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Santa Monica Workers’ Compensation Costs on Rise Again
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Convention and Visitors Bureau Santa Monica


By Niki Cervantes
Staff Writer

May 3, 2016 -- After briefly slowing, costs for employees injured on the job are rising again for Santa Monica’s city government and are likely to continue rising well into the future, a new risk management report has found.

Santa Monica police, the fire department and the City’s Big Blue Bus system were responsible for most of the rise in workers’ compensation costs, Finance Director Gigi Decavalles-Hughes said in a status report to the City Council.

New claims filed increased by 7.2 percent in the first half of the 2015-2016 fiscal year, compared to the same time period last year, she said, and in those instances mostly came from the fire department and BBB employees. But the increase in indemnity costs, or “lost time,” more than doubled that figure to reach 15 percent, she said.

In fact, 57 percent of the new claims prompted employees to stay off the job, the report said.

Santa Monica has experienced ongoing problems with rising workers’ compensation costs. The City added an extra $5 million to its self-insurance workers’ comp fund in 2014-2015 to pay increased costs, plus another $6 million over this and the upcoming fiscal years. The fund, is budgeted at nearly $13.8 million for the 2016-2017 fiscal year.

But the fund still can’t keep pace with escalating costs, Decavalles said.

“If the growth in claims costs continues at the current pace, however, the City should prepare for significant hikes (i.e., well beyond the 5% contemplated in the Financial Forecast) in contributions to the Self-Insurance Fund come FY 2017-18 and going forward,” her report said.

As of December 31, the compensation program’s liabilities – or the total value of all open claims from 1979 on – was $27.3 million, up from $23.6 million a year earlier, the report said.

Most of the growth came due to cases involving police and BBB employees, Decavalles said.

“Further, program expenses (i.e., cash flow) for the first half of the fiscal year totaled $5.3 million,” the report said. “If this trend continues, the City is on target to spend nearly $1.7 million more on program expenses in FY 2015-16 than the prior year.”

Decavalles' report did not detail the nature of the new cases reported but a similar report last year partially attributed the upswing to the City’s aging police force ("Santa Monica Police Forced Tied to Rising Injury Cost, City Officials Say," November 4, 2015). Nearly 40 percent of the force’s more than 200 sworn officers were 45 years of age or older and undergoing a high rate of surgery, that report said.

Most were for orthopedic injuries.

Little has changed, Decavalles said Monday.

“Our aging workforce continues to be a primary factor of rising workers' compensation costs,” she told the Lookout.

Decavalles said in her March 31 update to the Council that 58 claims were settled in the first half of the 2105-2016 fiscal year, compared to 50 during the same period last year.

Of those, 18 were settled for a total of $762,500 through “Compromise and Release Agreements,” lump sums offered to injured workers no longer employed with the City who then agree to close their claims.

The remaining claims were settled with “Stipulation” agreements totaling $1,044,851 and which set the amount of permanent disability, including all related medical costs for life.

Hoping to rein in costs, Decavalles noted the City recently created a committee of representatives of the City Manager’s Office, City Attorney’s Office, the Finance Department and the Human Resources Department to look at innovations in cost cutting for workers’ compensation cases.

For now, City staff schedules medical appointments for injured workers whenever possible, contacts the physician’s office immediately after medical appointments to update status and “promptly reschedules missed medical appointments” if needed, the report said.

The idea is to accelerate medical care and reduce the “length of injury duration,” Decavalles said.

Along with other programs, Risk Management staff are “also focusing on more one-on-one interactions with injured employees, contacting them at least every 45 days to discuss their care and offer support to get them back to work. This is considered an industry best practice.”

But she warned there are no quick fixes.

“It is important to understand, however, there are no immediate solutions to the City’s rising workers’ compensation costs,” her report said.

Rather, the City needs to continue to "vigilantly extract every efficiency and/or dollar savings from existing cost control measures and be open to trying unconventional methods that could take years to yield results.”

“Consequently” the report concluded, “it would be wise for the City to prepare for continued higher workers’ compensation well into the future.”

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