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
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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)