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HomeMy WebLinkAbout2010-04-21 PACKET 04.J.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 4/21/2010 PREPARED BY City Clerk Caron Stransky ORIGINATING DEPARTMENT DEPARTMENT HEAD COUNCIL ACTION REQUEST Consider authorizing the purchase of workers compensation insurance from the League of Minnesota Cities Insurance Trust in the amount of $248,729 with a $10,000 per occurrence medical deductible and a 15.5% premium credit. STAFF RECOMMENDATION Authorize the purchase of workers compensation insurance from the League of Minnesota Cities Insurance Trust. SUPPORTING DOCUMENTS ® MEMO /LETTER: Memo from Caron Stransky. ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ❑ OTHER: ADMINISTRATORS COMMENTS 4� P City Administrator Date COUNCIL ACTION TAKEN: [APPROVED ❑ DENIED ❑ OTHER Document3 From: Caron Stransky, City Clerk Date: April 14, 2010 Subject: Workers Compensation Coverage The City of Cottage Grove received its annual premium quotations from the League of Minnesota Cities Insurance Trust (LMCIT) for workers compensation insurance covering City employees, the Mayor and City Council Members, and members of the Cottage Grove Economic Development Authority for the 4/03/2010 to 4/03/2011 policy period. The LMCIT offers its members a number of premium options. Regular Premium Option Under the regular premium option, the premium is calculated based on City payroll times the classification rate per $100.00 payroll equals the premium. The following table shows the total payroll broke down by classification and includes the classification rate and 2010 premium. ;Rate Re De §cr'Ipdon -; :' Cale :.. 2010 '?. Payroll , ...' Per' _ . Rate 2fl10' _ : Premium Cause Payroll Change $10©: Change, Pramium ' 'Change', wa e' STREET & ROAD 5506 510,000 -1.0% 7.9 -5.4% 40,290 -6.4% Decrease in payroll 1.0% and CONSTRUCTION - reduction of rate 5.4% Applies to employees resulting in the reduction of maintaining or manual premium 6.4 %. constructing City streets, including street cleaning, sewer cleaning and removal of snow from City streets and sidewalks. AMBULANCE SERVICE 7380 _ 200,000 _ - 49.5 4.72 -15.0% 9,440 -57.1% Decrease in payroll 49.5% (Not Volunteer) - Applies due to the shift of the EMT/ to ambulance drivers and Firefighters to the Firefighter paramedics. (Not Volunteer) classification code and the decrease in 15.0% resulting in the l reduction of the manual mium 1.5 %. WATERWORKS - Applies 7520 370,000 _ -4.7°% 4.03 3.3% 14,911 -1.5% _ pre Decrease in payroll 4.7% and to employees working in reduction of rate 3.3% the City water plant and resulting in decrease in includes incidental line manual premium 1.5 %. repair (not line construction) and meter readers. -- Fe - -,. FIREFIGHTERS (Not --- 7706 — 216,900 0.0% 6 39 --- -12.1% 13,860 - -12.1% Reduction of rate 12.1 %, Volunteer) - Applies to resulting in a decrease of full-time firefighters. manual premium 12.1 %. N ote: No chan i n payr . FIREFIGHTERS 7708 29,029 -4.9% 113.84 30.0% 33,047 23.6% Decrease in payroll 4.9% and (Volunteer) - Applies to the increase in the rate 30 %, City's part-time primarily due to the shift of firefighters. The premium EMT /Firefighters payroll from base for this classification Ambulance Service is the population served classification, resulting in an for fire protection. Does increase in manual premium not qualify for 10% non- 23.6 %. smoker credit; 90% required. (84.31% of employees are non- smokers. POLICE- NONSMOKER- 7720 2,990,000 0.3% 3.45 -8.0% 103,155 -7.7% Increase in payroll 0.3% and Applies to the City's police decrease in rate 8.0 %, department and qualifies resulting in a reduction in the for 10% non - smoker manual premium 7.7 %. credit; 90% required. (92% of employees are non - smokers POLICE RESERVES- 7722 Pending Reserve officers will augment and assist sworn officers, and perform limited law enforcement duties not requiring the assignment of sworn officers. CITY SHOP &YARD - 8227 227,200 0.0% 3.59 -44.6% 8,156 - 44.6% Payroll remained the sam e; Applies to employees however, the rate decreased involved with shop and 44.6 %, resulting in a 44.6% yard work doing decrease m the manual maintenance on City premium. vehicles and equipment. j CLERICAL - Applies to 8810 1,775,500 j 0.8% 0.8 j 2.6% 14,204 3.4% Payroll increased .8 %, the employees engaged rate increased 2.6 %, exclusively in resulting in a 3.4% increase bookkeeping, in the manual premium. recordkeeping or in other office work where books and records are kept or correspondence is conducted. _ _ CLUB - COUNTRY /GOLF- 9060 560,000 -9.6% 1.96 14.6% 10,976 3.6% 1 Payroll decreased .96 %, the Applies to employees at rate increased 14.6, resulting the City golf in a 3.5% reduction in the course /clubhouse. manual premium. PARKS - Applies to 9102 850,000 ;.4% 3.65 3,11% 31,025 1.7% Payroll decreased 1.4 %, the employees in the City's rate increased 3.65 %, park system. resulting in a 1.7% manual '... premium increase. CITYARENA- 9182 245,100 0.1% 1.72 28A% 4,216 28.4% Payroll increased only .l OPERATIONS - Applies the rate increased 28.4 %, to employees working at resulting in a 28.4% '... the Ice Arena, including ''.. concession stand '.. work ers. payWtDes�r7Pton s soda 2 261(3 P Payroll , ,cafe T Ta1a 2 2S#1 P PPeTrO , °` .;, , ° Overall, the manual workers compensation premium decreased 7.5% and totals $286,986. In many of the categories above, the premium increased or decreased due to changes in payrolls and /or in the classification rates per $100 of payroll. For example, Ambulance decreased due to a shift in the EMT /Firefighter classification from Ambulance to the Firefighter (Not Volunteer) category. Also, the City Shop & Yard rate decreased 44.6 %, due to the significant reduction in rate from $6.48 to $3.45 per $100 in payroll. Experience Modifier The manual premium ($286,986) is then adjusted by an experience modifier. An experience modifier is a term used in the American insurance business and more specifically in workers' compensation insurance. It is a credit or debit factor based on our loss and payroll history. If the experience is worse than expected, we are "punished" with a high modifier (more than a 1.0) and this goes against our premium. However, if our experience modifier is better than expected, we are then "rewarded" with a lower modifier (less than a 1.0) and we pay less in premium dollars. For example, an experience mod of 0.80 = a 20% premium credit, while a 1.20 = a 20% percent increase. In determining the experience modifier, claims in the oldest three (3) out of the past four years are considered. The most recent past year is not considered. This year's experience modifier covers losses for the years 2006, 2007 and 2008. For this three -year period, the City's claims totaled $429,086 and are broken down as follows: For the three -year period, there were 70 workers compensation claims that cost $565,295, with 55.96% from the police department and 40.60% in the public works department. The following is a breakdown of the injuries that contributed toward the $565,295 in claims: 2006 Policy Period In this period, there were 23 claims totaling $280,536. Of this total, two (2) claims in public works totaled $189,684 and one (1) claim in police totaling $54,715.22. The three (3) claims totaled $244,399. 2007 Policy Period In this period, there were 21 claims totaling $22,918 - a great year overall. Then came 2008... 2008 Policy Period In this period, there were 26 claims totaling $261,840, two (2) of the claims were in police and total $236,800. Last year, the City's experience modifier dropped from 1.18 to 1.10. This year our experience modifier went backup to 1.18 due to the large number of claim that we had in 2008. The 1.18 modifier increased our premium an additional $51,657 for 2010 policy period. For many years, our modifier gradually decreased each year until 2006 when it dropped to .79. All it takes is a few bad claims for the modifier to go up, as depicted in the following chart. I Workers Compensation Experience Modification ! 1.1 250 1995 - 2010 Policy Periods 5,080 1.18 1.02 1.04 1.01 3.00% 10 ,15 9 1.10 96 0.�6 1.3 15,239 285,980 -- 0.82 0.91 0.84 0.90 5.00 _ 0.82 0.80 0.79 - 10,000 1.2 52,490 _ 248,729 I 1.1 1 0.9 0.8 0.7 i 0.6 a` rn m o 0 0 0 0 w rn o 0 0 0 N N N 0 N 0 N Options. The League of Minnesota Cities offers cities a number of options when renewing their insurance policy. 7. Deductible Option The Leagues offers a deductible option to Lower the premium in return for agreeing to reimburse them for paid medical losses up to a set deductible. If the City selects a deductible option, the deductible applies per occurrence to medical costs only. There are six deductible options ranging from a $250 deductible with a 2% premium credit to a $10,000 deductible with a 16% premium credit. The deductible premium options quoted by the League of Minnesota Cities Insurance Trust include the following: ..6ed>3clible ' Premium.., -Credit Net Depositi PerC?ccurrerrcQ Crsdif'`; . Amount 1.1 250 1.50% 5,080 1.18 1.02 1.04 1.01 3.00% 10 ,15 9 1.10 96 0.�6 0.92 15,239 285,980 -- 0.82 0.91 0.84 0.90 5.00 _ 0.82 0.80 0.79 - 10,000 15.50% 52,490 _ 248,729 The League of Minnesota Cities offers cities a number of options when renewing their insurance policy. 7. Deductible Option The Leagues offers a deductible option to Lower the premium in return for agreeing to reimburse them for paid medical losses up to a set deductible. If the City selects a deductible option, the deductible applies per occurrence to medical costs only. There are six deductible options ranging from a $250 deductible with a 2% premium credit to a $10,000 deductible with a 16% premium credit. The deductible premium options quoted by the League of Minnesota Cities Insurance Trust include the following: ..6ed>3clible ' Premium.., -Credit Net Depositi PerC?ccurrerrcQ Crsdif'`; . Amount i Premium i 250 1.50% 5,080 296,139 500 3.00% 10 ,15 9 291,060 _ 1.000 4.50% 15,239 285,980 2.500 7.50% 25,398 275,8 5.00 11.00% 37,2 263,968 10,000 15.50% 52,490 _ 248,729 Last year, the City selected a $10,000 per occurrence deductible and by doing so we saved $54,601 in premium. After we deducted our actual out -of- pocket medical expenses of $35,951, we currently have an $18,650 premium saving. 2. Non - Smoker Credit for Police and Firefighters The LMCIT also offers a 10% rate credit for non - smoking police and firefighters. To qualify for the credit, the City must obtain written statements of non - smoking from at least 90% of the members of the department. The statement must be signed and dated, and must state that the individual does not smoke and has not smoked within the premiums six months. LMCIT gives this discount because several of the diseases presumed by statute to be job - related for firefighters and police officers - various heart diseases, lung diseases, and cancers - are also related to smoking. Fire or police departments with very few smokers represent a lower risk for claims for heart disease, lung disease, or cancer. The City surveyed the police and fire department personnel. This year, 92% of police are non- smokers and 84% of the firefighters are non - smokers. Therefore, police qualified and received a 10% discount in their rate. Human Resources has implemented a policy of not hiring smokers in the Public Safety (police and fire) Department and will look into offering an incentive "quit smoking" programs to reduce the number of smokers within the police and fire departments with the hopes that the Fire Department will qualify for the non - smoker discount in the future. 3. Retrospective Rating Option Under the LMCIT's retrospective- rating option, the City's final premium cost reflects its own, actual loss experience for the year. Retro rating is a form of risk retention. With good experience, a retro can save the City significant money during the long run. Of course, the City is also subject to possible premium increases if it experiences a lot of injuries or a single big loss. Cities that select a retro option pay a deposit premium at the beginning of the agreement period. Six months after the end of the agreement year, the City's premium is adjusted up or down based upon the City's actual incurred losses for that year. That adjustment is repeated annually until all claim activity ceases permanently. This includes activity on claims that reopen and claims for injuries that are filed later for an accident occurring within the retro year. Summ ary For the 2010 policy period, the 1.18 experience modifier increased the premium in the amount of $51,657. Selecting a $10,000 per occurrence medical deductible will provide a 15.5% or a $52,490 premium credit, fora total premium for the 2009 -10 policy period totaling $248,729. The quotations received from the League follows: Manual Premium 286,986 Experience Modification -1.18 51,657 Standard Premium 338,643 Medical Deductible Credit - 15.5.0% (52.490) Premium Discount (37,424) Net Premium 248,729 The City budgeted $290,000 for workers compensation insurance coverage in the 2010 Self - Insurance Fund Budget for insurance expenses. Recommendation Staff recommends the Council authorize the purchase of workers compensation insurance from the League of Minnesota Cities Insurance Trust (LMCIT) in the amount of $248,729 with a $10,000 per occurrence medical deductible and 15.5% premium credit. /cs