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HomeMy WebLinkAbout10 - Renewal of Agreement with Hazelrigg Risk Management Services, Inc. (HRMS) for Worker's Compensation (WC) Claims Administration ServicesJune 9, 1997 Agenda Item No. 10 CITY OF NEWPORT BEACH ADMINISTRATIVE SERVICES DEPARTMENT Human Resources Division CITY OF NEWPGR i REPORT JUN -- 91997 C DATE: June 9, 1997 TO: The Honorable Jan Debay and Members of the City Council FROM: Lauren F. Farley, Risk Manager e SUBJ: Renewal of Agreement with Hazelrigg Risk Management Services, Inc. (HRMS) for Worker's Compensation (WC) Claims Administration Services. Recommended Action: Approve renewal of the agreement for July 1, 1997 - June 30, 1998 at the existing cost of $127,500 (0% increase), and authorize the City Manager to execute the addendum to the existing agreement. Background: The City of Newport Beach has been self-insured for workers' compensation for 20 years. As Newport Beach has a State of California authorized self-insurance program, the City is required by law to have a certified third party administrator (TPA) or to have certified in-house staff to administer the workers' compensation program. The benefits of using a TPA versus City staff are that the TPA possesses the technical expertise needed to manage the ever changing State workers' compensation laws to ensure City complianace; processes all medical bills, disabiliity benefits and associated vendor invoices; and provides a higher level of claims administration service to employees. During the fiscal year 1994/1995, the City of Newport Beach undertook a partnership with the City of Costa Mesa to perform a joint Request for Proposal (RFP) process for Worker's Compensation claims administration services. That process resulted in both Cities entering into an agreement with HRMS effective 5/1/95. At the Cities' request, a dedicated claims unit of four claims professionals was assembled to work exclusively on the Cities' claims. To date, HRMS has closed approximately 315 claims for the City of Newport Beach. The fee paid to HRMS during the 1995/1996 contract year was $245,000.00. (HRMS was the lowest qualified bidder in the RFP process.) Fees are split 50/50 between Newport Beach and Costa Mesa, with each City paying $122,500.00. (This was a reduction of $9,500.00 from our previous administrator's annual fee of $132,000.00.) HRMS's fees for FY 96/97 are $255,000.00 or $127,500.00 per City. (Still a $4,500.00 reduction from our previous administrator's annual fee.) Discussion: HRMS has developed an efficient system for processing new claims and providing Worker's Compensation benefits and assistance to employees on a timely basis. In addition, HRMS and the Cities will be developing mutually agreed upon "conditions of satisfaction" for the 1997/1998 contract year to continue the progress of improving claims procedures, reviewing medical providers & case management and other cost containment measures. These conditions of satisfaction will be reviewed with the Finance Committee at a future meeting and if these are achieved by HRMS in the 1997/98 contract, consideration r-1 Renewal of Agreement with HRMS June 9, 1997 Page Two of a 2 year contract beginning FY 98/99, with a reasonable negotiated fee increase, will be recommended by staff. Conclusion: The proposal for the 1997/1998 contract year is a zero (0%) increase. The City of Newport Beach is receiving above average service from HRMS. It is recommended that the agreement be renewed with HRMS at the current annual fee of $127,500.00. 05/19/1997 08:56 7147544943 CITY OF COSTA NIESa FACIE 02 May 16,1997 CrfY OF COSTA hZSA CALIFORNIA p2 M1200 P.O. Box 1200 PERSONNEL DEPARTMENT Arlene Hazelrigg, President Hazelrigg Risk Management Services, Inc. 1310 South Valley Vista Dian-ion3 liar, CA 91765 RE: City of Newport Beach City of Costa :Mesa Dear Arlene: This letter will confirm our conference call discussions on May 14, 1997 concerning the renewal of the contract with HRMS for workers compensation third party claims administration services. Per those discussions, we have mutually agreed that the contract will be presented to our respective City Councils for approval under the following conditions: 1. The fee for claims administration services for the term 7/1/97-6/30/98 will remain unchanged at $255,000. Any changes in operating costs experienced during the contract term will be fully borne by HRMS and shall not serve to alter or amend the agreed upon fee for services for the period stated. The Cities place no expectations apon HRMS for any internal adjustments to be made to any area of the operating costs of the company. We understand that HRMS is being cut to the slimmest of profit margins by agreeing to no fee increase this year. 2. The Cities and HR1MS will mutually establish "conditions of satisfaction", goals, and objectives to be accomplished by the HRMS claims unit during the 97/98 contract term. This process is not meant to imply any dissatisfaction with the services which have been provided to the Cities to date; rather, it is intended to create a blueprint by which the Cities' workers compensation programs will be fine tuned to the highest levels of effectiveness. A meeting to this end has been set for June 10, 1997 at 10:00 am at the HRMS offices. rr FAIR DRIVE PHONE. (714)754-5330 • TDD; 17141754-6244 05/19/1997 08:56 7147544943 Arlene Hazelrigg May 16, 1997 page 2 CITY OF COSTA MESA PAGE '03 Arlene, as we have discussed, we share the desire to develop Newport Beach's and Costa Mesa's programs into model programs. We certainly believe the HRMS claims staff has the talent and energy to rise to this challenge and make it happen. And as we further discussed, if, at the end of the 97/98 contract year, the conditions, goals and objectives have been met, then. the Risk Managers will support a renewal of the contract 7/l/98 for a two year term and with a reasonable negotiated fee increase. -nark you for your willingness to talk candidly with: us about the financial aspects of the contract, and work within the current needs of the Cities. We will forward the necessary agreement documents for your signature shortly. Here's to another successful year! Sincer y, Karen L. Adams Risk Manager City of Costa Mesa Lauren F. Farley Risk Manager City of Newport Beach 01