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Home My WebLink AboutPre Memo- Claims Adjusting ProgramCITY OF M1AM1, FLORIDA INTER -OFFICE MEMORANDUM TO: Ho •Ci Mayor and ssion FROM: Pedro G. `"'andez, P.E. City Manager DATE: SUBJECT: September 17th, 2009 FILE: Risk Management Claims Adjusting Program REFERENCES: ENCLOSURES: Attachments Prior to fiscal year 2000, the City experienced a very high volume of liability claims activity. During this time there were approximately 3,600 open claims between workers compensation and other general liability, being managed by a staff of 7 city adjusters (averaging more than 500 cases per adjuster). The large inventory of claims and the overwhelming case load created deficiencies in the investigation and administration of the claims. Initial responses to reported claims were untimely, injured workers did not receive timely treatment, the return to work percentages were low and claims files remained open and unsettled for lengthy periods, ultimately resulting in higher costs across the board. The situation was further exacerbated by the fact that there was limited coordination between the Law Department and the Risk Management Department, which made litigating claims costly and less successful. Finally, because Departmentstaff was constantly in a reactive posture, little to no effort was being made•to reduce claims frequency through safety and prevention programs. The City Administration attempted to improve the effectiveness of the city's internal claims management operations by hiring 8 additional city claims adjusters over the next two fiscal years (2001 and 2002). This change did result in a reduction in case load and better management of new claims files. Despite these successes, the prior claims files managerrient deficiencies still left the Department with a significant backlog of old unresolved claims files. In 2003, in an effort to resolve all of the claims management issues, the City Administration made a decision to completely outsource the mar:uement and administration of workers' compensation and liability claims. An RFP was issued for a third party administrator (TPA), that would provide full service management of workers compensation and liability claims, with compensation for these services being determined on a projected "per claimant" basis. Based on projections of claims flies at that time (1,600 new claim files and 2,300 outstanding open claims files) the annual fee for service was determined to be approximately ,S ..5 million. A contract was awarded to the successful and most responsive bidder Gallagher Bassett Services, Inc. Since engaging the service of Gallagher Bassett and after going through an unexpectedly long transition period, the City has realized vast Improvement in the claims management process and significant savings to the general fund. A recent evaluation of Gallagher Bassett for the period 10/1J04 — 4/30/09 documented that 7,206 claims were handled and 6,216 were closed (86%). This was the result of aggressive investigation of the compensability of the claims, close monitoring and auditing of claims In addition to better and more efficient settlements. This number excludes the transferred claims files. Of the original 2,300 files, approximately 85% of those claims have been settled and closed. 1 The change has also allowed the Risk Management department to be restructured; reducing staffing by ten positions resulting in a savings of approximately $4,000,000 in personnel cost since 2005. It has also made it possible for the remaining staff to focus on safety and prevention programs that continue to reduce the number of new workers compensation claims. The claims prevention process has been so successful that the City has realized a reduction in projected claims which reduced the administrative cost paid to Gallagher Bassett by approximately $500,000 per year (since the TPA contract is on a "per claimant" basis). Risk Management has been asked to explore the possibility of bringing the administration of claims in house. While it is possible to make such a change, we may face major obstacles In doing so. The initial setup costs will be expensive as there will be a need for additional office space, claims management software and additional overhead expenses (estimated at $900,000). Additionally, the department would need to be staffed up to a level that would keep the claims management efficiency level, at minimum, equal to today expectations. Based on the Department's review, we anticipate the need for 22 additional positions costing approximately $1.8 million annually. Details of the staffing and position cost are attached for your review. Our program is currently working well. Gallagher Bassett scores high on claims audits and performance evaluations. The performance standard for the Risk Management Department is also consistently high. The employees are meeting goals and initiatives and to some extent exceeding performance measures. The value of working in a close partnership with the TPA and City Attorney's office in all aspects of claims and litigation management only enhances the program. Based on the amount of time and effort invested over the last several years bringing the process to the current professional and cost effective +level, I would not recommend reversing that effort at this time Cc: Larry Spring, CFO Many of the remaining open workers' compensation claims are related to Permanent Total Disabilities and claims made under the Heart and Lung B1II (F.S. 112). The Risk Management Department has updated protocols and procedures to insure proper investigation of all claims asserted under the Heart and Lung Bill. As a result, the numbers of compensable claims has been reduced. 2 -RISK -MANAGEMENT. CLAIMS.0RGANIZATI0N. _.. . • POSITIQflj , : :. .. • .:: ; ''SALARY RANGE • : • CLAIMS MANAGER 95,000 -115,000 LIABILITY CLAIMS SUPERVISOR 75,000 - 85,000 WORKERS COMP CLAIMS SUPERVISOR 75,000 - 95,000 WC SENIOR ADJUSTERS 65,000- 75,000 WC SENIOR ADJUSTERS 65,000 - 75,000 WC SENIOR ADJUSTERS 65;000 - 75,000 WC ADJUSTER II 55, 000 - 65,000 WC ADJUSTER 11 55, 000 - 65,000 WC ADJUSTER I 35,000 - 55,000 LIABILITY SENIOR ADJUSTER 65,000- 75,000 LIABILITY SENIOR ADJUSTER 65,000- 75,000 LIABILITY ADJUSTER II 55,000 - 65,000 LIABILITY ADJUSTER I 35,000- 55,000 SUBROGATION ADJUSTER • • 35,000 - 55,000 WC ACCOUNT SPECIALIST • 35,000 - 50,000 ACCOUNTSPECIALIST MEDICAL BILL RE -PRICING 35,000 - 50,000 ACCOUNT SPECIALIST MEDICAL BILL RE -PRICING 35,000 - 50,000 CLAIMS ASSISTANTS 30,000 - 40,000 CLAIMS ASSISTANTS 30,000 - 40,000 CLERKS CLAIMS INPUT 25,000 - 35,000 CLERKS CLAIMS INPUT , 25,000 - 35,000 CLERK FILING 25,000-35000 Estimated Annual Salaries $1,080,000 -1,365,000 Average Annual Salaries $1,222,500.00 Benefits Cost $525,675.00 Estimated Total Personnel Cost . $1,748,175.00 RISK MANAGEMENT CLAIMS ORGANIZATION $ALAkY RANe - • : : • . ' ' .... ...•• •-VORIIIViENTS�,;";::`.: OFFICE SPACE TO ACCOMMODATE A TOTAL OF 21 CLAIMS PERSONNEL $90,000.00 Currently the Risk Management Department has 18 employees. We do not have any additional office space available to accommodate these 17 additional positions. CLAIMS SOFTWARE SYSTEM $300,000.00 Information obtained through benchmark. 24HRS ON -CALL CENTER TO REPORT NEW CLAIMS $75,000.00 This amount is based on what we currently pay Gallagher Bassett for the use of the 24 hour call center which is included in the current contract service fees MEDICAL CLAIMS MANAGEMENT COMPANY FOR TELEPHONIC CASE MANAGEMENT $300,000.00 This amount is based on what we currently pay AMERISYS for the use of the telephonic case management, managed care services and bill re -pricing which is included in the current contract service fees. COMPUTER AND RELATED EQUIPMENT FOR ADDITIONAL 17 CLAMS PERSONNEL $30,000.00 This cost would affect the IT Department and their budget. They have the inventory for computers for personnel . OFFICE SUPPLIES FOR ADDITIONAL 17 CLAIMS PERSONNEL 20,000.00 ' Currently the Risk Management Department has budgeted $10,000 for FY 09-10 for 18 employees. This number would have to be re -allocated . • FILING ROOM AND Currently the Risk Management Department has no additonal filing space available to store the claim files. Additional space will STORAGE CABINETS TO be required. STORE FILES, LIGHTNING $40,000.00 Estimated cost $855,000.00 , RISK MANAGEMENT CLAIMS ORGANIZATION CHART