Workers’ compensation claims are rising and the City should prepare for additional costs according to a report recently presented to the City Council.

Claims from the Big Blue Bus, Police Department and Fire Department are responsible for increasing frequency and severity of workers’ compensation reports. Staff said if the current trends continue, City Hall would spend $1.7 million more this year than last.

According to a report by the city’s Risk Management staff, the number of new claims increased by 7.2 percent in the first half of fiscal year 2015-16. Claims by BBB and Fire Department employees were responsible for this year’s increase. Severity of those claims, defined by the amount of time lost to each claim, also increased by 15 percent. Of new claims filed in the first half of the year, 57 percent resulted in workers taking time off due to injury.

The cost of all workers’ compensation claims still open since 1979 increased from $23.6 million in 2014 to $27.3 million as of December 31, 2015. The report said the vast majority of the overall growth occurred in BBB and Police Department claims.

“After showing some signs of stabilizing, the City’s workers’ compensation costs are again on the rise. The City has positioned itself to weather the impact of this on a short-term basis through a combination of increasing departmental contributions to the Workers’ Compensation Self-Insurance Fund by 30% ($3 million) in FY 2015-16 and maintaining this contribution level into FY 2016-17, and making a one-time $5 million contribution to the Fund in FY 2014-15,” said Risk Manager Deb Hossli in a written report.

“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.”

The City is responsible for covering medical treatment and providing payments to offset lost wages as a result of an injury. For the first half of the 2015-16 fiscal year, Santa Monica spent about $4.7 million in total. Of that, $2 million was spent on medical costs. About $1.2 million went towards lost wages related to temporary disability and $1.5 million to cover permanent disability associated with the residual impact of an injury.

The Risk Manager can settle all claims of less than $15,000 but the City Manger must approve larger settlements. For the reporting period, 58 claims were settled, 18 with one-time payouts totaling $762,500 and 40 were Stipulation Agreements totaling $1,044,851. A total of 50 settlements were executed in the same time last year. 

The report said a working group is currently evaluating future cost saving options. However, immediate efforts include greater control over management of worker medical care. To minimize time lost to injuries, staff schedules medical appointments whenever possible and reschedules employee-made appointments if doing so minimizes lost time. Staff also obtains status reports immediately after a visit and promptly reschedules missed appointments.

“This helps to speed medical care and reduce the length of injury duration. 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,” said the report. “This is considered an industry best practice.”

The report concludes that despite the best efforts of staff, compensation costs continue to grow. While there is hope that the new committee will generate new ideas, no immediate solutions are available.

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