SR 07-25-2017 3B
Ci ty Council
Report
City Council Meeting : July 25, 2017
Agenda Item: 3.B
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To: Mayor and City Council
From: Gigi Decavalles -Hughes, Director , Finance Department, Risk Management
Edward F. King, Director, Big Blue Bus, Transit Services Department
Subject: Workers' Compensation Claims Administration Services
Recommended Action
Staff recommends that the City Council:
1. Award RFP #105 to Intercare Holdings Insurance Services, Inc., a California -
based company, for workers’ compensation claims administration services;
2. Authorize the City Manager to negotiate and execute an agreem ent with
Intercare Holdings Insurance Services, Inc. for three years, with two one -year
renewal options in an amount not to exceed $1,699,509 over a five -year period,
with future year funding contingent on Council budget approval; and
3. Authorize the City Manager to negotiate and execute a first modification to
agreement #10234 in the amount of $113,800 with TCS Risk Management
Services, LLC, a California -based company, for workers’ compensation data
analysis and consulting services. This w ill result in a five -year amended
agreement with a new total amount not to exceed $326,300, with future year
funding contingent on Council budget approval.
Executive Summary
The Finance Department and Big Blue Bus (BBB) are requesting to engage in a three -
year pilot pro gram to determine the most cost -effective model for managing workers’
compensation claims. BBB will serve as the test group for the pilot program. As
proposed, administration of BBB’s workers’ compensation claims will transfer from in -
house staff in the Risk Management Division of the Finance Department to a private
claims administrator, referred to as a “T hird P arty A dministrator” (TPA). Pilot program
performance will be evaluated and monitored by BBB and Finance throughout the pilot
period.
In order to pursue the pilot program, staff from the Finance, BBB and Human Resources
Departments solicited formal proposals from TPAs for workers’ compensation claims
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administration services. Based on this process, staff recommends that the City enter
into an agr eement with Intercare Holdings Insurance Services, Inc. for an amount not to
exceed $1,699,509 over a five -year period. In addition, staff recommends that the City
amend its existing contract with TCS Risk Management Services, the City’s workers’
compensa tion consultant, for assistance with transitioning claims administration
services to the TPA and tracking and monitoring the pilot program’s performance. The
amendment will cost $113,800 and result in a new agreement amount not to exceed
$326,300.
Backgr ound
The City’s workers’ compensation costs continue to grow at an accelerated pace . In FY
2017 -18 alone, the City’s contributions to the Workers’ Compensation Self -Insurance
Fund increased by 50%. Further, contributions are projected to rise by 10% annu ally
thereafter if current claims trends continue. In response to this , the Finance Director
convened a Workers’ Compensation Working Group composed of the Assistant City
Manager, City Attorney, Human Resources Director , and Risk Manager for the purpose
o f promoting initiatives to curb the City’s growing workers’ compensation costs. Under
the guidance of the Working Group, a variety of pilot cost control projects have been put
in place across the City. Examples include the “Wow, That’s Fast” Program , whi ch
provides comprehensive case management services to injured sworn personnel and
post -job -offer functional capacity testing to ensure prospective employees are capable
of safely carrying out essential job functions prior to placement . The most recent ide a to
emerge from the Working Group involves a BBB/Risk Management Division proposal to
contract with a TPA to manage the BBB’s workers’ compensation claims. The idea was
intriguing to the Working Group due to the many advantages a reputable and
establishe d TPA could have over an in -house program, and it resulted in the
development of a three -year pilot program proposal to determine which model is more
cost -effective. The details of the pilot program proposal follow.
Discussion
The Risk Management Divisio n of the Finance Department is responsible for managing
the City’s Workers’ Compensation Program. In this capacity, the Department has relied
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on in -house personnel to administer workers’ compensation claims since 2001. The
decision to use internal or ext ernal staff to administ er claims is unique to each
employer. In 2001, the City selected an internal management model in hopes of
improving program outcomes through direct control over claims administration. Over
the past two decades, however, TPAs have m ade advancements in the quality,
sophistication, and breadth of services offered to their clients. TPAs also ha ve a variety
of advantages over an in -house program like the City’s. A few key examples include:
TPAs can provide their employees with incenti ves for consistently exceeding
performance targets. Public sector compensation plans are not set up to
contemplate incentive plans of this na ture.
Due to size, TPAs have systems in place to automatically redeploy examiner
staff when the account’s assigne d examiner is out of the office (e.g., vacation,
medical/family leaves, etc.). This ensures that claims continue to move forward
when the assigned examiner is unavailable. The City’s program is too small t o
provide this type of back -up .
TPAs have more r esources available to support claims staff and improve
outcomes. An established TPA can provide e verything from proprietary risk
management information systems (RMIS) that offer unique capabilities (e.g.,
employees can track claim status and medical appoi ntments on smart phones,
etc.) to in -house training units devoted to keeping claims staff up -to -date on the
latest developments/best practices in the workers’ compensation arena.
TPAs are able to spread their fixed administrative costs (e.g., administrati ve staff,
training, RMIS, office rents, etc.) across all of their clients.
Collectively, these advancements and advantages have positioned TPAs to provide
very cost -effective claims administration services. This information was presented to
the Working G roup and prompted their subsequent support for pursuing a pilot program
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to determine whether the City could benefit from using a TPA to manage its workers’
compensation claims.
Pilot Program Proposal
The Working Group selected BBB to serve as the test gro up for the pilot program. BBB
represents a little over one -quarter of the City’s workers’ compensation open claim
inventory and generates roughly 90 to 100 new claims per year. Further, it receives
claims from a cross -section of workers that mirrors the City’s total inventory of claims
(i.e., claims from workers performing sedentary jobs and physically demanding jobs).
These characteristics, coupled with the BBB’s keen desire to be more involved in
managing its workers’ compensation claims, make it the i deal test group in t he City for
the pilot program.
Once BBB was selected for the pilot, a group of staff from BBB, Finance/Risk
Management, and Human Resources was assembled to develop and issue an RFP for
claims administration services. The group also e stablished the following parameters for
purs u ing the pilot program:
Implementation: The TPA will manage all of BBB’s existing workers’
compensation claims and any new claims received during the pilot period . BBB
staff, in turn, will serve as the TPA’s p rimary contact throughout the pilot
program. BBB already handles certain human resources -oriented tasks with
internal staff, and as such, is uniquely positioned to effectivel y oversee the efforts
of a TPA.
The balance of the City’s claims will continue t o be managed by the City’s in -
house staff in Risk Management. Efforts of the in -house staff previously devoted
to BBB will be redeployed to the remaining claim inventory. This will bring down
internal staff caseloads to approximately 110 claims per exami ner , which is
equivalent to the TPA examiner caseload requirements set out in the RFP and
consider ed an industry best practice.
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Ongoing Oversight: BBB, Finance/Risk Management, and Human Resources
will work together to closely monitor the TPA’s performan ce during the pilot
period to ensure that any issues with TPA performance are detected an d
addressed in a timely manner.
Employee Notification: Injured employees with open workers’ compensation
claims will be provided ample notice of the changeover so al l questions/concerns
can be addressed and all medical services and benefit payments continue
without interruption.
Accounting Arrangements: The BBB’s share of the Workers’ Compensation
Self -Insurance Fund’s (Fund 59) assets and liabilities will be calcul ated and
transferred to a newly created fund so that pilot program financial performance
can be accurately tracked. Once these figures are available, staff will return to
Council for authorization to create a Transit Workers’ Compensation Self -
Insurance F und and transfer the assets/liabilities.
Program Evaluation: BBB and Finance/Risk Management will evaluate the pilot
program ’s success against a set of objective performance measures (e.g., total
cost per claim, lost -time per claim, total open claim inv entory, overhead costs per
claim, etc.) and subjective performance measures (e.g., employee satisfaction
surveys, employee focus groups, etc.) throughout the pilot period and at its
conclusion. BBB and Risk Management will be responsible for reporting out at
regular intervals to the Working Group on the pilot program’s performance. At
the conclusion of the three -year pilot period, the Working Group will make a
recommendation to the City Council as to whether the TPA contract should be
terminated, extended for BBB only (thus the inclusion of the two, one -year
renewal options), or possibly expanded to include a larger segment of the City’s
workers’ compensation claims.
TPA Selection Results
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On March 7, 2017, the City published an RFP for workers’ compensati on claims
administration services for the BBB. The RFP was posted on the City’s online bidding
site and notices were advertised in the Santa Monica Daily Press in accordance with
City Charter and Municipal Code provisions. 373 potential firms were notifi ed of the
RFP and 3 1 downloaded the bid. T he following seven firms submitted a response:
AdminSure Inc.; Athens Administrators ; Broadspire Services Inc.; CorVel Corporation ;
Intercare Holdings Insurance Services, Inc.; Tristar Risk Management ; and Y ork R isk
Management Services.
An evaluation panel comprised of staff from BBB, Finance/Risk Management , and
Human Resources evaluated all seven RFP responses based on the criteria in SMMC
2.24.073, including price, staffing commitment, understanding of program goals and
objectives, references/experience, incentive plan commitment, and value -added
services. The panel used the criteria to narrow the field to four firms who were invited to
make on -site presentations. The interviews confirmed all four of the firm s were capable
of competently fulfilling the RFP’s scope of work and offered competitive pricing and
value -added services. On balance, however, Intercare Holdings Insurance Services
offered the best combination of staffing, transit claim experience, refer ences, and price.
Therefore, staff recommends Intercare Holdings Insurance Services as the best -
qualified firm to provide the claim s administration services requested in the RFP.
Contracted Services Policy
While the City’s Contracted Services Policy cont emplates physical or manual work as
opposed to professional services, the intent of the policy, coupled with its evaluation
criteria, provided staff with guidance for assessing the appropriateness of pursuing the
pilot program. Specifically, the proposal contained in this staff report meets the “spirit”
of at least five of the criteria set out in the policy: 1) it is a pilot program; 2) the City
would benefit cost -wise from the contractor’s economies of scale; 3) the contractor is
better positioned to resp ond to workload fluctuations; 4) the contractor is equipped with
back -up staffing options; and 5) the contractor’s performance can be measured through
objective means. In light of this, staff determined that pursuit of the pilot program was
consistent wit h the Council’s polic y for contracting out services.
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TCS Contract
The City currently has an agreement in place with TC S Risk Management Services,
LLC for workers’ compensation consulting services. The contract was awarded to TCS
by the City Council at i ts December 2015 meeting (attachment A) after engaging in a
competitive selection process. TCS provides Risk Management with indepth quarterly
analyses on the financial and operational performance of the Workers’ Compensation
Program. Staff is requesting to amend TCS’s agreement to include assistance with
developing the pilot program’s performance measures , transitioning claims
administration services to the TPA , and monitoring pilot program performance. This
assistance will ensure the TPA transition goe s smoothly for staff and injured workers,
and BBB and Risk Management are able to closely and accurately monitor the pilot
program’s performance. The contract amendment will cost $113,800.
Financial Impacts and Budget Actions
The agreement to be awarded to Intercare Holdings Insurance Services, Inc. is for an
amount not to exceed $1,699,509 over a five -year period. FY 2017 -18 contract costs
total $327,900. Further, the agreement modification to be awarded to TCS Risk
Management Services, LLC is $113,800 for an amended agreement total not to exceed
$326,300. This will increase the FY 2017 -18 contract costs by an additional $41,067 .
Funds for the initial payments required in FY 2017 -18 for both agreements have been
budgeted in the Workers’ Compensation S elf -Insurance Fund (Fund 59) in account
59235.555060. Once the Transit Workers’ Compensation Self -Insurance Fund
referenced in the “Discussion” portion of this staff report is created (September 2017),
the new Transit Workers’ Compensation Self -Insurance Fund will reimburse Fund 59 for
all costs incurred to date for these two agreements. All subsequent expenses for the
Intercare agreement will be paid out of the Transit Workers’ Compensation Self -
Insurance Fund. All subsequent expenses for the TCS agreem ent will be paid out of
Fund 59. However, each year, the Transit Workers’ Compensation Self -Insurance Fund
will reimburse Fund 59 for its share of TCS’s expenses. Future funding for both
agreements is contingent on Council budget approval .
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Prepared By: Deb Hossli, Risk Manager
Approved
Forwarded to Council
Attachments:
A. December 15, 2015 Staff Report
B. Intercare Holdings Insurance Services Inc Oaks Form
Ci ty Council
Report
City Council Special Meeting: December 15, 2015
Agenda Item: 3.A
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To: Mayor and City Council
From: Gigi Decavalles -Hughes, Director , Finance Department, Risk Management
Administration
Subject: Award Agreement to TCS Risk Management Services, LLC for Workers’
Compensation Program Data Analysis and Reporting Services
Re commended Action
Staff recommends that the City Council:
1. Award Request for Proposal (RFP) # 54 to TCS Risk Management Services, LLC, a
California -based company, for workers’ compensation program data analysis and
reporting services; and
2. Authorize the City Manager to negotiate a five year professional services agreement
with TCS Risk Management Services, LLC in an amount not to exceed $212,500,
with future funding contingent on Council budget approval.
Executive Summary
Staff recently solicited propo sals from consultants for workers’ compensation program
data analysis and reporting services. The City received one response to the proposal,
and it came from the consulting firm currently providing this assistance, TCS Risk
Management Services, LLC (TCS). In light of this, staff verified the RFP was distributed
to qualified firms and sought their feedback on the limited response. This effort satisfied
staff that reissuing the RFP would not attract additional proposals. Staff subsequently
moved ahead with c onfirming TCS’s submittal met the requirements of the RFP and
offered competitive pricing. As such, staff recommends the City pursue a five year
contract with TCS for an amount not to exceed $212,500. Funding for the agreement is
contained in the Workers’ Compensation Self -Insurance Fund which is financed with
contributions from all City Departments.
Background
Controlling the City’s escalating workers’ compensation costs continues to be a priority .
Critical to this effort is the availability of in -depth analyses and reporting tools that
provide staff with the ability to effectively monitor and manage program performance.
Generating data of this sophisticated nature, however, exceeds the capabilities of the
City’s current risk management information system (RMIS). Therefore, it has been
necessary to hire a consultant to download and analyze the City’s workers’
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compensation claims and financial data, and prepare the required analyses and reports.
TCS Risk Management Services, LLC has fulfilled this role for the City since December
of 2010. TCS’s current contract, awarded by the Council on December 11, 2012, is set
to expire on December 31, 2015 (Attachment A).
Discussion
At the onset of the consulting contract with TCS Risk Management Services, LLC
(TCS), st aff developed a set of key performance measures to assess the City’s
Workers’ Compensation Program’s financial and operational performance. Since then,
the consultant has tracked, analyzed, and reported to the City on these measures on a
quarterly basis. T his information has provided Finance staff with the tools to proactively
monitor program performance (e.g., isolate program trends down to the division level,
gauge the effectiveness of individual cost containment initiatives, etc.); encourage
departmental participation in program management; develop new cost -control
strategies; and concisely report the program’s financial and operational standing to key
stakeholders.
Given the value of these services, staff recommends the City continue to use a workers’
compensation consultant to prepare quarterly, in -depth program performance analyses.
Further, staff envisions a need for these services well into the future. Even the state -of -
the -art risk management information systems currently under evaluation by staff to
replace the City’s outdated system are not geared to generate the type of analyses
provided through this agreement. Consequently, staff prepared and released a n RFP
with a scope of work that mirrors the current agreement. The results of this process a re
detailed below.
Vendor/Consultant Selection
On October 1, 2015, the City issued an RFP for workers’ compensation data analysis
and reporting services. The RFP was posted on the City’s on -line bidding site, and
notices were advertised in the Santa Mon ica Daily Press in accordance with City
Charter and Municipal Code provisions. Ninety vendors were notified of the RFP; 24
vendors downloaded the RFP. TCS, the City’s current workers’ compensation
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consultant, submitted the only response to the RFP.
Given the small pool of consultants who perform the type of specialized workers’
compensation data analysis services requested in the RFP, the single vendor response
was not surprising. That said, staff verified the RFP was distributed to qualified firms
and su rvey ed vendors for feedback on the limited response. The effort yielded two
responses (i.e., one vendor was not interested, the other was relocating across the
country) and satisfied staff that reissuing the RFP would not attract additional proposals.
Staf f subsequently moved ahead with confirming that TCS’s proposal met the RFP’s
minimum requirements and offered competitive pricing. As such, staff recommends the
City pursue a five year agreement with TCS for a total amount not to exceed $212,500.
Financ ial Impacts and Budget Actions
The agreement to be awarded to TCS is for an amount not to exceed $212,500. First
year costs will total $41,100, of which half, $20,550, is included in the Finance
Department’s FY 2015 -16 budget (the agreement runs on a calen dar year basis). The
cost of the agreement will then increase by 1.7% each year thereafter. All agreement
expenses will be charged to account 59235 .555060. Future year funding is contingent
on Council budget approval.
Prepared By: Deb Hossli, Risk Manage r
Approved
Forwarded to Council
Attachments:
A. December 11, 2012 Staff Report (Weblink)
REFERENCE:
Agreement No. 10506
(CCS)