HomeMy WebLinkAboutMINUTES - 04202004 - D4 DA
TO: BOARD OF SUPERVISORS �� ` ` '* CONTRA
COSTA
FROM: John Sweeten, County Administrator
•i COUNTY
DATE: April 24, 2004
SUBJECT: UPDATE ON WORKERS' COMPENSATION COST TRENDS
AND COST CONTAINMENT STRATEGIES
SPECIFIC REQUEST(S) OR RECOMMENDATION(S)&BACKGROUND AND 37USTIFICATION
RECOMMENDATION(S):
1. RECOGNIZE that to effectively contain workers' compensation program costs,the County must utilize a
comprehensive approach.
2. ACKNOWLEDGE that recent improvements to the County's Workers' Compensation program, including
the implementation of an Ergonomic Program&Lab, an Occupational Medical Program, and a new
partnership with the Contra Costa Schools Insurance Group for medical bill review services,have had a
positive affect on program costs.
3. RECALL that on March 11, 2004 the County Administrator advised in the FY 2004-05 Budget Outlook that
in order to meet current and future liabilities, Workers' Compensation Trust Fund would require a$10
million increase over the current$20 million contribution.
4. DIRECT the County Administrator to work with employee organizations to implement a modified Return-
to-Work program, identify additional ways to reduce costs, and review Risk Management staffing to identify
ways to reduce caseloads per adjuster in order to implement new laws.
CONTINUED ON ATTACHMENT: _,,,_YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR—RECO DATION OF BOARD COMMITTEE
—APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON APRIL 25. M APPROVED AS RECOMMENDED I,OTHER
SEE ADDENDUM ATLA=.
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A
�_UNANIMOUS(ABSENT NONE ) TRUE AND CORRECT COPY OF AN
AYES:—
NOES: ACTION TAKEN AND ENTERED
ABSENT: ABSTAIN: ON MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Contact:
ATTESTED APRIL 20, 2004
CAO JOHN SWEETEN,CLERK OF
THE BOARD OF SUPERVISORS
AND COUNTY ADMINISTRATOR
. / J f
By v �'`£� € y; S f>{_• DEPUTY
BACKGgOUNDIREASQN(S)FOR RECOMMENDATION S):
In April 2003,the Board received a report on the County's Workers' Compensation Program that identified the
rising costs of the Workers' Compensation Program. The purpose of the report was to clarify the County's
responsibility under Workers' Compensation laws and to identify ways to decrease costs and to slow the rate of
growth. The Board took action on several recommendations to achieve that objective, 'including implementation
of a new Occupational Medical Program; assumption of responsibility to direct care of any injured employee
during the first 30 days following a claimed injury; establishing a new ergonomic program and lab and creation
of a joint partnership with Contra Costa County Schools Insurance Group to reduce medical bill review costs.
In addition,Risk Management has developed a medical utilization program,which includes applying American
College of Occupational and Environmental Medicine guidelines in compliance with new State laws(AB 227
and SB 228). Risk Management also retained an independent consultant, Single Source Consulting,to review
results,analyze trends and make fcu-ther recommendations.
The results of these actions have helped to reduce the rate of growth in Workers' Compensation costs.
Nevertheless, Workers' Compensation costs and exposure continue to escalate due to the benefit rate increases
contained in AB 749, medical cost increases, and the increased duration of disability. Given these facts and
trends, it is important for the Board to consider steps to curb the continuing growth in Workers' Compensation
costs. Recommendations include directing the County Administrator to:
• Work with employee organizations to implement a modified Return-to-Work program to offset the
effects of temporary disability rate increases and identify other strategies to reduce costs.
• Review Risk Management staffing to proactively implement new workers' compensation mandates(AB
227 and SB 228) efficiently and effectively.
Current Trends
Annual Workers' Compensation costs continue to rise due to the rate increases imposed by AB749,medical cost
inflation and the increased duration of lost time from work. Temporary disability rates increased another 21%
from$602 per week in 2003 to $728 per week in 2004. Potential future cost of existing claims(future claim
liabilities) increased from$57 million to $69 million in the last 12 months because the County now has more
open claims than ever before. The average cost of the future liability of each of the 2,670 open claims is
$.25,834. Two years ago the average cost was$17,466. In order to address this outstanding liability, as a self-
insured
elfinsured.employer,it is necessary to assess the adequacy of the Workers' Compensation Trust Fund,which
requires ongoing review.
In the last four years,the actuarial confidence level dropped from 90%to 35%. For FY 04-05 a$10 million
increase over the current$20 million contribution is required in order to elevate the reserve to a 50%confidence
level,which is below actuarial recommendations. We anticipate that contributions will need to be increased
again next year by a similar amount.
In the Single Source analysis, claims frequency(number of claims filed)was found to have declined in the last
12 months. While it is too early to know if this is a temporary aberration or a result of the actions recently taken
by the Board of Supervisors,the severity of the open cases--i.e.,the County's costs incurred--continues to
escalate.
• Costs for medical payments have increased at a slower rate than in FY 02-03. However,it is unclear
whether this lower growth rate is a temporary aberration, or if it is due to the implementation of the
Occupational Medical Program or the conversion to a new billing payment system. Continued
monitoring of medical payments over the next several months will determine whether or not this trend
continues or whether a spike will emerge late in the fiscal year. The recent passage of SB 228 provides
for medical utilization guidelines that became effective in early 2004. Risk Management has
implemented the State mandated program to gain greater control over medical costs by applying the
presumption of correctness in the American College of Occupational and Environmental Medical
guidelines.
• Temporary disability claims have continued to increase as a result of AB 749 and the increasing duration
of temporary absences from work. Because AB 749 provides for annual rate increases through 2006
with indexing thereafter, costs will continue to increase. The County can mitigate a significant amount
of this exposure by implementing a modified Return-to-Work program with the objective of reducing the
duration of lost time for County workers.
2
Permanent disability cast increases mandated by AB 749 also contribute to our rising costs. For
example, a case with a 35%permanent disability rating in 2003 that would have produced costs of
$23,310 will now produce casts of$29,850 in 2004(a cost increase of 28%).
Contra Costa's Prograan Compared to other Counties
Single Source has also concluded that claims efforts should continue to focus on inventory control. As the
claims inventory increases, so do costs and expected future liabilities. Single Source notes that claims staffing
has not kept pace with the increased caseload., and recommends that consideration be given to adding two
working supervisors to the Claims Unit in order to better manage claims inventory at a caseload more consistent
with industry standards. Single Source advises that lower caseloads for claims examiners are needed to take
advantage of the cast control potential of AB 227,and SB 228.
Finally,in response to the question of how Contra Costa County compares with other counties in the way we
manage the Workers' Compensation program, a survey was conducted of large urban counties. We found that
all urban counties are self-insured, most utilize the CSAC Insurance Authority for excess coverage and the
majority is self-administered.
ADDENDUM TO ITEM DA
April 20, 2004
On this day the Board of Supervisors considered report from the County Administrator
on recent trends on Workers' Compensation costs.
The Board discussed the history of the issue and requested clarifications of
various relative items from staff.
The Chair invited comments from the public, and the following people spoke:
Rollin Katz, (P.E.U. Local 1) P.O. Box 222, Martinez;
Jim Hicks, (AFSCME 2700), 1000 Court Street, Martinez
After further discussions, the Board took the following actions:
• RECOGNIZED that to effectively contain workers' compensation
program costs, the County must utilize a comprehensive approach;
• ACKNOWLEDGED that recent improvements to the County's Workers'
Compensation program, including the implementation of an Ergonomic
Program and Lab, an Occupational Medical Program, and a new
partnership with the Contra Costa Schools Insurance Group for medical
bill review services,had had a positive effect on program costs;
• RECALLED that on March 11, 2004 the County Administrator advised in
the FY 2004-05 Budget Outlook that in order to meet current and future
liabilities, Workers' Compensation Trust Fund would require a$10
million increase over the current$20 million contributions;
• DIRECTED the County Administrator to work with employee
organizations to implement a modified Return-to-Work Program,
identified additional ways to reduce costs, and reviewed Risk management
staffing to identify ways to reduce caseloads per adjuster in order to
implement new laws.
• REQUESTED the County Administrator to be briefed on the legal aspects
of the new Workers' Compensation Reform that the Governor just signed
on Monday, April 19, 2004.
Supervisor Gioia made a motion to approve the above,which was seconded by
Supervisor Uilkema.
Motion passed—510