HomeMy WebLinkAbout10 - Renewal of Agreement with Hazelrigg Risk Management Services, Inc. (HRMS) for Worker's Compensation (WC) Claims Administration ServicesJune 9, 1997
Agenda Item No. 10
CITY OF NEWPORT BEACH
ADMINISTRATIVE SERVICES DEPARTMENT
Human Resources Division
CITY OF NEWPGR i
REPORT
JUN -- 91997
C
DATE: June 9, 1997
TO: The Honorable Jan Debay and Members of the City Council
FROM: Lauren F. Farley, Risk Manager e
SUBJ: Renewal of Agreement with Hazelrigg Risk Management Services, Inc. (HRMS) for
Worker's Compensation (WC) Claims Administration Services.
Recommended Action:
Approve renewal of the agreement for July 1, 1997 - June 30, 1998 at the existing cost of $127,500 (0%
increase), and authorize the City Manager to execute the addendum to the existing agreement.
Background:
The City of Newport Beach has been self-insured for workers' compensation for 20 years. As Newport
Beach has a State of California authorized self-insurance program, the City is required by law to have a
certified third party administrator (TPA) or to have certified in-house staff to administer the workers'
compensation program. The benefits of using a TPA versus City staff are that the TPA possesses the
technical expertise needed to manage the ever changing State workers' compensation laws to ensure
City complianace; processes all medical bills, disabiliity benefits and associated vendor invoices; and
provides a higher level of claims administration service to employees.
During the fiscal year 1994/1995, the City of Newport Beach undertook a partnership with the City of
Costa Mesa to perform a joint Request for Proposal (RFP) process for Worker's Compensation claims
administration services. That process resulted in both Cities entering into an agreement with HRMS
effective 5/1/95. At the Cities' request, a dedicated claims unit of four claims professionals was assembled
to work exclusively on the Cities' claims. To date, HRMS has closed approximately 315 claims for the City
of Newport Beach.
The fee paid to HRMS during the 1995/1996 contract year was $245,000.00. (HRMS was the lowest
qualified bidder in the RFP process.) Fees are split 50/50 between Newport Beach and Costa Mesa, with
each City paying $122,500.00. (This was a reduction of $9,500.00 from our previous administrator's
annual fee of $132,000.00.) HRMS's fees for FY 96/97 are $255,000.00 or $127,500.00 per City. (Still a
$4,500.00 reduction from our previous administrator's annual fee.)
Discussion:
HRMS has developed an efficient system for processing new claims and providing Worker's
Compensation benefits and assistance to employees on a timely basis. In addition, HRMS and the Cities
will be developing mutually agreed upon "conditions of satisfaction" for the 1997/1998 contract year to
continue the progress of improving claims procedures, reviewing medical providers & case management
and other cost containment measures. These conditions of satisfaction will be reviewed with the Finance
Committee at a future meeting and if these are achieved by HRMS in the 1997/98 contract, consideration
r-1
Renewal of Agreement with HRMS
June 9, 1997
Page Two
of a 2 year contract beginning FY 98/99, with a reasonable negotiated fee increase, will be recommended
by staff.
Conclusion:
The proposal for the 1997/1998 contract year is a zero (0%) increase. The City of Newport Beach is
receiving above average service from HRMS. It is recommended that the agreement be renewed with
HRMS at the current annual fee of $127,500.00.
05/19/1997 08:56 7147544943 CITY OF COSTA NIESa FACIE 02
May 16,1997
CrfY OF COSTA hZSA
CALIFORNIA p2 M1200 P.O. Box 1200
PERSONNEL DEPARTMENT
Arlene Hazelrigg, President
Hazelrigg Risk Management Services, Inc.
1310 South Valley Vista
Dian-ion3 liar, CA 91765
RE: City of Newport Beach
City of Costa :Mesa
Dear Arlene:
This letter will confirm our conference call discussions on May 14, 1997 concerning the
renewal of the contract with HRMS for workers compensation third party claims
administration services. Per those discussions, we have mutually agreed that the contract
will be presented to our respective City Councils for approval under the following
conditions:
1. The fee for claims administration services for the term 7/1/97-6/30/98 will
remain unchanged at $255,000. Any changes in operating costs
experienced during the contract term will be fully borne by HRMS
and shall not serve to alter or amend the agreed upon fee for services for
the period stated. The Cities place no expectations apon HRMS for any
internal adjustments to be made to any area of the operating costs of the
company. We understand that HRMS is being cut to the slimmest of profit
margins by agreeing to no fee increase this year.
2. The Cities and HR1MS will mutually establish "conditions of satisfaction",
goals, and objectives to be accomplished by the HRMS claims unit during
the 97/98 contract term. This process is not meant to imply any
dissatisfaction with the services which have been provided to the Cities to
date; rather, it is intended to create a blueprint by which the Cities'
workers compensation programs will be fine tuned to the highest levels of
effectiveness. A meeting to this end has been set for June 10, 1997 at
10:00 am at the HRMS offices.
rr FAIR DRIVE
PHONE. (714)754-5330 • TDD; 17141754-6244
05/19/1997 08:56 7147544943
Arlene Hazelrigg
May 16, 1997
page 2
CITY OF COSTA MESA
PAGE '03
Arlene, as we have discussed, we share the desire to develop Newport Beach's and Costa
Mesa's programs into model programs. We certainly believe the HRMS claims staff has
the talent and energy to rise to this challenge and make it happen. And as we further
discussed, if, at the end of the 97/98 contract year, the conditions, goals and objectives
have been met, then. the Risk Managers will support a renewal of the contract 7/l/98 for a
two year term and with a reasonable negotiated fee increase.
-nark you for your willingness to talk candidly with: us about the financial aspects of the
contract, and work within the current needs of the Cities. We will forward the necessary
agreement documents for your signature shortly. Here's to another successful year!
Sincer y,
Karen L. Adams
Risk Manager
City of Costa Mesa
Lauren F. Farley
Risk Manager
City of Newport Beach
01