HomeMy WebLinkAbout04 - Workers Compensation Third Party AdministrationCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item 4
April 11, 2006
To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
From: Human Resources, Lauren F. Farley, Risk Manager, 949 -644-
3300
Ifarley(a ) city.newport- beach.ca.us
Subj: Contract for Workers Compensation Third Party
Administration (TPA) Services
Issue:
Should the City Council authorize the annual expenditure of $234,000 for
Workers Compensation Third Party Administrator (TPA) services?
Recommendation:
Approve the contract (Attachment A) for Workers Compensation Third
Party Administrator (TPA) services with Hazelrigg Risk Management
Services (HRMS) which continues a joint agreement to provide TPA
services for the self- insured workers compensation programs for Cities of
Newport Beach and Costa Mesa for the initial term of April 1, 2006 to
December 31, 2006 with the option for two one year extensions.
Background:
The City is authorized by the State of California as a self- insured public
entity for its workers compensation program. However, the City is not
authorized to self- administer its workers compensation claims and
therefore must contract with a qualified third party administrator (TPA) to
provide the necessary claims administration services. In early 1995, the
Cities of Newport Beach and Costa Mesa began discussions regarding joint
TPA services in order to maximize employee satisfaction program and
minimize costs with administration of the workers compensation benefit
program. The conclusion of those discussions resulted in a partnership
between the two cities to jointly procure TPA services with each City
paying an equal portion of the annual fees. A comprehensive request -for-
proposal (RFP) was undertaken by the two cities at that time and the Cities
began contracting with Hazelrigg Risk Management Services (HRMS) for
claims administration which included medical bill review services
beginning July 1, 1995.
HRMS has provided TPA and medical bill review services to the Cities
under a dedicated claims unit format that exclusively handles the workers
compensation claims for both entities. The dedicated claims unit has
served both Cities well and Newport Beach has experienced the extra
added benefit of having the same claims adjuster, Leah Velez, for the last
ten years. TPA market surveys were conducted at the conclusion of
HRMS's initial contract in 1998 and subsequent contract in 2002, to verify
current industry pricing against HRMS' proposed increases. At the time, it
was determined that HRMS' proposed increases were competitively priced
in the industry for the Cities to continue the HRMS' contract.
In 2002, the TPA market survey revealed double digit increases industry-
wide and continuing into the foreseeable future, so the Cities explored the
possibility of self administration. After conducting research with several
other self- administered public entities, it was determined by the Cities that
there was not enough to merit implementing a program of self
administration due to the size of our programs, start -up operational costs
and most importantly the on -going trend in the industry in retaining
qualified and experienced claims staff. Newport Beach's average annual
costs in the last three years for both claims administration and medical bill
review services total $321,180. During this same time period, the City has
realized a savings of $2.7 million dollars in medical fees through the
medical bill review service, alone.
Analysis:
Since the last formal RFP process three years ago, we felt it was
appropriate to again conduct a formal RFP process, to compare our current
services against the quality of the services available in the industry and
determine the competitiveness of our current pricing. In the RFP, we
requested proposals for claims administration services bundled with
medical bill review services and proposals unbundling the two services.
Together with Costa Mesa, we began the RFP process in November 2005
with sixteen (16) RFP's mailed to local and national TPA companies.
Twelve (12) companies submitted proposals in response to our RFP.
The proposals received revealed a significant increase in the cost of
workers compensation claims administration and a decrease in separate
medical review services. Both Cities have previously contracted with
HRMS for medical bill review services, but the results of the RFP process
revealed that the Cities could gain additional cost savings by utilizing
another medical bill review company. Medical bills are a substantial part of
the cost of the City's workers compensation program.
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The medical bills are payable subject to a required State fee schedule, but
many of the medical providers involved in the workers compensation
system, including outpatient facilities and hospitals charge fees that
exceed the required State fee schedule. This practice requires employers
to be prudent in their efforts to reduce medical fee costs by contracting for
medical bill review services. Because the medical bill review services were
significantly lower when unbundling the services, both Cities decided to
utilize the services of another medical bill review company, Lien on Me, Inc.
(LOM) to further continue maximizing cost - savings on medical fees. In
Staff anticipates that during LOM's initial contract period, the fees are
expected to be in the $20,000 to $25,000 range. This amount is within the
City Manager's contract authorization level provided in Council Policy F -14.
The underlying reasons for the cost increases in claims administration
services are the salaries and benefits associated with the hiring and
retention of a technically knowledgeable claims staff, in addition to,
keeping up with all the recent reform legislation (SB 899, SB 227 & SB 228)
effective in 2004. These bills made dramatic changes in many of the
statutory areas of the State's Labor Code such as medical /legal
procedures, permanent disability ratings, utilization review of medical
treatment, medical provider networks, second opinions and apportionment
procedures increasing the complexity of the claims administration of the
Cities' workers compensation programs.
The claims administration proposals were evaluated by staff of both Cities
using criteria including experience in municipal claims administration. TPA
staff qualifications and experience, ability to perform the services outlined
in the RFP's scope of work, responsiveness to the RFP and the proposed
fees. The eight (8) companies listed on attached Proposals and Fee
Comparison Chart (Attachment B) were invited for panel interviews with the
Cities' representatives including an experienced Workers Compensation
Manager from another Orange County city. At the conclusion of the
interviews, we selected three companies to continue in the process:
Tristar, HRMS, and Southern California Risk Management Associates
(SCRMA). All three companies were qualified and capable of providing the
cities with TPA services for this program. A comparison of the annual fees
proposed by all three companies showed HRMS at $468,000 ($234,000 per
City) for the first year which is $19,000 (or $8,500 per City) more per year
than Tristar and $84,000 (or $42,000 per City) less per year than SCRMA. In
addition, SCRMA's proposal required the Cities to use their in -house
medical bill review services which we did not want to pursue. HRMS'
proposal for the second and third year fees will be approximately 4% to
4.5% higher than each prior year, at $486,720 ($243,360 per City) and
$508,622 ($254,311 per City), respectively. This seems reasonable and
comparable with the other proposals.
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Several joint meetings and discussions were held between the Cities and
the vendors before the Cities made a final selection. Because costs were
comparable, the discussions focused on the current level of service being
provided and the overall quality of work. Both Cities are satisfied with the
services of HRMS and discussed the potential disruption in the Cities
programs that would be brought about by a change in administrators, as
well as, additional transfer and conversion costs. A change should only be
considered when a clear improvement in service quality would be realized
or there would be significant cost savings. Newport Beach is very satisfied
with the quality of work and customer service provided to us by our claims
examiner, Leah Velez. Our Police, Fire, General Services and Utilities
departments have the most interaction with Ms. Velez and have expressed
many times that her quality of work, work ethic and superior customer
service make a difference in their employees overall positive experience
with the City's workers compensation program.
Last year the total HRMS costs for claims administration and medical bill
review services was $318,305 and next year the HRMS' costs for claims
administration and LOM's costs for medical bill review services will be
approximately $259,000. This is a reduction in overall program costs of
approximately $59,305 annually.
Funding Availability:
Funds which cover the recommended expenditures are in the Internal
Services Budget — Insurance Reserve Fund #6010 -8612 and 6010 -8636,
respectively. The total amount budgeted in both these accounts is
$349,320 and the requested contract fees for claims administration and
medical bill review services are $259,000. The represents an overall budget
savings of $90,320 in the Workers Compensation Internal Reserve Fund.
Prepared B Submitted By:
Lauren F. Farley, Risk Manag Barbara Ramsey, HR irector
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Attachment A
AGREEMENT FOR WORKERS' COMPENSATION
CLAIMS ADMINISTRATION SERVICES
THIS AGREEMENT is made and entered into as of this 15r day of April 2006, by and
between the CITY OF NEWPORT BEACH, a Municipal Corporation ( "City "), and
Hazelrigg Risk Management Services, a California corporation, whose address is
14275 Pipline Avenue, Chino, California, 91710, ( "Consultant "), and is made with
reference to the following:
RECITALS
A. City is a municipal corporation duly organized and validly existing under the laws
of the State of California with the power to carry on its business as it is now
being conducted under the statutes of the State of California and the Charter of
City.
B. City desires to engage Consultant to provide workers compensation claims
administration services ( "Project').
C. Consultant possesses the skill, experience, ability, background, certification and
knowledge to provide the services described in this Agreement.
D. The principal member[s] of Consultant for purposes of Project shall be a
dedicated claims unit with one claims supervisor, two claims examiners and one
claim assistant.
E. City has solicited and received a proposal from Consultant, has reviewed the
previous experience and evaluated the expertise of Consultant, and desires to
retain Consultant to render professional services under the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as
follows:
1. TERM
The term of this Agreement shall commence on the above written date, and shall
terminate on December 31, 2006, unless terminated earlier as set forth herein.
The City, in at its sole discretion, may choose to extend the Agreement by
exercising the two one year options as provided for in Exhibit B of this Agreement
by providing written notice to the Consultant prior to the expiration date.
2. SERVICES TO BE PERFORMED
Consultant shall diligently perform all the workers compensation claims
administrative services, regardless of caseload, including but not limited to all
services described in the Scope of Services — Claims Administration attached
hereto as Exhibit A and incorporated herein by reference. The City may elect to
delete certain tasks of the Scope of Services at its sole discretion. The following
are the minimum claims administration services to be performed by the
Consultant:
Program Administration
2.1 Provide professional and technical staff to perform the services as
described in this Agreement. Pursuant to Paragraph 3 in the Scope of
Services — Exhibit A, the claims examiner's caseload shall not exceed 175
open claims. The City and the Consultant agree that such maximum shall
be subject to a ten percent (10 %) variance only as it relates to the claims
examiner's caseload. In the event the caseload of the examiner exceeds
10% of the maximum on average for a period of two calendar months, the
City at its discretion may request, in writing, additional examiner support.
The terms and conditions regarding the nature and extent of the additional
examiner support will be determined by mutual consent of the parties.
2.2 Represent CITY in all matters related to the set -up, investigation,
adjustment, processing, negotiation and resolution of workers'
compensation claims against the CITY.
2.3 Inform the CITY of changes or proposed changes in Labor Code statutes,
rules and regulations and case law affecting its workers' compensation
claims program.
2.4 Assist in the development of policies and procedures relating to the
workers' compensation claims program.
2.5 Provide information and guidance regarding the workers' compensation
claims program and specified claims.
2.6 Provide copies of file correspondence and documentation as requested by
City.
2.7 Inform CITY of problem areas or trends, both potential and perceived, and
provide recommendations and /or solutions to address problem areas or
trends.
2.8 Attend appointments, including but not limited to meetings, conferences,
Court appearances, and scene investigations.
2.9 Conduct risk management related seminars for department heads and /or
City staff at request of City.
2.10 During the term of this Agreement, all closed claims will be stored by the
Consultant for a period of one hundred eighty (180) days following the
claim closure date at no charge to the City. The Consultant will advise the
City of the date their files are closed, so that the City and the Consultant
can make the necessary arrangements to have the those files copied to
another medium or stored for retention by a vendor of the City's choice
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within the 180 day gratis period.
3. MATERIAL PROBLEMS AND REGULATORY CHANGES
Consultant will advise the City on any material problems or need for
improvements in any matter related to this agreement, including advice relating
to changes and proposed changes affective the City's Workers' Compensation
program.
4. TIME OF PERFORMANCE
Time is of the essence in the performance of services under this Agreement and
the services shall be performed to completion in a diligent and timely manner.
The failure by Consultant to perform the services in a diligent and timely manner
may result in termination of this Agreement by City.
5. COMPENSATION TO CONSULTANT
City shall pay Consultant for the services in accordance with Exhibit B of this
Agreement. No billing rate changes shall be made during the term of this
Agreement without the prior written approval of City.
5.1 Consultant shall quarterly invoices to City describing the work performed
the preceding month. City shall pay Consultant no later than thirty (30)
days after approval of the monthly invoice by City staff.
5.2 City shall reimburse Consultant only for those costs or expenses
specifically approved in this Agreement, or specifically approved in
advance by City in writing.
5.3 Consultant shall not receive any compensation for Extra Work performed
without the prior written authorization of City. As used herein, "Extra
Work" means any work that is determined by City to be necessary for the
proper completion of the Project, but which is not included within the
Scope of Services and which the parties did not reasonably anticipate
would be necessary at the execution of this Agreement
6. PROJECT MANAGER
Consultant shall designate a Project Manager, who shall coordinate all phases of
the Project. This Project Manager shall be available to City at all reasonable
times during the Agreement term. Consultant has designated Alan Schiller,
Claims Manager, to be its Project Manager. Consultant shall not remove or
reassign the Project Manager or any personnel listed in Exhibit A or assign any
new or replacement personnel to the Project without the prior written consent of
City. City's approval shall not be unreasonably withheld with respect to the
removal or assignment of non -key personnel.
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Consultant, at the sole discretion of City, shall remove from the Project any of its
personnel assigned to the performance of services upon written request of City.
Consultant warrants that it will continuously furnish the necessary personnel to
complete the Project on a timely basis as contemplated by this Agreement.
7. ADMINISTRATION
This Agreement will be administered by the Human Resources Department. The
Risk Manager shall be the Project Administrator and shall have the authority to
act for City under this Agreement. The Project Administrator or his /her
authorized representative shall represent City in all matters pertaining to the
services to be rendered pursuant to this Agreement.
8. STANDARD OF CARE
8.1 All of the services shall be performed by Consultant or under Consultant's
supervision. Consultant represents that it possesses the professional and
technical personnel required to perform the services required by this
Agreement, and that it will perform all services in a manner
commensurate with community professional standards. All services shall
be performed by qualified and experienced personnel who are not
employed by City, nor have any contractual relationship with City.
8.2 Consultant represents and warrants to City that it has or shall obtain all
licenses, permits, qualifications, insurance and approvals of whatsoever
nature that are legally required of Consultant to practice its profession.
Consultant further represents and warrants to City that Consultant shall, at
its sole cost and expense, keep in effect or obtain at all times during the
term of this Agreement, any and all licenses, permits, insurance and other
approvals that are legally required of Consultant to practice its profession.
Consultant shall maintain a City of Newport Beach business license
during the term of this Agreement.
9. INDEMNIFICATION AND HOLD HARMLESS
To the fullest extent permitted by law, Consultant shall indemnify, defend and
hold harmless City, its City Council, boards and commissions, officers, agents
and employees (collectively, the "Indemnified Parties ") from and against any and
all claims (including, without limitation, claims for bodily injury, death or damage
to property), demands, obligations, damages, actions, causes of action, suits,
losses, judgments, fines, penalties, liabilities, costs and expenses (including,
without limitation, attorney's fees, disbursements and court costs) of every kind
and nature whatsoever (individually, a Claim; collectively, "Claims "), which may
arise from or in any manner relate (directly or indirectly) to any work performed or
services provided under this Agreement or Consultant's presence or activities
conducted on the Project (including the negligent and /or willful acts, errors
and /or omissions of Consultant, its principals, officers, agents, employees,
vendors, suppliers, consultants, subcontractors, anyone employed directly or
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indirectly by any of them or for whose acts they may be liable or any or all of
them).
Notwithstanding the foregoing, nothing herein shall be construed to require
Consultant to indemnify the Indemnified Parties from any Claim arising from the
sole negligence or willful misconduct of the Indemnified Parties. Nothing in this
indemnity shall be construed as authorizing any award of attorney's fees in any
action on or to enforce the terms of this Agreement. This indemnity shall apply
to all claims and liability regardless of whether any insurance policies are
applicable. The policy limits do not act as a limitation upon the amount of
indemnification to be provided by the Consultant.
10. INDEPENDENT CONTRACTOR
The relationship of Consultant and the City established by this agreement is that
of independent contractors, and nothing contained in this agreement shall be
construed to establish an employer /employee relationship or to constitute the
parties as partners, joint ventures, co- owners or otherwise as participants in a
joint and common undertaking. Consultant, its agents and employees are
representatives of the City only for the purpose of administering the City's
workers' compensation claims program as set forth in this agreement, and they
have no power or authority as agent, employee, or in any other capacity to
represent, act for, bind or otherwise crease or assume any obligation on behalf
of the City for any purpose whatsoever, except as specifically required to perform
Consultant's obligations under this Agreement.
11. COOPERATION
Consultant agrees to work closely and cooperate fully with City's designated
Project Administrator and any other agencies that may have jurisdiction or
interest in the work to be performed. City agrees to cooperate with the
Consultant on the Project.
12. CITY POLICY
Consultant shall discuss and review all matters relating to policy and Project
direction with City's Project Administrator in advance of all critical decision points
in order to ensure the Project proceeds in a manner consistent with City goals
and policies.
13. INSURANCE REQUIREMENTS
Before performing Services, Consultant will provide proof a Certificate of
Insurance for the following:
a) Workers Compensation Insurance with a minimum of $1,000,000 in
employer liability. Statutory limits, as required by the Labor Code
of the State of California.
14. AUDIT
b) Commercial general and automobile liability insurance with a
minimum of $1,000,000, combined single limit per occurrence, to
include premises operations; independent contractual; broad -form
property damage endorsement; and vehicles owned, non -owned
and hired.
c) Professional liability /errors and omissions insurance with a
minimum of $1,000,000 per occurrence, to include coverage for all
errors and omissions which may result in financial loss to the CITY.
d) Fidelity bond with a minimum limit of $500,000 per occurrence,
applied exclusively to the City.
e) During the term of the Agreement, the Consultant shall purchase
and provide copies of the Certificates of Insurance and maintain
insurance coverage that is acceptable to the City. Endorsements
of insurance will be required, naming the City as additional insured
on all policies; and providing the City with a 30 -day written notice of
cancellation, material change, or non - renewal.
f) City shall not be liable to Consultant for personal injury or property
damage sustained by Consultant in the performance of this
Agreement, whether caused by Consultant, its officers, agents or
employees, or by any third person.
g) Consultant agrees to defend any legal action commenced against
City caused directly or indirectly by wrongful or negligent acts of
Consultant, Consultant's officers, employees, agents or others
engaged by Consultant and to indemnify City against nay loss,
liability, cost or damage, including attorney's fees resulting there
from.
h) City agrees to defend any legal action commenced against
Consultant caused directly or indirectly by wrongful or negligent
acts by City officer's employees, agents or others engaged by City,
and to indemnify Consultant against any loss, liability, cost or
damage, including attorney's fees resulting therefrom.
i) Consultant agrees that in the event of loss due to any of the perils
for which it has agreed to provide insurance. Consultant hereby
grants to the City on behalf of any insurer providing insurance to
either Consultant herein, a waiver of any right of subrogation which
any insurer of said Consultant may acquire against the City by
virtue of the payment of any loss under such insurance.
j) Any controversy arising out of this Agreement between the parties
shall be resolved by non - binding mediation under the provisions of
California law.
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Consultant agrees to cooperate with the City in making any and all claim files,
records, reports and other documents and materials pertaining to City's claims
available to the City for audit by City or City's appointed representatives, at any
time during Consultant's regular business hours upon 24 -hours advance notice.
The City reserves the right to inspect and audit Consultant's financial records
relevant to the City's account at any time during regular business hours upon 24-
hours notice. City will provide necessary information pertaining to claims
reported for adjustment under the provisions of any Agreement.
15. PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS
Except as specifically authorized under this Agreement, the services to be
provided under this Agreement shall not be assigned, transferred contracted or
subcontracted out without the prior written approval of City. Any of the following
shall be construed as an assignment: The sale, assignment, transfer or other
disposition of any of the issued and outstanding capital stock of Consultant, or of
the interest of any general partner or joint venturer or syndicate member or
cotenant if Consultant is a partnership or joint- venture or syndicate or cotenancy,
which shall result in changing the control of Consultant. Control means fifty
percent (50 %) or more of the voting power or twenty -five percent (25 %) or more
of the assets of the corporation, partnership or joint- venture.
16. SUBCONTRACTING
The parties recognize that a substantial inducement to City for entering into this
Agreement is the professional reputation, experience and competence of
Consultant. Assignments of any or all rights, duties or obligations of the
Consultant under this Agreement will be permitted only with the express written
consent of City. Consultant shall not subcontract any portion of the work to be
performed under this Agreement without the prior written authorization of City.
17. OWNERSHIP OF DOCUMENTS
Each and every report, draft, record, document and other writing produced
(hereinafter "Documents "), prepared or caused to be prepared by Consultant, its
officers, employees, agents and subcontractors, in the course of implementing
this Agreement, shall become the exclusive property of City, and City shall have
the sole right to use such materials in its discretion without further compensation
to Consultant or any other party. Consultant shall, at Consultant's expense,
provide such Documents to City upon prior written request. Consultant shall also
provide computer tapes containing all computerized data pertaining to the City
and their claims, together with format thereof upon termination of this
Agreement.
18. CONFIDENTIALITY
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Consultant shall treat information, reports and analyses obtained or developed
pursuant to this Agreement as being confidential. Prior written consent from the
City shall be required before any information, in any format, is disclosed to any
third party. It is further agreed that Consultant shall produce, maintain and
dispose of all such information reports and analyses in a manner to guarantee
reasonable safeguards to such confidentiality.
19. RECORDS
Consultant shall keep records and invoices in connection with the work to be
performed under this Agreement. Consultant shall maintain complete and
accurate records with respect to the costs incurred under this Agreement and
any services, expenditures and disbursements charged to City, for a minimum
period of three (3) years, or for any longer period required by law, from the date
of final payment to Consultant under this Agreement. All such records and
invoices shall be clearly identifiable. Consultant shall allow a representative of
City to examine, audit and make transcripts or copies of such records and
invoices during regular business hours. Consultant shall allow inspection of all
work, data, Documents, proceedings and activities related to the Agreement for a
period of three (3) years from the date of final payment to Consultant under this
Agreement.
20. CITY'S RIGHT TO EMPLOY OTHER CONSULTANTS
City reserves the right to employ other Consultants in connection with the
Project.
21. CONFLICTS OF INTEREST
The Consultant or its employees may be subject to the provisions of the
California Political Reform Act of 1974 (the "Act "), which (1) requires such
persons to disclose any financial interest that may foreseeably be materially
affected by the work performed under this Agreement, and (2) prohibits such
persons from making, or participating in making, decisions that will foreseeably
financially affect such interest.
If subject to the Act, Consultant shall conform to all requirements of the Act.
Failure to do so constitutes a material breach and is grounds for immediate
termination of this Agreement by City. Consultant shall indemnify and hold
harmless City for any and all claims for damages resulting from Consultant's
violation of this Section.
22. NOTICES
All notices, demands, requests or approvals to be given under the terms of this
Agreement shall be given in writing, to City by Consultant and conclusively shall
be deemed served when delivered personally, or on the third business day after
the deposit thereof in the United States mail, postage prepaid, first -class mail,
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addressed as hereinafter provided. All notices, demands, requests or approvals
from Consultant to City shall be addressed to City at:
Attn: Risk Manager
Human Resources Department
City of Newport Beach
P.O. Box 1768
Newport Beach, CA, 92658 -8915
Phone: 949 - 644 -3300
Fax: 949 - 644 -3305
All notices, demands, requests or approvals from City to Consultant shall be
addressed to Consultant at:
Attn: Arlene Hazelrigg, President
Hazelrigg Risk Management Services (HRMS)
P. O. Box 669
Chino, CA 91708
23. TERMINATION
This Agreement may be terminated by the City without cause at any time by
submitting 30 days prior written notice of intention to terminate; provided,
however, that should the City determine not to renew this Agreement on any
annual renewal date, no advance notice of termination need be given. The
Consultant shall not be required to perform any of its services beyond the date of
termination and all fees owed to the Consultant by the City will be paid on a pro -
rata basis up to the date of termination. Such notices of intent to terminate shall
be sent to the parties addressed as follows:
City: Consultant:
City of Newport Beach Hazelrigg Risk Management Services
Attention Risk Manager Attention Arlene Hazelrigg
P.O. Box 1768 P.O. Box 669
Newport Beach, CA 92658 -8915 Chino, CA 91708
24. COMPLIANCE WITH ALL LAWS
Consultant shall at its own cost and expense comply with all statutes,
ordinances, regulations and requirements of all governmental entities, including
federal, state, county or municipal, whether now in force or hereinafter enacted.
In addition, all work prepared by Consultant shall conform to applicable City,
county, state and federal laws, rules, regulations and permit requirements and be
subject to approval of the Project Administrator and City.
25. WAIVER
A waiver by either party of any breach, of any term, covenant or condition
contained herein shall not be deemed to be a waiver of any subsequent breach
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of the same or any other term, covenant or condition contained herein, whether
of the same or a different character.
26. INTEGRATED CONTRACT
This Agreement represents the full and complete understanding of every kind or
nature whatsoever between the parties hereto, and all preliminary negotiations
and agreements of whatsoever kind or nature are merged herein. No verbal
agreement or implied covenant shall be held to vary the provisions herein.
27. CONFLICTS OR INCONSISTENCIES
In the event there are any conflicts or inconsistencies between this Agreement
and the Scope of Services or any other attachments attached hereto, the terms
of this Agreement shall govern.
28. AMENDMENTS
This Agreement may be modified or amended only by a written document
executed by both Consultant and City and approved as to form by the City
Attorney.
29. SEVERABILITY
If any term or portion of this Agreement is held to be invalid, illegal, or otherwise
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall continue in full force and effect.
30. CONTROLLING LAW AND VENUE
The laws of the State of California shall govern this Agreement and all matters
relating to it and any action brought relating to this Agreement shall be
adjudicated in a court of competent jurisdiction in the County of Orange.
31. EQUAL OPPORTUNITY EMPLOYMENT
Consultant represents that it is an equal opportunity employer and it shall not
discriminate against any subcontractor, employee or applicant for employment
because of race, religion, color, national origin, handicap, ancestry, sex or age.
32. INTERPRETATION
The terms of this Agreement shall be construed in accordance with the meaning
of the language used and shall not be construed for or against either party by
reason of the authorship of this Agreement or any other rule of construction
which might otherwise apply.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
the day and year first written above.
APPROVED AS TO FORM:
For-A ot., (-
City Attorney
For the City of Newport Beach
ATTEST:
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CITY OF NEWPORT BEACH,
A Municipal Corporation
By:
Mayor
For the City of Newport Beach
CONSULTANT:
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LaVonne Harkless, Arlene Hazelrigg, President
City Clerk
Attachments: Exhibit A — Scope of Services
Exhibit B — Schedule of Billing Rates
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Rev: 08- 30 -04 /da
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SCOPE OF SERVICES
(1) Dedicated Claims Unit
The objective of this scope of services is the establishment of a dedicated claims
unit to service and manage only the City's account. The unit will consist of a
minimum of three (3) technical personnel selected with the concurrence of the City
and one (1) clerical support/claims assistant to sufficiently assist the claims unit.
(2) Assigned Personnel
Administrator shall designate a full time Claims Supervisor to be assigned to this
account and will act as the primary contact for the City and selected with the
concurrence of the City. The Claims Supervisor must possess the Self- Insurance
Plan Certificate.
The Administrator shall assign two (2) full time Claims Examiners to the claims
unit selected with the concurrence of the City. The Claims Examiners must
possess the Self- Insurance Plan Certificate.
The Administrator shall assign (1) full time clerical support/Claims Assistant to the
account.
If for any reason the City find, in their sole discretion, that the service provided by
any assigned personnel is unsatisfactory, the Administrator will agree to assign
replacement personnel that must also be approved by City. Supervisors and
adjusters assigned to the account must have a minimum of five (5) years full time
experience as a workers compensation adjuster.
(3) Caseloads
Caseload for the purpose of this scope of services and the contract are defined as
all open claims, indemnity and medical only, to calculate "Total Caseload." Claims
that are designated as companion files will be counted with the master claim file as
one claim file.
The maximum caseload for the assigned personnel shall be as follows:
Claims Assistant:
Claims Examiner:
Claims Supervisor:
Medical only claims
150 open claims
20 open claims
If at any time during the term of the agreement the number of all open claims
exceeds 150 per Examiner and 20 for the Supervisor, the Administrator shall
assign additional staff to the City account with City concurrence.
(4) Program Administration
Program administration services shall, at a minimum, include the following:
(A) Provide professional and technical staff to perform the services as agreed
upon under separate contract with the City and this scope of services.
(B) Represent City in all matters related to the set -up, investigation, adjustment,
processing, negotiation and resolution of workers compensation claims
against City.
(C) Inform City of changes or proposed changes in statutes, rules and
regulations and case law affecting the workers compensation program.
(D) Assist in the development of policies and procedures relating to the workers
compensation claims program.
(E) Provide information and guidance regarding the workers compensation
program and specified claims.
(F) Inform City of problem areas or trends, both potential and perceived, and
provide recommendations and /or solutions to address problem areas or
trends.
(G) Provide copies of file correspondence and documentation as requested.
This element is, of course, subject to the parameters of the laws of the State
of California, i.e., medical related information.
(H) Attend appointments, including but not limited to meetings, conferences,
court appearances, and scene investigations at request of City.
(1) Conduct risk management related seminars for department heads and /or
City staff at request of City.
(J) Maintain and store all hardcopy files for five (5) years after file is closed.
(K) Provide the City with an adequate supply of preprinted forms and notices
specific to each City during the term of the contract.
(L) Destroy any claim records by shredding. There will be no additional cost to
City for destruction of claim records.
(M) Administrator shall provide to City, at no additional cost, within five (5)
business days of the date of termination of this Agreement, all claims,
reports, files and a computer tape of City's self- insured workers'
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a
compensation program in a computer program compatible with new
Administrator's computer system and information on the tape lay - out/format.
(5) Claims Administration
Claims Administration services shall, at a minimum, include the following:
(A) Create and enter new claim files into the computer within 48 hours of receipt
of notice from City.
(B) Injured workers who are disabled more than three (3) days or are involved
in serious accidents shall be contacted by telephone by Administrator within
48 hours after constructive knowledge that an injury has occurred.
(C) Maintain a hardcopy file for each claim.
(D) Review the Employer's and Doctor's first report of Industrial Injury /Illness,
make a determination as to accept, deny or delay the claim and inform the
employee in a timely manner. Notify employee when benefits are being
initiated, interrupted, or terminated, as well as the reason therefore.
(E) Process all claims in accordance with City's instructions and policies.
(F) Monitor and pay medical /legal expenses. In addition, Administrator will
require medical treatment to be pre- authorized whenever possible and that
all charges are paid according to the provisions of workers compensation
laws.
(G) Establish, maintain and manage an interest bearing trust account for each
City. The City will be co- signer on their respective accounts. Administrator
shall provide copies of check registers and copies of checks (at City option)
from the account.
(H) Initiating and coordinating supplemental job displacement benefits for
qualified injured workers.
(1) Arrange for independent investigators or experts when, in Administrator's
judgment and with the consent of City, such action is deemed necessary to
(1) properly process questionable cases; (2) assist in determining the status
of disabled employees; (3) prepare litigated cases; or (4) assist in
determining fraudulent claims.
(J) Making recommendations to City's staff regarding settlement/disposition of
claims, based on thorough analysis of relevant factors. Final settlement
authority shall rest with the City.
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r:
(K) Determining the extent and degree of permanent disability based upon
medical evidence.
(L) The Administrator will be required to complete the annual Public Entities
Self- Insurers report for the City as required by the Department of Industrial
Relations, Self- Insurance Plans, to be submitted to the City, no later than 30
days prior to the due date.
(M) Provide the City with the following information:
1) Copies of all medical reports on injured /ill employees. This element is,
of course, subject to the parameters of the laws of the State of
California, i.e., medical related information.
2) Copies of all correspondence to and from service providers with
respect to individual claims. This element is, of course, subject to the
parameters of the laws of the State of California, i.e., medical related
information.
3) Copies of all documents /correspondence pertaining to litigated claims.
This element is, of course, subject to the parameters of the laws of the
State of California, i.e., medical related information.
4) Narrative reports of claims involving major injuries, or significant
financial exposure, on request. This element is, of course, subject to
the parameters of the laws of the State of California, i.e., medical
related information.
5) Periodic (semi - annual or annual) risk management analysis reports,
including recent statutory and case law regulation and
recommendations for preventive measures based on analysis of City
claims and losses.
(N) Conduct a case file review meeting at least semi - annually with each
respective City.
(0) A quarterly meeting shall be held between the Administrator, and each
respective Risk Manager. The purpose of this review shall be to outline
losses and identify problems, examine reserves, identify current trends,
discuss changes in the Labor Code, apply new case law to existing claims,
discuss the needs for improving or altering claims management, and to
make recommendations for improvement in communications between the
Administrator and the City.
(P) At the direction of City, contact claimant or their attorney and maintain
appropriate contact until the claim is closed.
(Q) Review status of claims and adequacy of reserves on all active cases at
least every 90 days.
(R) Provide narrative reports to City when recommending disposition of a claim,
when a claim goes to trial, or any other significant events that have or will
occur. Reports must be clear and concise and be provided in a format as
approved by City.
(S) Diary all files at appropriate intervals to allow for timely completion of
required activity.
(T) Files will clearly and concisely document action taken on the claim.
(U) Telephone calls from City's staff, claimants or claimant's attorneys shall be
returned within 24 hours. If the Administrator's appropriate staff member
called is not available to return the call within this time frame, another
designated staff member shall return the call.
(V) Have translators available to assist with non - English speaking claimants.
(W) Also, the Administrator may be asked to attend additional meetings upon
request.
(X) Request an Index check on all new claims and at six (6) month intervals on
continuing active claims. Administrator shall report all of City's claims to the
Index System.
(6) Medical Service and Expenditures
With respect to medical services provided to employees who incur job - related
injuries or illnesses, the Administrator shall:
(A) Develop and recommend, as requested by City, a panel of physicians for
the first treatment of employee injury or illness and recommend a panel of
medical specialists for treatment requiring long -term or specialty care.
(B) Monitor treatment programs for injured or ill employees including review of
all doctors' reports, referring as necessary to a State - approved and City -
approved utilization review management program for required
determinations.
(C) Recommend referral and with the consent of City, submit a claim for nurse
case management services for assistance in medical control of the claim or
for consultation to a City - approved nurse case management company.
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(D) Maintain close liaison with treating physicians.
(E) Provide guidance in the evaluation of physical capacity of injured employees
and their ability to return to work.
(F) Determine eligibility for and authorize payment of medical benefits, and
arrange and authorize examinations to determine the nature and extent of
disability.
(G) Arrange and advise all interested parties to a claim of all medical
appointments, including Agreed or Independent Medical Evaluations, using
the panel list agreed upon between Administrator and City or as required by
the State agency.
(H) File and serve all medical reports on interested parties of a claim and with
the appropriate State agency within five (5) days of receipt.
(1) Review all billings for reasonableness using the State Medical Fee
Schedules and submit for medical auditing as necessary to a City- approved
bill review service.
(J) Assist City, as requested, with establishing a Medical Provider Network
(MPN) to treat injured workers.
(7) Consultation
With respect to consultation provided to City and /or employees who incur job -
related injured or illnesses, the Administrator shall:
(A) Provide information and guidance to injured employees regarding the
benefits they will receive in accordance with City's policies.
(B) Provide information, guidance and assistance to injured employees
regarding permanent disability ratings, Qualified Medical Examiner process
and settlement of claims.
(C) Assist City in solving employee non -legal problems arising out of industrial
injury cases.
(D) Work with the injured employees, City's personnel and other agencies to
provide rehabilitation, retraining or reassignment of employees with physical
or performance limitations arising out of industrial injuries.
(E) Assist in developing policies and procedures to insure that the return to
work by, or reassignment of, injured employees is consistent with the
medical findings.
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(F) Assist City, as requested, with cost containment and incentive programs.
(8) Litigation Management
Litigation management services by the Administrator shall, at a minimum, include
the following:
(A) Refer litigated cases to attorneys using a listing of legal firms provided by
City.
(B) Assist in the preparations of litigated cases.
(C) Assist in negotiation of Compromise and Release settlements.
(D) Monitor all cases for potential subrogation recoveries, prepare
correspondence to effect collection, and assist legal counsel where litigation
is required to effect recovery.
(E) Ensure that, for employees who are represented by legal counsel, their
attorneys receive copies of reports and correspondence as
appropriate /required.
(F) Maintain a litigation management budget for each litigated file and provide
litigation status reports on a monthly basis for each litigation file.
(G) Cooperate fully with all attorneys chosen by City, including City Attorneys.
(9) Information Management and Reports
Administrator shall, at a minimum, include the following:
(A) Utilize computer programs to provide City's management with continuing
information on paid losses, incurred costs, the progress of individual claims
and the effectiveness of safety and other cost control programs.
(B) Submit a comprehensive annual statistical summary survey and, if
requested by City, narrative report to serve as the basis for evaluation of
City's programs.
(C) Prepare reports required by the California Department of Industrial
Relations.
(D) Prepare the City's annual CaIOSHA Log 300.
(E)
(F)
(G)
Prepare any reports on City's claims and expenditures as may be required
by the California Department of Industrial Relations.
Provide, upon City's request, narrative or analytical reports of major cases.
Provide the following monthly reports by the 5th business day of the
following month:
1) Management summaries by department, locations and for the total
program.
2) Check Register by payment type.
3) Listing of checks received
overpayments).
A) Voucher Register by payment type.
(reinsurance, subrogation and
5) Alphabetical listing of open claims with date of injury, body part, paid to
date, reserves and expected total incurred.
6) Alphabetical listing of opened claims.
7) Alphabetical listing of closed claims with date closed and amount paid
on claim.
8) Alphabetical listing of aggregate closed claims with date closed and
amount paid on claim.
9) Alphabetical listing of denied claims.
10) Alphabetical listing of all claims with Total Incurred > $1,000,000.
11) Fiscal Year Summaries by department and for the total program.
(H) Provide a written status of cases, as selected by City, and meet with City to
discuss these cases at established intervals.
Provide City on the first workday of each month the following information for
the previous month:
1) Number of closed files
2) Number of new files
s
3) Number of open files by category of Medical Only, Indemnity and
Maintenance cases
4) Number of claims assigned to each member of the dedicated unit
5) Settlement Award Log
6) Litigation Assignment Log
7) Penalties Log
(J) Provide City on January 1, April 1, July 1 and October 1 of each year the
following information on open claims with total incurred > $100,000:
1) Claimant's Name
2) Date of injury
3) Reinsurance Carrier(s)
4) Self- Insured Retention Level
5) Total Incurred
6) Total Paid
7) Total Reserves
(K) Upon request by City, Administrator shall provide on -line usage of
Administrator's computer system at designated individual agency sites.
(L) Upon request by City, Administrator shall provide secure, electronic reports
to allow performance of certain routine data analysis by City.
(10) Financial Management
Each City shall establish a Workers' Compensation Trust Fund, of which the
Workers' Compensation Administrator shall be designated co- trustee. The
purpose of this fund shall be to pay medical /legal and other expenses incurred as
a result of accepted industrial injuries /illnesses, as well as payment of Workers'
Compensation benefits to which eligible employees are entitled. With respect to
the Trust Fund, it shall be the responsibility of the Workers' Compensation
Administrator to:
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(A) Report at least monthly, or as needed, to the City of charges against the
fund, and obtain reimbursement to maintain the fund at an appropriate level
determined by the City.
(B) Manage the Trust Fund in a reasonable and prudent manner and in
compliance with City's policies.
(C) Issue vouchers to City from the Trust Fund in those instances where an
employee is paid Labor Code 4850 pay, temporary total disability benefits or
salary continuation in lieu of temporary disability benefits.
(D) Actively collect any overpayment of benefits.
(E) Reimburse City for any penalties assessed against City which are found to
be the result of Administrator's lack of proper claims handling or the holding
of checks due to insufficient funds in the bank account.
(F) Establish procedures and necessary documentation enabling City to write
checks for payment of benefits or to have Administrator draw checks for
payment of benefits on an appropriate account of City.
(G) Pay for the printing of any checks. City's name will appear on the check,
and imprinted on all check copies. All checks shall be printed in numerical
order, locked and controlled by Administrator's accounting department. All
checks must be accounted for as payments, voids, etc.
(H) Use a separate check register for City. Daily entries will be made on all
checks disbursed on the account. Credits, if any, shall be entered, as well
as all deposits made on checks, received on reimbursement requests made
from Administrator's office. Administrator shall provide City with one (1)
copy of each check issued, to be included with the check register and
mailed to City.
(1) Provide City's accounting office, if requested, with one (1) copy of each
check register, all voided checks, etc.
(J) Review periodically all Trustee accounts to determine if initial deposit is
adequate for handling the dollar volume for the month so that the holding of
checks waiting for a deposit does not occur. In such instances where it is
determined that deposit is inadequate, Administrator's accounting office
shall submit a report with a recommendation for an increase to the Trustee
account based on this review. Prompt payments on Administrator's
reimbursement requests are a major factor in the efficiency of a Trustee
account. City's reimbursement payments should reach Administrator's
office within ten (10) days from the date of Administrator's request in order
to maintain a continuous flow of checks issued throughout the month.
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Exhibit B
COMPENSATION /PAYMENT SCHEDULE
Claims Administration Services
The fee structure for the initial year and two one year options is as follows:
A. For claims administration services from April 1, 2006 through December 31,
2006 shall be One Hundred and Seventy Five Thousand and Five Hundred Dollars
($175,500).
B. For claims administration services from January 1, 2007 through December 31,
2007 shall be Two Hundred Forty Three Thousand and Three Hundred Sixty Dollars
($243,360).
C. For claims administrations services from January 2008 through December 31,
2008 shall be Two Hundred Fifty Four Thousand and Three Hundred and Eleven
Dollars ($254,311).
Tail Claims
Administration of existing claims is included for the life of the agreement in the above
compensation structure, so long as such claims were open as of the day preceding the
first day of the first agreement year.
Start -Up Costs
There are no start up costs.
Annual License Fee
Included at no additional cost.
12 `D
ATTACHMENT B
Workers' Compensation
Third Party Administration
Proposals Received and Fee Comparison Chart
Firm
ACME Administrators, Inc.
27475 Ynez Rd., #322
Temecula. CA 92591
AIMS
80 S. Lake Ave., Ste. 500
Pasadena, CA 91101
Athens Administrators
P.O. Box 696
Concord. CA 94522
Buckeye Claims Administrators
P.O. Box 3177
Cerritos, CA 90703
Hazelrigg Risk Management Services
P.O. Box 669
Chino, CA 91708
Octagon Risk Services
2101 Webster St., #645
Oakland, CA 94612
So. Calif. Risk Mgmt. Assoc. (Finalist)
313 E. Foothill Blvd.
Upland, CA 91786
TriStar Risk Management (Finalist)
203 N. Golden Cir., Ste. 200
Santa Ana, CA 92705
First Year Fees
$440,735
($10,000 - $15,000 per City
for data transfer)
$382,920
($10,000 data conversion)
$442,355
$451,320
($5,000 program
implementation)
$678,000
$522,445
($10,000 claims conversion)
$449,000
($8,000 data transfer)
Annual fee to be re-
negotiated if claims
increase or decrease by
15%