HomeMy WebLinkAbout08 - Workers Compensation Third Party AdministrationCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 8
March 10, 2009
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Human Resources, Lauren Farley, Risk Manager, (949) 644 -3302,
Ifarley @city.newport- beach.ca. us
SUBJECT: Extension of Contract for Workers Compensation Third Party
Administration (TPA) Services
Issue:
Does the Council approve an annual expenditure of $272,740 to extend the current
Workers Compensation Third Party Administrator contract through December 31, 2009?
Recommendation:
Approve the attached contract extension by amendment for Third Party Administrator
(TPA) services with CorVel Corporation with a proposed 3% increase to the existing
annual fee of $254,311, plus an additional fee of $10,800 to handle the future medical
maintenance files for a total annual fee not to exceed $272,740 in 2009.
Back-ground:
The City is authorized by the State of California as a self- insured public entity for its
workers compensation program; however, the City is not authorized to self - administer
its workers compensation claims and must contract with a qualified third party
administrator (TPA) to provide these services. The City of Newport Beach partnered
with the City of Costa Mesa in February 1995 to jointly contract for TPA services to
secure a dedicated claims unit for the purposes of continuity of claims adjusting and
customer satisfaction.
The last formal Request for Proposal (RFP) process for these services was conducted
at the end of 2005 with an agreement presented to City Council for approval in April
2006. This agreement was for the initial term of April 1, 2006 through December 31,
2006, with the option for two one year extensions and the City exercised both those
options extending the contract through December 31, 2008.
Excess Workers Compensation (WC) Insurance Renewal
March 10, 2009
Page 2
Analysis:
The dedicated claims unit has served the Cities well with Newport Beach experiencing
the extra added benefit of having the same claims adjuster for over eleven years.
Unfortunately, our long -time claims adjuster left in May 2007 and the City's Risk
Management staff began immediately working with the TPA to find a new claims
adjuster. The City began working with our new adjuster in July 2007; however, by July
of 2008 continued staff disruptions in the dedicated unit and customer service issues
with our claims adjuster resulted in discussions about the quality of service, claims
adjusting and trends and the potential need for proposed staffing changes. During this
time period, the City also experienced an increase in future medical maintenance files.
The increase of medical maintenance files resulted in the trend of workers no longer
settling their claims upon retiring or terminating employment due to the cost of health
care and the economy. The increase in future medical maintenance files and the
customer service issues resulted in an independent audit conducted by George
Kingston & Associates of the workers compensation claims administration. The audit
found improvement in many areas since the last audit that occurred in 2005.
To address the increase in our medical maintenance files, CorVel proposed a temporary
adjuster for a six -month period to finalize former employees' claims. Also, the recent
claims adjuster change for Newport Beach should address the remaining customer
service issues. Both Newport Beach and Costa Mesa agree that extending the contract
up to an additional 12 months allows for continued benefits of the dedicated claims unit,
correction of any items found in the audit and the opportunity to evaluate current pricing
and performance within the industry before embarking on a new RFP process late in
2009.
Funding Availability:
Funds which cover the recommended expenditure are in the Internal Services Budget —
Insurance Reserve Fund 6010 -8612 and are sufficient to cover the increase for the
remainder of this fiscal year. Additionally, this increase has been accounted for in the
proposed budget for Fiscal Year 09 -10.
Pr p red by:
Sheri Anderson, Sr. HR Analyst
-
Submitted by:
Terri L. Cassidy, HR Director
Lauren Farley, Risk Manager
AMENDMENT NO. 1
TO
PROFESSIONAL SERVICES AGREEMENT WITH CORVEL COMPANY
FOR WORKERS COMPENSATION CLAIMS ADMINISTRATION SERVICES
THIS AMENDMENT NO. 1 TO PROFESSIONAL SERVICES AGREEMENT, is
entered into as of this 1 day of March, 2009, by and between the CITY OF NEWPORT
BEACH, a Municipal Corporation ( "CITY "), and CorVel a California Corporation or
whose address is 10750 Fourth Street, Suite 100, Rancho Cucamonga, California,
91730 ( "COMPANY "), and is made with reference to the following:
RECITALS:
A. On April 1, 2006 CITY and CONSULTANT entered into a Professional Services
Agreement, hereinafter referred to as "AGREEMENT', for Claims Administration
Services.
B. CITY desires to enter into this AMENDMENT NO. 1 to reflect additional services
not included in the AGREEMENT and to extend the term of the AGREEMENT to
December 31, 2009.
C. CITY desires to compensate COMPANY for additional professional services
needed for workers compensation claims administration.
D. CITY and COMPANY mutually desire to amend AGREEMENT, hereinafter
referred to as "AMENDMENT NO. 1 ", as provided here below.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as
follows:
1. In addition to the services to be provided pursuant to the AGREEMENT and
AMENDMENT NO 1, COMPANY shall diligently perform all the services
described in AMENDMENT NO. 1 including, but not limited to, all changes
recommended in the Workers Compensation Claims Audit, Index of
Recommendations attached hereto as Exhibit A and incorporated herein by
reference. The City may elect to delete certain tasks of the Scope of Services at
its sole discretion.
2. City shall pay Company for the services on a quarterly flat fee basis not -to-
exceed Two hundred, seventy-two thousand, seven hundred and forty dollars
and no /100 ($272,740) without prior written authorization from City.
3. The term of the AGREEMENT shall be extended to December 31, 2009.
4. Except as expressly modified herein, all other provisions, terms, and covenants
set forth in AGREEMENT shall remain unchanged and shall be in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO.
(INSERT] on the date first above written.
APPROVED AS TO FORM:
ZZ22c-
City A omey
for the City of Newport Beach
ATTEST:
By:
Leilani Brown,
City Clerk
CITY OF NEWPORT BEACH,
A Municipal Corporation
0
Mayor
for the City of Newport Beach
CONSULTANT:
By:
(Corporate Officer)
Print Name:
97
(Financial Officer)
Print Name:
Attachments: Exhibit A — Claims Audit, Index of Recommendations
F: W sers\catl sharedl ContractTemplatesPublishedon4ntranet \FORMPSAAmendment.doc
ExHi iT A
City of Newport Beach
REVIEW OF WORKERS'
COMPENSATION CLAIM
MANAGEMENT
PROGRAM
George Kingston & Associates
Corona, California
February 15, 2009
INDEX OF RECOMMENDATIONS
Discussion
on Page(s)
Continue the current staffing level of the CITY
account with the replacement of the assistant who
recently left Corvel.
Require Corvel to reassign the 55 maintenance 11
claims to another staff member.
Increase the staff level assigned to the CITY 11
account by 113 potion to accommodate the
reassignment of the 55 maintenance claim$.
4 Require Corvel to implement a written plan 14
describing what steps will be taken to prevent the
City's claim files from being lost in the future.
The City should take steps to monitor the progress 14
of the plan to ensure that it is implemented and has
the desired affect.
6 Conduct a file reconciliation of all claim files 15
reported in the last two years and all currently open
files to determine the extent of the problem.
7 Require Corvel to take steps, including training, to 16
ensure that all payments are supported by the
appropriate documentation.
Provide training to the examiner and assistant 15
responsible for payment of disability benefits.
Emphasize the importance of prompt payment and
the need to pay voluntary penalties when
applicable.
GeMe Kingston & AssocWes
9 Require Corvel to determine why benefit notices 18
are sent late and take corrective action to prevent
this from occurring in the future.
10 Implement procedures at the CITY to ensure that 18
the Employee Claim Form (DWC -1) is given to the
employee in a timely manner.
11 Provide the examiner and assistant with additional 21
training and oversight to correct weaknesses
leading to the errors found in the administration of
claims.
12 Adjust the contract language to include the 22
changes recommended in items 1 and 2 above.
13 Design minimum performance standards that 22
define specific performance, and incorporate them
into the contract at the next opportunity.
George Kingston 8 Associates