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AUTHORIZE THE CITY MANAGER TO APPROVE A CONTRACT WITH ATHENS ADMINISTRATORS AS THIRD PARTY ADMINISTRATOR (TPA) FOR THE CITY’S SELF-INSURED WORKERS’ COMPENSATION PROGRAM
recommended action
RECOMMENDATION
It is recommended that City Council adopt and authorize a motion to:
1. Authorize the City Manager to execute an agreement and all supporting documents with Athens Administrator (Athens) to provide services as the Third Party Administrator (TPA) for the City’s self-funded Workers’ Compensation Program:
2. Approve findings for an exception to the competitive bidding process; and
3. Authorize the City Manager to take all necessary and appropriate action to carry out the purpose and intent of this motion.
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Summary
The City currently contracts with CorVel Enterprise Comp, Inc. (CorVel) to provide services as the TPA for the City’s self-funded Workers’ Compensation Program. These services include the TPA administering workers’ compensation claims in accordance with State law and regulations and City policy and procedures while providing the administration of workers’ compensation benefits such as medical treatment and timely indemnity payments to the injured worker. The TPA will assist the City with medical cost containment services such as utilization review, bill review and nurse case management.
The agreement with CorVel expires on September 30, 2018. On January 16, 2018, the City Manager approved the use of a Request for Proposal (RFP) process to solicit proposals for services as the TPA for the City’s self-funded Workers’ Compensation Program. On May 22, 2018, the RFP Evaluation Committee (Committee) interviewed three of the five most highly rated responsive proposers and unanimously chose Athens. If approved, the agreement with Athens will commence on October 1, 2018, and continue for five years until September 30, 2023 (Attachment A).
Athens will bill the City for services rendered based on flat fee as noted in the contract.
|
TPA Services |
Athens |
|
Program Year 1 |
664,160 |
|
Program Year 2 |
684.085 |
|
Program Year 3 |
704,607 |
|
Program Year 4 |
725,745 |
|
Program Year 5 |
747,518 |
|
TOTAL |
$3,526,114 |
This billing structure is less than what the City is currently paying with the current administrator, CorVel. The cost savings over a five-year period equates to $152,486.
DISCUSSION
Background
The City of Stockton has been self-insured for workers’ compensation since January 1, 1979. The City’s Workers Compensation Program has claims expenditures of approximately $8.5 million per year. The City’s current inventory is 650 open workers’ compensation claims and an average of 250 new claims are open per year. The City’s current claims reserves for the program are currently budgeted at $39 million.
Due to the level of training, expertise, volume of activity, and technological infrastructures required for effective claims management, the City has historically contracted with a TPA firm that has the certification, expertise, and resources to handle the daily mechanics of claims administration activities.
CorVel has been the City’s current vendor since October 1, 2010. The agreement with CorVel expires on September 30, 2018. On January 16, 2018, the City Manager authorized the Human Resources Department to execute an RFP.
Present Situation
An RFP for a Workers’ Compensation TPA was issued on March 8, 2018. The RFP outlined the scope of work, and requested responses to a detailed questionnaire addressing the vendor’s experience, organizational philosophy, and commitment to transparency in delivery of services and pricing. The RFP also contained the request to administer workers’ compensation claims in accordance with State law and regulations, City policies and procedures; maintain open and closed claim files; stop loss reporting; subrogation recovery; utilization review and medical bill review/pricing. The City also requested a strategic plan to address the volume of open claims.
The City initially received five (5) proposals, three (3) of which were selected for the presentation/interview phase of the RFP and they were Athens Administrators, Tristar, and York. CorVel did not submit a proposal.
A committee was established to evaluate the proposals submitted and select the best available TPA. The committee was comprised of staff from the City Manager’s Office, Human Resources, the Police Department, Administrative Services and a representative from the California State Association of Counties Excess Insurance Association.
On May 22, 2018, the committee interviewed the three proposers and unanimously selected Athens. Reference checks were conducted from current Athens public entity clients resulting in positive feedback. Athens has a vast experience with public employers and is uniquely suited to address the specific challenges of claims administration within the public industry. Understanding public safety presumptions and effective administration of these benefits is a high priority for the City. Athens offers a delivery model of expertise with a commitment to delivering superior, measurable results. They will provide specialized solutions tailored to meet the unique needs of the City.
Data analytics is an area of improvement desired by the City. The current provider, CorVel does not have the ability to generate robust reports. Athens Claims Management system will allow the City to have unlimited access to data analytics allowing the City to make data driven decisions. AthensPredict is a predictive modeling program that will provide the City with another tool to triage and manage claims.
In the proposal, Athens submitted a five-year indemnity inventory forecasting model reflecting a possible reduction of claim volume by 38% in the next five program years through better management of the Workers’ Compensation program. They have committed to partnering with the City on a strategic plan to reduce incurred costs potentially generating significant savings. Athens has also agreed to evaluate reducing fees if there is a reduction of open claim inventory.
The RFP process was utilized as an exception to the competitive bidding process, as selection based on cost alone does not necessarily guarantee the most appropriate vendor choice for specialty services such as benefits consulting and actuarial services.
Findings
SMC section 3.68.070 provides an exception to the competitive bidding process in cases where the City Council has approved findings, which support and justify this action.
Findings to justify an exception to the competitive bidding process are as follows:
1. The RFP process was utilized as an exception to the competitive bidding process, as selection based on cost alone does not necessarily guarantee the most appropriate vendor choice for specialty services such as Third-Party Workers Compensation Administration. A strict competitive basis for selection would likely lower the quality of the services provided.
2. Selection based on cost alone does not take into account public sector experience or the ability to provide consistent quality claims administration services.
3. These types of services, such as workers’ compensation claims administration, medical cost containment, and our return to work program require experienced professionals who have handled such services for other public entities and can work closely with City staff, which is in the public interest.
4. The RFP process allows the vendors to specify what services they can provide to the City rather than the City bidding specific services.
It is necessary for the City to hire outside professionals to handle these services as City staff does not have the full expertise or capacity to perform these services
FINANCIAL SUMMARY
The following costs are based on the specific RFP criteria listed and the response received from Athens as compared to the incumbent. The savings over the 5-year period equates to $152,486:
|
TPA Services |
CorVel* |
Athens |
|
Program Year 1 |
$735,720 |
$664,160 |
|
Program Year 2 |
735,720 |
684,085 |
|
Program Year 3 |
735,720 |
704,607 |
|
Program Year 4 |
735,720 |
725,745 |
|
Program Year 5 |
735,720 |
747,518 |
|
TOTAL |
$3,678,600 |
$3,526,114 |
*Estimated based on current agreement
Funding for the Workers’ Compensation third party administrator services agreement is budgeted each year in fund 551-5610-572 based on the anticipated scope of work.
Attachment A - Athens Contract 2018