HomeMy WebLinkAboutItem 2h: Agreement for Third Party Administrator Services for Workers' Compensation ClaimsDATE: April 6, 2010
TO: Mayor and City Council
STAFF REPORT
Administrative Services Department
FROM: Hue C. Quach, Administrative Services Director
Prepared by: Michael A. Casalou, Human Resources Administrator
SUBJECT: Agreement for Third Party Administrator Services for Workers'
Compensation Claims
Recommendation: Authorize the City Manager to enter into a contract with
AdminSure Inc. for Third Party Administrator Services in the amount of
$23,113.00 for the remainder of Fiscal Year 2009 -10 and $95,227.00 in
FY 2010 -11
SUMMARY
Staff is recommending the City Council authorize the City Manager to enter into a
contract with AdminSure Inc. for Third Party Administrator Services in the amount of
$23,113.00 for the remainder of Fiscal Year 2009 -10 and $95,227.00 in FY 2010 -11.
BACKGROUND
The City of Arcadia operates a self- funded workers' compensation insurance program
and requires the services of a third party administrator to handle the day to day
operations of the City's systems. AdminSure Inc. (formally known as Colen and Lee)
has successfully administered the City's programs since 1985.
Scope of services for the workers' compensation program include tracking claim
information, setting and updating reserves, arranging for investigations, medical
treatment, monitoring disability status, and auditing and paying medical bills. Further,
AdminSure Inc. ensures that the City maintains compliance with the requirements of
changing workers' compensation law. In -house staff does not have the capacity or the
expertise to properly manage this program. As a result, the City has always contracted
for this professional service.
DISCUSSION
The City entered into its current agreement with AdminSure Inc. for workers'
compensation claims administration in 1997. The term with AdminSure Inc. continues
in effect until terminated by the cancellation provisions in the contract.
In 2005, the City's Joint Powers Insurance Authority (ICRMA) went out to bid for
workers' compensation claim services on behalf of all members and selected two firms
that members could choose from; AdminSure Inc. was one of the two firms. The City
ultimately decided to continue its contract with AdminSure Inc.
A few months ago, staff sought the assistance of Janet Kiser, General Manager of the
City's current JPA (CIPA), to help with the preparation of a request for proposals for
workers' compensation claims administration. Ms. Kiser informed staff that she had just
went out to bid about a year earlier for these services on behalf of several member
cities (Irvine, Laguna Beach, Orange and Tustin). A total of nine (9) firms responded to
the RFP and AdminSure Inc. was ultimately selected. A three year contract was
subsequently agreed to between CIPA (on behalf of these cities) and AdminSure Inc.
The contract included contemporary formulas for computing fees with caps on
maximum charges. It also included performance standards and other various
requirements that protect CIPA's member cities.
Ms. Kiser conveyed that she felt it would benefit the City and would immediately provide
significant cost savings if the City joined the existing contract. This practice is known as
"piggybacking" and the cities of Brea and Cypress have already joined the contract as
well. Several other CIPA cities are also currently considering joining the agreement.
Ms. Kiser presented a cost analysis that demonstrated that Arcadia would have saved
nearly $70,000.00 over the last 14 months if it were part of this contract. Furthermore,
the fees being charged to Arcadia are based on outdated formulas that are not
commonly used any longer and are considerably more costly than newer formulas.
Additionally, Ms. Kiser and City staff believe that if the City were to solicit proposals at
this time, the City would receive responses from the same firms, and likely not get the
results CIPA received on behalf of multiple cities. The current CIPA contract runs
through June 30, 2011, at such time it can be renewed, renegotiated or re -bid.
FISCAL IMPACT
Claims administration fees will increase by approximately $4,000.00 for the remainder
of Fiscal Year 2009 -10; but other fees associated with these claims (medical review and
utilization review) shall be dramatically reduced. Adequate funds are budgeted in the
2009 -10 Budget for these services and claims administration fees of $95,227.00 will be
included in the 2010 -11 Budget.
RECOMMENDATION
It is recommended that the City Council:
Enter into a contract with AdminSure Inc. for Third Party Administrator Services
in the amount of $23,113.00 for the remainder of Fiscal Year 2009 -10 and
$95,227.00 in FY 2010 -11.
APPROVED:
Donald Penman, City Manager