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<br /> 5.1E
<br />/REPOIRt! Page 1
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<br />May 22, 2006
<br />Subject
<br />Renew contract with Third Party Administrator (TPA) for worker's compensation
<br />administration services, Claims Management Inc. (CMI) for the period of July 1, 2006
<br />through June 30, 2007.
<br />Recommendation
<br />Authorize staff to renew an agreement with Claims Management Inc. (CMI) to continue
<br />to act as third-party administrator for the City's self-insured worker's compensation
<br />program for the period of July 1,2006 through June 30, 2007.
<br />Background
<br />The City of Redwood City is a self-insured employer under the Workers' Compensation
<br />laws of the State of California. In order to fulfill our obligations as a self-insured
<br />employer, the City retains the services of a third-party administrator (TPA) to ensure the
<br />City is in compliance with the various laws and procedures that govern the Worker's
<br />Compensation Program.
<br />Over the past several years CMI has been the claims administrator for the City's
<br />workers' compensation program. The Human Resources Department, management
<br />and employees have expressed their satisfaction with CMl's performance.
<br />The City has also initiated program enhancements in order to more effectively manage
<br />the workers' compensation program. The City requested that CMI dedicate a full-time
<br />examiner to the City's account. This has proven to be effective as the claims examiner
<br />has been able to dedicate time to closing old cases and managing more effectively new
<br />and existing cases. The City also introduced a performance-based incentive program in
<br />October 2004 contract with CMI in which CMI is eligible to earn up to $20,000 dollars in
<br />additional compensation for meeting or exceeding the identified performance categories
<br />(attachment "B").
<br />Performance based compensation systems are relatively new in the industry but are
<br />intended to focus attention on the major cost drivers in the workers' compensation
<br />system. Some of the major cost drivers include medical costs and litigation. Initiating
<br />and maintaining close contact with claimants assist in the quick resolution of claims
<br />thereby reducing the overall claim cost. Effective utilization review and bill review
<br />processes ensure that the City utilizes medical services when appropriate and that
<br />medical facilities are providing the City with all eligible discounts. Raley's Food has
<br />had a successful program like this in place for many years and Bay Cities Joint Powers
<br />Insurance Authority initiated a similar program in October of 2004 for its member
<br />agencies.
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