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Home My WebLink AboutMINUTES - 06072005 - C130 CONTRA 1_0- •:� , TO: BOARD OF SUPERVISORS }1 • • • - - -• :• COSTA 81% •� COUNTY FROM: John Sweeten, County Administrator DATE: June 7, 2005 "10014 elf SUBJECT: Grand Jury Report No. 0506 — "Fix Workers' Compensation Now!" SPECIFIC REQUEST( ) S OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION(S): RECEIVE the Grand Jury Report No. 0506 entitled "Fix Workers' Compensation Now!" and REFER it to the County Administrator for response. CONTINUED ON ATTACHMENT: 7� YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE ,APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ONncl APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS(ABSENT Afro N - ) TRUE AND CORRECT COPY OF AN AVE-S: NOES: ACTION TAKEN AND ENTERED ABSENT: ABSTAIN: ON MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. Contact:Julie Enea,Sr.Deputy CAO (.0 ATTESTED rJ/0-4—/o JOHN SWEETEN,CL RK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR cc: CAO B TY t Grand J725 .Court Street R. C+ box 911 Costa Martinez,CA County r , i At -,ya,u-uyyg t� May 31, 2005 rA,covr� John Sweeten Contra Costa County Administrator 651 Pine Street, 1 I�h Floor Martinez, CA 94553 Dear Mr. Sweeten: Attached is a copy of Grand Jury Report No. 0506 "Fix Workers' Compensation?how!"prepared by the 2004-2005 Contra Costa County Grand Jury, In accordance with California Penal Code Section 933.05,this report is being provided to you at least two working days before it is released publicly. Section 933.5(a)of the California Government Code requires that(the responding person or entity shall report one of the following actions) in respect to each finding: (1) "The respondent agrees with the finding." (2) "The respondent disagrees with the finding." (3) "The respondent partially disagrees with the Ending." In the cases of both(2) and (3) above,the respondent shall specify the portion of the finding that is disputed, and shall include an explanation of the reasons therefor. In addition, Section 933.05(b)requires that the respondent reply to each recommendation by stating one of the following actions: 1. The recommendation has been implemented,with a summary describing the implemented action, 2. The recommendation has not yet been implemented,but will be implemented in the future,with a time frame for implementation. 3. The recommendation requires further analysis. This response should explain the scope and parameters of the analysis or study, and a time frame for the matter to be prepared for discussion. This time frame shall not exceed six months from the date of the publication of the Grand Jury Report. John Sweeten Contra Costa County Administrator May 31, 2005 Page 2 4. The recommendation will not be implemented because it is not warranted or is not reasonable, with an explanation thereof. Please be reminded that Section 933.05 specifies that no officer, agency, department or governing body of a public agency shall disclose any contents of the report prior to its public release. Please insure that your response to the above noted Grand Jury report includes the mandated items. We will expect your response,using the form described by the quoted Government Code, no later than August 1, 2005 Sincerely, X4 ANTONIO MEDRANO,Foreperson 2004-2005 Contra Costa County Civil Grand Jury cc: John Sweeten A REPORT BY THE 2003-04 CONTRA COSTA COUNTY GRAND JURY 725 Court Street Martinez, California 94553 Report No. 0505 FIX WORKERS' COMPENSATION NOW! APPROVED BY THE GRAND JURY: Date: Zeft 7-c*ter- ANTONIO MEDRANO GRAND JURY FOREPERSON ACCEPTED FOR FILING: Date: THOMAS M. HADDOCK PRESIDING JUDGE OF TTIE SUPERIOR COURT Grand Jury P-12-1-•-- 725 Court Street Contra P.O.Box 911 Martinez,CA 94553-0091 Costa � I� County Contact*. Antonio Medrano Foreperson (925) 646-2345 For Immediate Release: Executive Summary F* Workers' Compensation Now! Grand Jury asks that County act now to eliminate enhanced benefits, strengthen the Trust Fund, and control costs. The 2003-2004 Contra Costa County Grand Jury issued a report that discussed the County Workers' Compensation program. This topic continues to be important because of significant changes at the state and County levels and the expiration of many union contracts on September 30,2005. The total cost of benefits and claims for Workers' Compensation for the County has increased from$27.1 million in 2001 to $46.2 million in 2004. During the same period,the unfunded liability with respect to Workers' Compensation increased from$5.0 million to $64.2 million, significantly reducing the-adequacy of the Trust Fund to pay claims. TheGrandJury recommends that the County establish a target for the funding level of the Workers' Compensation Trust Fund and develop a specific plan to attain this level by June 30, • 2008. In many cases the County's Salary Continuation Program provides more"take-home"pay for staying home,providing a disincentive to get workers back on the job. The Grand Jury recommends that enhanced benefits such as the County's Salary Continuation Program and the three-hour medical appointment benefit be eliminated and an effective Return-To-Work program be drafted and implemented. Finally,the Grand Jury has a number of other recommendations directed at reducing injuries and/or costs. The complete report is available on the Grand Jury web site: www.cc-courts.org/grandjury. CONTRA COSTA COUNTY GRAND JURY REPORT NO. 0506 Fix Workers' Compensation Now! To: Contra Costa County Board of Supervisors Contra Costa County Administrator Director,Risk Management Division INTRODUCTION Last year, the 2003-2004 Contra Costa County Grand Jury issued Report 0408, "Contra Costa County's History of Paying High Workers' Compensation Benefits"that discussed the Contra Costa County("County)Workers' Compensation program. This topic continues to be important because of legislative changes at the state level and recent changes at the County level. In the year fiscal ended June 30, 2004, the County2s,total cost of benefits anti claims for Workers" Compensation was$46.2 million, a$27.1 million,or 142 percent, increase from the comparable amount in the year ended June 30,2001. Over the same period,the unfunded Workers' Compensation liability has increased from$5.0 million to $64.2 million— significantly reducing the adequacy of the Workers' Compensation Trust Fund to pay claims. In addition to these financial developments, during the past few years there has been a substantial amount of Workers' Compensation legislation in California. The County has placed a significant amount of effort into an aggressive loss control program that, if the trend continues,could result in the lowest claims frequency in the past four years. Since a significant number of the County's union-contracts expire in 2005, an opportunity now exists to re-evaluate acid renegotiate the non- statutory Workers' Compensation benefits the County grants. BACKGROUND California Workers' Compensation laws recognize on the job injuries as being"no fault"and therefore the employee does not have to prove employer negligence to receive Workers" Compensation benefits. These benefits are mandated by state law for employment related injuries and include: 1. Reasonable medical treatment. 2. Temporary disability benefits, calculated as two-thirds of an employee's weekly wage, subject to a minimum and a maximum. The reduced pay amount is in recognition of the fact the employee does not have to prove the employer negligent and may fimction as a return-to-work incentive. 2 3. Permanent disability compensation if the injury results in reducing the employee's ability to compete in the labor market. These are based on an evaluation of the degree to which the employee is limited. 4. Death benefits,which are flat amounts payable to dependents. The County self-insures its Workers' Compensation exposure with claims adjustment handled in-house by the Risk Management Division("Risk Management"). Risk Management also provides loss prevention services,training, and other risk control strategies to minimize loss exposures. During the past few years, there has been a substantial amount of Workers' Compensation legislation in California. In October 1999,Assembly Bill("AB') 1127 put teeth into Cal/OSHA requirements by exposing governmental managers and supervisors to liability along with their employer for willful - violations of safety standards. The act substantially increased fines and allowed the fining of public entities. This legi4lation resulted in significant additional focus on safety by the County. Beginning January 1,2003,AB749 substantially increased benefits. For instance,before January 11 2003,the weekly Temporary Disability Maximum payment was$490; on January 1,2003, it went to$602, and on January 1, 2005, it increased finther to$840-up 71%from the level prior to the legislation. Permanent disability rates also increased and,, as of January 1,, 2006, death benefits Will double. FINDINGS Funding 1. The County is self-insured for its Workers" Compensation claims, maintaining excess coverage with cornmerci al insurance carriers for large claims.- 2. The table below contains key financial information with respect to the self-insured program for Workers' Compensation for the County(including Fire Protection Districts). The source of the information is the County's Comprehensive Annual Financial Report. 3 County Workers' Compensation Financial Data (In thousands) Fiscal Year Ending June 30 2001 2002 2003 2004 Revenue: Premiums Charged to Departments Regular Charges $14,1238 $152779 $22,017 $22,313 Interest Earned/Other 2,690 2q083 1,092 802 Total Revenue $1.6,928 $17,862 $239109 $23,115 Expense: Claims Paid $14,786 $18,175 $232117 $231,648 Increase in Claims Payable 1,1421 1 18,38817,714 Total Claims Expense $162207 $28,791 $419505 $413,362 Administrative Expense Total Expense $19q066 $31,828 $45,197 $46,175 Profit or(Loss): $(21138) $(13,966) $(223,088) $(2310060) Balance Sheet: Assets $45.1658 $423,013 $38,805 $333,046 Liabilities 50,69661,0177 97,198 Net Assets (Deficit) $(5,1038) $(19,004) $(413,092) $(64,0152) 3. At the-end of each fiscal year during this period, the County established a Reserve for Benefits and Claims based on the expected cost of incurred benefits and claims,as detern-iined by an independent actuary. 4. Between June 30.,2001, and June 30,2004, Liabilities(primarily the Reserve for Benefits and Claims)increased from$50.7 million to$97.2 million,while Assets (primarily Cash and Investments)to pay them decreased from$45.7 million to $33.0 million. Thus, the net deficit grew from$5.0 million to$64.2 million. 5. In the Notes to its Basic Financial Statements for each of the last three fiscal years (starting in 2002),the County listed the actions it was taking to reverse the negative trend in net assets such as: increasing premium charges to departments, continuing an aggressive loss control program, and conducting further negotiations with represented labor groups. Notwithstanding these actions (as shown in the table above),between June 30, 2001 and June 301, 20041 there has been an increase in the net deficit of$59.1 million. 4 6. For the first nine months of the fiscal year 2004-2005, the County's Workers' Compensation claim payments were 10%below those of the previous year. 7. In the independent actuary's June 30, 2004 report to the County, it recommended that the County strive to fund its incurred benefits and claims at the 80% confidence level or higher. (A"confidence level"is a measure of the probability that the Workers" Compensation Trust Fund("Fund")will have enough money to cover all benefits and claims that have been incurred). 8. On April 20, 2004, the County Administrator advised the Board of Supervisors that the confidence level had dropped in the previous four years from 90 percent to 35 percent, and that in fiscal year 2004-2005 a$10 million increase over the then projected$20 million County contribution Was required to elevate the Fund to a 50 percent confidence level. He also reported that the contribution would need to be increased again m* 2005-2006 by a similar amount. 9. As of June 30,2004,the actuary's estimate of discounted benefits and claims at the 80 percent confidence level (discounted at a 5.5 percent interest rate)-was$90.7 million-- $57.7 million more than the assets available to pay these benefits and claims. Benefits 10. The County pays enhanced Workers' Compensation benefits in accordance with its union contracts,Memorandums of Understanding("MDUs'), greater than required by state statute for those injured on the job and out of work. No charge is made against the injured employees' sick leave or vacation accruals for this program. The key components of this are: a. The County's Salary Continuation Program provides, in lieu of the employee's salary, 86%of an employee's regular salary, tax-free, during any period of temporary disability for up to one year. An example follows, using the County's average monthly salary of$4,703 and a combined federal and state tax rate of 20%. Uninjured Employee Employees Injured on the Job Mandated State Current County Average Monthly"take- Temporary Salary Monthly home"pay Disability Continuation Earnings (gross) Monthly"take- Monthly"take- home"pay home"pay $4,703 $3,762 $3,135 $42045 b. Workers are provided up to three hours paid time-off per day for medical appointments including chiropractic or physical therapy sessions. 5 11. Since Salary Continuation payments are income tax free, the"take-home"pay for an employee on Salary Continuation can be greater than the employee's regular"take- home"pay(e.g. $283 for the average employee as shown in the table),providing a disincentive for the employee to return to work. 12. A Risk Management survey in 2003 reported that County Workers' Compensation benefits exceeded those of five similar counties in Northern California. In fact, three of those five counties offered only the state mandated benefits. 13. A significant number of the County's MOUs expire on September 30, 2005. Loss Control 14. The best way to reduce Workers' Compensation costs is to prevent injuries in the workplace. 15. In addition to the payments to medical providers and to the injured employee,injuries cause additional costs from hiring temporary replacements for an injured employee and/or from overtime. 16. Risk Management implemented an aggressive approach to injury prevention by: 0 initiating web-based ergonomic training. 0 organizing a task force that ergonomically evaluates an employee's work station upon request. 0 capturing,recording, and distributing data on.injury frequency and type to departments. 0 working with departmental Loss Control Coordinators to evaluate Work activities and work stations for risk of injury,to develop training programs, and to conduct Safety Meetings that are focused on injury prevention. 0 initiating formal training for Loss Control Coordinators. 17. In its report to the Board of Supervisors on April 12, 2005, Risk Management estimated that 1200 claims will be filed for the fiscal year ending June 30th-the lowest "claim frequency"in the past four years. 18. The Sheriff s Department has responded to the challenge of injury prevention by designating a full time Safety Services Manager,by developing its own injury monitoring database emphasizing injury cause., and by 'identifying measures to prevent injury reoccurrence. 19. Departmental Safety Programs are in various stages of development and efforts to enhance them are evident. 6 At A 20. Safety is usually not the primary function of the department Loss Control Coordinator. Other job responsibilities may diminish the effectiveness of the Loss Control Coordinator in reducing injuries,relegating safety/loss control to a duty to be performed if their primary job duties permit. 21. Sharing capabilities,training, and safety program ideas between departments is infrequent. 22. A number of Loss Control Coordinators do not use the data available on the Risk Management"Nature of Injury vs. Cost"report to focus training on the reduction of the most frequent and most costly injuries for their departments. In fact, some Loss Control Coordinators were unaware of this data. 23. The"Nature of Injury vs. Cost"report identifies"injury type"(i.e. back strain), rather than "injury cause"(i.e. dealing with an unruly prisoner). 24. Risk Management reports show total injuries and costs and don't show information per-100 employees,making it difficult to compare different sized departments. Claims 25. A March,2005 Workers' Compensation claims audit conducted by an independent Workers' Compensation consultant reflected overall". . . excellent performance results"by the Risk Management Claims Department, 26. Claim adjusters in Risk Management are the only employees authorized to contact the employee's physician to maintain compliance with the Health Information Protection Act. 27. Managers are not always aware of the expected duration for which an injured employee may be absent from work with a work related injury, creating difficulty for ., 1W managers to manage their workload. 28. Departmental contact with an injured employee may reduce the length of time that an employee is off work and make the transition back to work easier. 29. Contact between department supervisors and injured County employees is often infrequent or, at times,nonexistent. 30. The County has a"limited duty"Return-to-Work program which allows an injured employee to return to work for as little as two hours per day. �1- On April 20, 2004, the Board of Supervisors considered and accepted the report on Workers' Compensation costs from the County Administrator recommending to the Board of Supervisors that he be directed to work with employee organizations to implement a modified Return-To-Work program. 7 01 CONCLUSIONS 1. Even with recent improvement"in claim experience, and the$20 million additional contribution projected for fiscal year 2005-2006 made,the Trust Fund will still be significantly under funded. 2. Unlike most other employee benefits, Workers' Compensation benefits are mandated by law. There is no evidence that the County's enhancements to mandated Workers' Compensation benefits provide a competitive advantage in hiring or retaining employees. 3. In many cases,the County's Salary Continuation Program can provide more"take- home"pay for staying home,providing a disincentive to get workers back on the job. The Salary Continuation Program may encourage malingering,increase costs, and contribute to low morale among those who must cover an absent worker's duties. 4. The upcoming negotiations of MOUs provide the County an opportunity to eliminate the enhanced Workers' Compensation benefits. 5. If an employee returns to work for only two hours a day, as employees are permitted to do under the County's Return-to-Work program, it provides little relief to the department affected by the injury-created staff shortage, and it has minimal impact on reducing costs. 6. Since many departments conduct training without referring to historical loss statistics and virtually all conduct training without cause of injury data,department safety training may not always be focused on preventing the injuries that have been the most frequent and/or costly. RYCOMMIENDATIONS The 2004-2005 Contra Costa County Grand Jury recommends: I Establish a target for the fimding level of the Workers' Compensation Trust Fund of not less than the 80%"confidence level"recommended by the independent actuary. 2. Develop a specific plan, including ongoing monitoring steps and a timetable, to increase the Fund to the established target(see Recommendation 1)by June 30, 2008. 3. Eliminate the County's Salary Continuation Program from future MOUs. 4. Eliminate the County's three-hour medical appointment benefit from future MOUs. 8 5. Implement a new Rettim-to-Work program for injured employees as follows: a. Evaluate existing jobs and tasks to develop listings ofjob tasks that can be linked with those activities not restricted by an injured employee's physician. b. Institute a Return-to-Work program,that utilizes the above listings and requires a minimum of four hours per day commitment by the injured employee. c. Test and evaluate the proposed Return-to-Work program in selected departments; modify it as appropriate; expand it to all County departments. 6. Reduce claims costs by accelerating the return to work of injured employees though improved co: ilunication as follows: a. Require work unit managers to maintain regular communication with injured employees to m. rapport and to keep the injured employee informed of workplace activities and developments. b. hnplement standards for timely communication between the claims adjusters and each of the following: department managers,,injured employees, injured employees' physicians, and Loss Control Coordinators. T, Enhance the current momentum in reducing injuries and future claims as follows: a. Require each department to establish measurable goals for the reduction of injuries and costs. b. Evaluate the cost-benefit tradeoffs of designating a fall time Loss Control Coordinator in larger departments. W..0 0 V#a C V c. Expand loss data already provided to County departments to include cause of injury and injury frequency per 100 employees. d. Provide periodic reports so that the County Administrator, department managers, and Risk Management can compare departments and monitor how each department is meeting its goals.' e. Continue formal training for all Loss Control Coordinators to: • bring uniformity to the Loss Control Program. • develop loss control training that is focused on those areas that have the greatest impact on reducing injury frequency and costs. f. Develop a forum for Loss Control Coordinators to share"best practices" and remain abreast of safety resources available. 9 f REQUIRED RESPONSES Findings: :_`Contra Costa County Board of Supervisors: 1-9, l Oa, l Ob, 11-13 Contra Costa County Administrator: 30-31 Director,Risk Management Division: 14-29 Recommendations: Contra Costa Board of Supervisors: 1-4, 5a-5c Contra Costa County Administrator: 5a-5c, 6a, 7a, 7b Director,Risk Management Division: 5a, 5b, 6b, 7c-7f 10