceptance or denial of the claim and is provided with further information regarding the claims process or avenues of appeal, This quick- response benefits the City by eliminating the need for the employee to seek information through contact with City staff, an employee organization or private counsel. As regards the payment of claims, Brown Brothers has processed the necessary forms for disability payments quickly and issues disability payment checks to employees without delay. The City has received very few complaints from physicians over the past two years regarding the payment of medical bills. Overall, the City's experience with Brown Brothers Adjusters has been excellent in comparison to the years Santa Monica was associated with the State Fund. The quality of service provided to the City by Brown Brothers also appears to surpass that which is provided to many other cities by other adjusting firms, In addition to continuing the services provided during the past two years, in 1978 -79 Brown Brothers will advise the City in accomplishing two special objectives: development and implementation of a specific safety and loss prevention program;and analysis of the feasibility of self - administration of worker's compensation claims, T0; Mayor and City Council -3 July 20, 1978 Cost of Claims Administration for 1978 -79 Brown Brothers has agreed to provide claims administration services during 1978 -79 at a rate of .10045 per $100 of gross annual payroll in an amount not to exceed $21,236.61. This is a 50% increase over 1977 -78. The primary reason for this large increase is the fact that Brown Brothers! fee during the past two years was far below that of its competitors (see attachment I), While the firm had extensive private sector experience in worker's compensation claims administration, its government experience was limited. The company offered itsservices to the City at a significant savings in an effort to break into the municipal market, The amount proposed by Broom Brothers is consistent with staff's initial esti- mate of third year costs made at the time the City became self - insured in 1976, The estimate was for $20,720 and this proposal is a 2.5% increase over that amount. Furthermore, the City's insurance analysts, Mund, McLaurin and Company, advise that the proposed service feeds quite competitive with that which is currently available in the marketplace (see attachment II). Based upon the competitive price, the highly competent service provided thus far, the possibility of self - administration of claims in the next few years and the costs involved in changing adjusting firms, requesting bids from other companies is not advised at this time. T0: Mayor and City Council M Recommendation July 20, 1978 It is recommended that the Council authorize the City Manager to retain the firm of Brown Brothers Adjusters to provide claims administration services for 1978 -79 in an amount not to exceed $21,236,61. Funding for this contract would be provided through the worker's compensation self- insurance fund. Prepared by: JEANNE KENNEDY Administrative Assistant JK:dvl dministrator . -own Brothers Adjusters, In( i I S. Catalina Street 'cite 305 ,.os Angeles, California 90005 Z13) 387 -5201 050 Wilshire Boulevard ,os Angeles, California 90010 213) 381 -2577 L. Kautz & Go. 800 Avenue of the Stars ',os Angeles, California 90067 21 ?' 556 -1111 '.'red S. James & Co. , inc. A35 Wilshire Boulevard cos Angeles, California 90010 ,213) 385 -0545 CLAIMS ADMINISTRATORS COMPARISON SHEET Proposal Components Medical control Employee consultation serv: Safety &-loss control Rehabilitation Monthly reports Adjusting legal serv. for first year Fiscal & reserves control Claims administration Medical control Safety & loss control Monthly reports Legal serv, for first year Fiscal & reserves control Medical control Fiscal & reserves control Legal serv, for first year Monthly reports Semi annual reports Safety & loss control Claims Administration- - Program management Fiscal & reserves control Employees consultation & liaison Legal serv. for first year Safety & loss prevention Medical control Monthly reports Attachment 1 Costs Comments $13, 500 annual Received excellent recommendations fee from all subscribers. Brown Brother $200 per diem has had extensive experience in the safety serv, private sector. As part of this eurrei effort to break into the municipal mar they offered Santa Monica the most balanced package, the largest support staff, at the lowest quote. TI-4—,6T4 annual Recommendations receivedt were goou fee Program in proposal was not as com- $170 per diem plete as others received. Monthly safety serv. reports not as clear as other reports reviewed. fee $200 per diem safety serv. Recommendation received were goou. Proposal well balanced and complete. Extensive experience in public sector 190 500 annual. Recommendations received were goo( fee Proposal was well organized and ver, $Z75 per diem complete. Extensive experience in safety serv, I public sector. Mund, McLaurin & CompanY U; Z IL 27 NIB OF LOS ANGELE5 ESTABLISHED 19PO Risk Management Insurance Analysts Administrative Services CNA Park Place 600 South Commonwealth A.'enue, Suite 1203 p Los Angeles, CaWornia 90005 • (233) 385-3201 MEMONANDUM NO. LA -78-755 To: CITY OF SANTA MONICA DATE: June 23, 1978 ATTENTION: Ms. Jeanne Kennedy Administrative Assistant sDD,ECT: WORKERS' COMPENSATION CLAIMS ADMINISTRATION FEE This confirms this morning's telephone conversation in which we advised that the overall Pee proposed by Brown Brothers of $23,000 was, in our opinion, competi- tive with Pees we have seen proposed by other administrators. The Santa Monica fee is approximately $55 to $60 per claim and in recent pro- posals received for another client proposals of $60,'-$65 and $75 per claim were received. We further discussed with you that there is substantial advantage in maintain- ing continuity of claims administrators, provided satisfactory services are being rendered. Please advise if we can be of any further service to you in this matter. i yY W. J. Pinckney WJP/cq Reference: Contract No. 3071 (CCS)