TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Lisa Jenkins, Human Resources Director
Briza Morales, Risk Manager
SUBJECT:Title
Consideration of a Resolution Approving a Five-Year Agreement with AdminSure, Inc. for Third Party Administration Services in Support of the Self-Insured Workers’ Compensation Program for an Amount Not-To-Exceed $1,221,144 (Human Resources Director Jenkins).
ADOPT RESOLUTION NO. 21-0055
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council approve an agreement with AdminSure, Inc. (AdminSure) for an amount not-to-exceed $1,221,114 over five years for third party administration of workers’ compensation claims and ancillary medical management services.
Body
FISCAL IMPLICATIONS:
Funds in the amount of $230,004.00 are budgeted in the Fiscal Year (FY) 2021-2022 Risk Management Workers’ Compensation Claims Administration and Claims Paid Funds. Funds for FY 2022-2023 through FY 2025-2026 will be budgeted accordingly.
Fiscal Year Amount
2021 - 2022 $ 230,004.00
2022 - 2023 $ 236,916.00
2023 - 2024 $ 244,020.00
2024 - 2025 $ 251,328.00
2025 - 2026 $ 258,876.00
5-Year Total $1,221,144.00
BACKGROUND:
The City has been permissibly self-insured for workers’ compensation since May 1, 1974. Historically, the City has maintained a self-insured retention (SIR) level and purchased excess workers’ compensation coverage through risk-sharing pools. Since 2002, the City has maintained a SIR level of $750,000. From 1983 through 2017, the City purchased excess workers’ compensation coverage through the Independent Cities Risk Management Authority (ICRMA). Since 2017, the City has purchased excess workers’ compensation coverage through the Public Risk Innovation, Solutions, and Management (PRISM) pool, formerly named the California State Association of Counties-Excess Insurance Authority (CSAC-EIA).
As a self-insured public entity, the City depends significantly on a third party administrator (TPA) to effectively and efficiently manage its workers’ compensation claims. The TPA’s assigned claims adjusters work closely with risk management and injured workers throughout the claims process. The TPA is responsible for coordinating any necessary medical treatment, issuing applicable benefit notices, paying temporary disability when appropriate, setting the financial reserves for the claim, and continuously monitoring the claim. The TPA is also responsible for complying with all laws and reporting requirements for self-insured workers’ compensation programs. Additionally, the TPA is responsible for complying with PRISM’s underwriting and claims administration standards, including handling, reporting, and auditing guidelines.
DISCUSSION:
AdminSure has been the incumbent for over twenty years. In 2015, the City issued a request for proposals (RFP) for workers’ compensation claims administration services. In response to the RFP, nine proposals were received by the City. After the evaluation and selection process, AdminSure was awarded a three-year contract with two optional one-year renewals. The City’s current agreement with AdminSure expired June 30, 2021. When evaluating if the City should again issue a RFP, staff considered several factors, including the impacts of transitioning TPA’s, the prior RFP results, and overall contract costs.
AdminSure has successfully provided services to public entities across California since 1982. They currently serve seventy-six public entities, including one county, six fire districts, and sixty-nine cities, of which sixty-seven have safety personnel (police and fire). AdminSure is the current TPA for the neighboring cities Redondo Beach and Hermosa Beach. AdminSure has demonstrated its long-term commitment to providing quality and compliant service to public entities statewide.
The primary claims adjuster assigned to the City’s account has handled the City’s claims for several years. The claims supervisor has also handled the City’s account for many years and has a thorough knowledge of the City’s more complex claims. The claims adjuster is knowledgeable and responsive to both injured workers and risk management staff. The claims adjuster stays abreast of claim trends, both in the City and in the public sector, and makes recommendations for areas where the City can focus its loss prevention efforts.
Over the past couple of years, AdminSure and Risk Management have worked closely to streamline the claims process and increase the level of follow-up and communication with injured workers. This level of continuous communication through the claims process aids in injured workers’ care and makes for a smoother claims process for all parties, which was especially critical during the COVID-19 pandemic.
To ensure competitive pricing, staff reviewed a matrix compiled by PRISM comparing the following five TPA’s: AdminSure, Corvel, Intercare Holding Insurance Services, Inc., LWP Claims Solutions, Inc., and Sedgwick. The matrix includes a comparison of claim services offered and the average relative cost, and demonstrates that AdminSure is 9% below baseline costs. Additionally, staff reviewed contracts entered into by various cities that are relatively comparable to Manhattan Beach either in staff size or average claim count. This review included the cities of Costa Mesa, Newport Beach and Beverly Hills. In 2018, the City of Costa Mesa issued a RFP and awarded a four-year contract, with one optional year, to AdminSure. Costa Mesa’s contract is for $175,000 for the first year, with up to 3% annual increases thereafter. In 2019, the City of Newport Beach issued a RFP and awarded a five-year contract to AdminSure in the amount of $1,705,506. In 2019, the City of Beverly Hills entered into a five-year contract with Corvel (another workers compensation TPA) for $1,429,648.
In addition to ensuring competitive pricing, staff also considered the significant time it would take to transition to a new TPA, and the challenges a new adjuster would have in gaining the same depth of knowledge about the City’s claims while maintaining the level of communication successfully established in recent years. By not needing to devote staff time and resources to manage this transition, staff is able to focus time and resources on process improvement, injury and illness prevention, training on the workers’ compensation process, and creating a safety-first workplace culture.
The proposed five-year agreement reflects a 3% increase per year. The modest increases reflect the TPA’s commitment to continuing as the City’s workers’ compensation administrator. Pursuant to Manhattan Beach Municipal Code (MBMC) Section 2.36.130, contracts for professional services are exempt from bidding. However, if the amount equals or exceeds $50,000, such contracts can only be approved by the City Council.
Accordingly, staff recommends that the City Council adopt the resolution approving the agreement with AdminSure, Inc.
LEGAL REVIEW:
The City Attorney has approved the agreement as to form.
ATTACHMENTS:
1. Resolution No. 21-0055
2. Agreement - AdminSure Inc.