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HomeMy WebLinkAboutMINUTES - 05111993 - 2.1 TO: BOARD OF SUPERVISORS Contra FROM: Phil Batchelor, '; '�� A`.'� Costa County Administrator County DATE: '.s May 11, 1993 SUBJECT: Operation of Risk Management Division of County Administrator' s Office SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: Accept report outlining the Risk Management program. DESCRIPTION: THE RISK MANAGEMENT PROGRAM The Risk Management Division was established in April, 1986, and is responsible for administration of: m Workers' Compensation Claims Liability Claims Medical Malpractice Claims Loss Prevention Services Insurance Programs Various Risk Control and Financing Strategies Employee Benefits Programs There are four units in Risk Management: Workers' Compensation (which includes Vocational Rehabilitation) , Liability, Safety and Loss Control, Risk and Insurance Administration, and Employee Benefits Programs. Establishing an in-house Risk Management Office has proven to be a good business decision. SELF-INSURANCE SAVINGS The Risk Management function has saved the taxpayers millions of dollars through self-insurance and loss control programs. Milliman & Robertson, consulting actuaries, estimate that the County is saving $8. 3 million CONTINUED ON ATTACHMENT: X YES SIGNATURE: W ", I RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOA MMITTEE APPROVE OTHER SIGNATURE(S): _ ACTION OF BOARD ON May 11 , 1993 APPROVED AS RECOMMENDED _X_ OTHER ACCEPTED report, and REQUESTED the County Administrator to provide a summary of the presentation on the Risk Management program for distribution as a budget bulletin to County Departments , AFSCME , Local 1, the Central Labor Council , and the Contra Costa Taxpayers ' Association. VOTE OF SUPERVISORS X _ _ _ I HEREBY CERTIFY THAT THIS IS A TRUE UNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. ontact: Joseph J. Tonda (646-2014) CC: CAO Risk Management ATTESTED May 11, 1993 _ PHIL BATCHELOR.CLERK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR M382 (10/88) BY �� /,���� DEPUTY annually by being self-insured. The actuaries believe it would cost $25.6 million to insure the County' s auto and general liability, medical malpractice, and workers' compensation exposures. They further believe the County can self-insure those exposures for $17. 3 million. See attached letters from Milliman & Robertson. IN-HOUSE CLAIMS ADJUSTING By adjusting the claims in-house, the County is saving $461,000 annually: - $320,000 of that savings is through handling workers' compensation claims in-house. Annual in-house adjusting costs $720,000 versus outside claims administration costs of $1,040,000. - $141,000 is saved by using in-house liability claims adjusters at annual costs of $237,000 versus outside claims administration at annual estimated costs of $378,000 . Actual charges for outside liability adjusting plummeted from $319,000 in 1987 to $4,000 in 1992. CLAIMS MANAGEMENT The County aggressively evaluates the validity of all claims. From 1986 to present, of claims closed in: - Medical Malpractice: 42 or 21% of 200 claims were closed with NO payment to claimants. - General Liability: 1,250 claims or 54% of 2,280 claims were closed with NO payment to claimants. - Automobile Liability: 421 or 70% of 598 automobile liability claims were closed with NO payment. LEGAL SERVICES Risk Management contracts with certain outside law firms for legal representation on selected cases. The current rates paid to outside attorneys are: - General & Auto Liability Claims: $90 to $110 per hour - Medical Malpractice Claims: $115 per hour The Risk Management Office closely monitors legal services and receives quality representation at reasonable rates. The County has achieved an exemplary level of closings. on cases handled. by outside attorneys. Of 1,152 cases closed from 1986 to present, there was no payment to claimants on 58% of those cases handled by outside. attorneys. LITIGATION COST CONTAINMENT In addition to pro-active management of liability cases, steps taken to save money include: - Immediate claims adjuster and safety consultant responses to minimize exposures. - Prompt decisions on assignments to attorneys. - Early and effective use of experts on potential claims and lawsuits. - On cases to be tried, conducting community attitude surveys, video presentation of witnesses, and mock trials. - Extensive and personal involvement in negotiations processed by Risk Management. - Use of alternative dispute resolution. 2. of 3 Establishment of the InterPublic Entity Litigation Cost Containment Program. This program saves participating public entities more than $200,000 per year in reduced litigation expense. The program received the California State Association of Counties Challenge Award trophy in 1992. LIABILITY CLAIMS AUDIT The audit of the Liability Program by Heyenrath & Associates found: "The overall claims administration as handled by County staff is excellent. " When the outside auditors compared the County to outside claims and management services, they said, . . . "It is our professional opinion that the services provided by the County are far superior and cost effective. The County made the correct decision by bringing this program in-house. " CONCLUSION Risk Management takes proactive measures to reduce the cost of risk to the County. Programs to control exposures and mitigate losses are continually evaluated and modified for the most cost-effective methods to protect the County against loss. 3 of 3 AL M�i_ nVIAN & ROBERTSON,INC. Actuaries and Consultants Guy A.Avagliano,A.C.A.S. Suite 400 Wendell Milliman,F.S.A.(1976) James R.Berquist, FC.A.S. 251 South Lake Avenue Stuart A.Robertson,F.S.A. Michael L.DeMattei.A.C.A.S. Pasadena,California 91101-3075 Chairman Emeritus John S.Edwards,FC.A. Telephone:818/577-1144 Dennis L Graves,FSA. Fax:818/793-2808 Michele P.Gust,A.C.A.S. March 25 1993 Roger M.Hayne,F.C.A.S. + Michael A.McMurray, F.C.A.S. TroyJ.Pritchett,F.SA. Donald IC.Rainey,A.C.A.S. Craig P.Taylor,A.C.A.S. Joseph J. Tonda CONTRA COSTA COUNTY 651 Pine Street, 6th Floor Martinez, California 94553 RE: ESTIMATED FISCAL YEAR 1993/1994 INSURANCE PREMIUMS Dear Joe: Based on the fiscal year 1993/1994 projections detailed in our January 11, 1993 letter, we have attempted to estimate what the corresponding insurance premiums would be for comparable coverage. We caution that the premium figures shown are approximations and that the only way to get reliable estimates is to receive quotes from insurance companies. However, as you are probably aware, no company is willing to rate an entity the size of Contra Costa County unless they believe that a policy is likely to be purchased. Assuming the County could purchase coverage for all the risks currently covered in the self- insurance program, the cost comparison is: Program Current Cost Premium Difference Workers' Compensation - County $8.8 $10.6 $1.8 Medical Malpractice 2.5 5.5 3.0 Automobile & General Liability 6.0 9.5 3.5 County-Only Sub-Total $17.3 $25.6 $8.3 Consolidated & Riverview Fire Districts - Workers' Compensation $1.6 $2.0 0.4 Total $18.9 $27.6 $8.7 NOTE: 1. Dollar amounts are in millions. t 1 Albam • Atlanta • Boston • Chicago • Cincinnati • Dallas • Deriver • Hartford • Houston Indianapolis • Irvine • Lus Angeles • Milwaukee • Minneapolis • New York • Omaha • Philadelphia Phoenix • Portland • St.Louis • Salt lake City • San Diego • San Francisco • Seattle • Washington,D.C. l: to;::.riirn::rllt \CO(A)P..r)11 M11.1.1MAN .'';tt::r!ia • AIISI!ct • i;ri'::iu:;i Ilt:ruturla r;;ct;r',:=0 (:hatuu•I lo.!:,::rls • i)r•r:,arl. 1:;-!:rr.. • i:u!r It'sirn \r,t,r.r':::O ds: .rt. ;.r:11mirl l,hi!':::;mu ° !: ° i'::urrl l in a ;„ I ;loci!i„ar Iti til i;:rlit: Joseph J. Tonda -2- March 25, 1993 As detailed above, we estimate that the County will approximately save $8.7 million in insurance costs in the 1993/1994 fiscal year. This savings may actually be understated due to retained exposures and policy deductibles. It is very possible that some losses would not be covered under a policy and for those that are covered the County could still be responsible for the first $5,000 or $10,000 of each claim. Also, this figure reflects long-term assumptions and the County's actual experience in 1993/1994 could vary significantly above or below our estimates. Please call if you have any comments or questions. Best regards, Michael A. McMurray MAM:ms cc: Michael L. DeMattei MILLIMAN &ROBERTSON,INC. MUIffMAN & ROBERTSON,INC. Actuaries and Consultants Guy A.Avagliano,A.C.A.S. Suite 400 Wendell Milliman,ES.A.(19711) James R.Berquist,FC.A.S• 251 South Lake Avenue Smart A.Robertson,F.S.A. Michael L DeMattei,A.C.A.S. Pasadena,California 91101-3075 Chairman Fmeriuts John S.Edwards,F.C.A. Telephone:818/577-1144 Dennis L Graves,FSA. Fax:818/793-2808 Michele P.Gust,A.C.A.S. Roger M.Hayne,F.C.A.S. May 6, 1993 Michael A.McMurray,F.C.A.S. y Troy J.Pritchett,F.S.A. Donald K.Rainey,A.C.A.S. Graig P.Taylor,A.C.A.S. Joseph J. Tonda CONTRA COSTA COUNTY 651 Pine Street, 6th Floor Martinez, California 94553 Dear Joe: The attached graph shows the total insurance costs under three different funding assumptions: full self-insurance, full insurance coverage and insurance coverage with a deductible. The difference between the self-insurance option and the other two represents the expense and profit load. As shown, the total costs would not change with the two different deductible assumptions; however, the distribution of losses changes. Any change in the deductible amount just shifts the loss between parties. Please call if you have any comments or questions. Best regards, 1 Michael L. 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