Brad Cain is an Editor of Workers’ Comp Executive
The city of Elk Grove has had its workers’ comp with the State Compensation Insurance Fund since it first incorporated as a city a decade ago. But that relationship is over. Faced with a double-digit rate hike, the Sacramento suburb opted to explore its options and is switching its coverage to Travelers. All the due diligence is saving its citizens a bundle.
The city of 143,000 was facing a workers’ comp bill of $1.3 million if it stuck with State Fund for the coming year, an 18% increase over its existing policy.
State Fund has notoriously high expenses relating to claims, and is not noted for its expertise in lowering X-Mods. For State Fund policy holders who don’t have the benefit of a broker, it can be even worse. But the city is taking action on the loss control front and that played a key role in cutting its costs, says Susan Blankenburg, a senior vice president with Arthur J. Gallagher and Company, the city’s new broker.
According to Compline, the free X-Mod service, the city’s X-Mod climbed from 92 in 2009 to 110 in 2010.
Blankenburg approached the city about finding alternate coverage back in the spring and ultimately came back with multiple bids that significantly undercut the proposal from State Fund.
“Most carriers are fearful of the concentration of police officers that they have,” Blankenburg tells Workers’ Comp Executive. “There are a lot of carriers that don’t like to go beyond 30% [of payroll] for police and fire and 50% of Elk Grove’s payroll is cops. So there’s not a huge marketplace to look at that kind of stuff and we actually had two quotes so we felt like we hit a homerun.”
A walk-off homerun is more like it. The first bid came in from Chartis and would lower Elk Grove’s expenses to just over $714,000 for the policy year. But then Blankenburg came back with an even lower bid from Travelers that would cut its workers’ comp bill essentially in half to $629,000.
“Both Chartis and Travelers provide the same services that SCIF currently provides the City, including loss prevention services, claims adjusters specifically assigned to service the City’s account, utilization review and a Medical Provider Network,” notes Jim Ramsey, an administrative analyst in the city’s Risk Management office, in presenting the options to the City Council.
But both Chartis and Travelers provide services beyond what SCIF provides, including a nurse advocate (who is available both over the phone and in person), personal phone calls to injured employees, back injury programs and onsite physical therapy programs, Ramsey says. Elk Grove doesn’t lose anything by payng less. Instead, it gains.
“What we did with Elk Grove is we were able to take some time to show [the carriers] the extensive programs that they have that a lot of others don’t. So a lot of what really got them the savings was being able to showcase their wellness program, their modified duty and return-to-work program and their fitness program,” Blankenburg notes. “What I found is that people don’t realize how important it is to bring that loss control program and really sit down with the people that are going to be crunching the numbers to get them to understand everything that’s going on behind the scenes because their experience is very exceptional for somebody that has that level of police and fire.”
Blankenburg says other municipalities are starting to make the switch, but the experience is the key.
But before any move could be made, Elk Grove’s city council had to approve the measure and they had to act quickly to maximize their savings.
“Our SCIF policy automatically renewed and if we didn’t tell them before it automatically renewed then we would be into the next policy year and at that point we would have had to pay the $125,000 cancellation fee,” Ramsey tells Workers’ Comp Executive.”It happened real quick so we wanted the council to make a decision so we wouldn’t waste that money if they did decide to switch [at a later date].”
In the end it was an easy argument to make: Get more spends less. Not surprisingly, the council approved the switch to Travelers without any dissent. The city’s analysts worked with the new broker to save the citizenry money and everyone is ahead for it.
Copyright 2010 Providence Publications, LLC / Workers’ Comp Executive All Rights Reserved Reprinted/Republished with Permission.