TO:
Honorable Mayor and Members of the City Council
THROUGH:
Mark Danaj, City Manager
FROM:
Teresia Zadroga-Haase, Human Resources Director
SUBJECT:Title
Contract with AdminSure, Inc., for Third Party Administration Services in Support of the Self-Insured General Liability Program (Human Resources Director Zadroga-Haase).
APPROVE AND APPROPRIATE
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council approve a three-year contract effective July 1, 2016, with two option years with AdminSure, Inc. (AdminSure) for third party administration (TPA) services in support of our self-insured general liability program and authorize City Manager to execute same (Attachment 1). The total estimated expenditure for the contemplated full five year contract period would be $124,203.
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FISCAL IMPLICATIONS:
The annual estimated value of the contract in years one and two is $24,107. Adequate funding for these services has been included in the proposed two-year budget for FY 2016-17 and FY 2017-18. The year three fee is set at $24,830. The maximum fee in year four, the first option year, would be $25,326. Year five, the final option year, would have a maximum fee of $25,833.
BACKGROUND:
The City administers a self-insured general liability program. Reserves are set aside to pay obligations related to general liability claims filed against City. In order to limit the financial exposure for these claims the City became a founding member of the Independent Cities Risk management Authority (ICRMA), a risk pooling joint powers authority (JPA), in 1980. The City maintains a self-insured retention (SIR) level of $500,000 per claim and ICRMA provides coverage for costs in excess of that amount in a pooled layer up to $5,000,000 and in an excess insurance layer above that amount up to a total of $30,000,000 in coverage.
Human Resources Risk Management staff provides oversight and coordination of the claims administration process and services provided by our TPA. Due to the level of training, expertise, volume of activity, and technological infrastructure required for effective claims management, the City has historically contracted with a TPA firm that has the expertise and economies of scale to handle the daily mechanics of claims administration activities. The city contracted with Colen and Lee effective July 1, 1994 for general liability TPA services. A new with contract Colen and Lee was executed effective July 1, 1997. This was the last full contract that was entered into between the parties. The corporate name was changed to AdminSure, Inc., on September 1, 2007. The contract has essentially been renewed by addendum for the 19 years since the last full agreement was entered into.
DISCUSSION:
As the general liability TPA services had not been marketed for 19 years and a new agreement had not been processed during that time, options for developing a new service agreement were considered. On August 8, 2013, the ICRMA Board of Directors mandated members participating in the general liability program use either Carl Warren and Company or AdminSure as their general liability TPA. Since AdminSure is the incumbent and is one of the ICRMA-mandated providers, it is appropriate to develop a new agreement with AdminSure for presentation to Council in order to maintain continuity of services and avoid the inefficiencies inherent in a TPA transition.
To ensure that it was proper to move a new contract process with AdminSure forward, inquiry was made with the City Attorney’s office as to whether or not a competitive process was necessary, particularly in light of the fact that the City was bound to use one of two vendors per the ICRMA mandate. Staff was pointed to Municipal Code Section 2.36.130, Professional Services, which states “[c]ontracts for services of specially-trained and professional persons shall be exempt from bidding…” Based on the ICRMA mandate, the provisions of the Municipal Code, and AdminSure’s familiarity and competency in handling the City’s claims, it was determined that staff would pursue an updated contract with AdminSure to facilitate continued provision of TPA services for our self-insured general liability program.
The TPA services for the City’s self-insured general liability program currently being provided by AdminSure have been competent and committed. Their services have been essential in assisting the City in establishing and implementing proactive claims management practices. It is essential to have a competent TPA provider with the technical capacity and skilled workforce to ensure effective claims administration activities occur. AdminSure’s long-term engagement in this capacity also brings familiarity with our claims and jurisdictional idiosyncrasies. The monthly rate for the first two years of the proposed agreement is at the same level as the last amendment in 2012, so pricing stability is achieved. Based on these many factors it is recommended that the attached agreement be approved by Council.
POLICY ALTERNATIVES:
There are no viable policy alternatives for this action.
PUBLIC OUTREACH/INTEREST:
This is an internal services contract, so public outreach was not deemed necessary.
LEGAL REVIEW:
The agreement has been reviewed and approved by the City Attorney’s office as to legal form.
Attachment:
1. Agreement with AdminSure, Inc.