The cost of settling workers’ compensation claims is increasing even as workers are filing less claims.

In Fiscal Year 2020-21, workers filed 261 claims with the City, which reflects a 21 percent decrease from the 330 claims filed in FY 2019-20. However, claims cost the City $31.6 million in FY 20-21 compared to $31 million in FY 19-20.

These trends can be attributed to the shift in staff composition, assignments and numbers due to the pandemic. The increase in cost per claim poses the potential to become a more severe financial stressor as the pandemic subsides and the City continues to rehire staff.

In 2020 when the City restructured its budget due to COVID-related revenue losses, it eliminated about 337 permanent and 144 temporary employees.

The significant reduction in staff and scaled-down City operations can explain why the number of claims filed in the last fiscal year dropped to a ten-year low.

The report attributes the increase in costs per claim to several factors including an older workforce, less availability of light duty assignments, a rise in litigation and limited access to non-urgent medical care during the pandemic.

Disability payments grew by 17 percent from FY 19-20 to FY 20-21 and were especially high for sworn public safety employees, for whom they increased by 31 percent. The costs these claims incur are significant as sworn employees receive 100 percent of their pay while off-work recovering from injuries, whereas non-sworn personnel receive 66 percent of their pay after salary continuation ends. Absence of sworn personnel is also costly as police and fire staffing levels need to remain near constant, which results in expensive overtime pay.

Rising rates of litigation further drove the increased cost per claim as litigation climbed from 46 percent of open claims at the end of FY 2019-20 to 50 percent at the end of this year. Simultaneously, reduced staffing levels in the Risk Management Division reduced the speed at which claims could be resolved, at times increasing costs.

Looking ahead the report predicts that unresolved claims filed during FY 20-21 will be more costly than those filed during previous years. This is due to an increase in the percentage of claims that include lost time and/or litigation and the number of filings for cumulative trauma claims.

The City is looking at ways to address the uptick in costs of claims. The Risk Management Division is requesting a restoration of the Senior Risk Management Analyst position to oversee efforts to control the workers compensation costs as part of the FY 21-22 mid-year budget revisions.

Efforts to reduce costs include the ‘Wow, that’s Fast Program,” which provides sworn personnel with a comprehensive case management services in an effort to avoid litigation; the “Return-to-Work” program, which offers employees recovering from work-related injuries temporary light duty assignments; and the use of a third-party administration to settle claims from the Department of Transportation.

The full report can be found at https://www.smgov.net/departments/council/infoitems.aspx

Clara@smdp.com