Santa Monica’s workers' compensation program saw a significant 29.5% increase in total liabilities during the 2023-24 fiscal year, largely driven by three catastrophic claims that accounted for $7.9 million of the $8.2 million total increase, according to an annual report released Tuesday.
According to City Finance Director Oscar Santiago, total program liabilities reached $36 million by June 30, up from $27.8 million in the previous fiscal year. Despite this sharp increase, the city's self-insured retention program liabilities showed stability, decreasing slightly by 0.4% to $24.3 million — their lowest level in a decade.
The report doesn’t go into detail regarding the catastrophic claims but it does say one originated from the police department and two came out of the fire department. These departments have historically represented the highest risk categories for workplace injuries among city employees according to the report.
Program expenses also increased dramatically, jumping 29.2% from $13 million to $16.8 million. Medical payments experienced the most significant growth, increasing by 71% year-over-year. This surge was largely attributed to dramatic increases in hospital fees, which rose 264%, and nursing/home care payments, which skyrocketed 652%.
"These increases were primarily due to catastrophic claims requiring extensive medical care," Santiago noted in the report. "In contrast, routine medical costs, measured by doctor's fees, remained relatively stable with a 4% increase year-over-year."
The report also highlighted a concerning reversal in claim frequency trends. Following a post-pandemic decline that reached a ten-year low of 245 claims in FY 2022-23, new claims jumped 20% to 294 in FY 2023-24. The Police Department was identified as the primary driver of this increase, with its employees filing 96 claims — a 35% increase from the previous year.
The severity of claims has also worsened. Claims involving lost time and/or litigation increased from 55% to 66% of total claims, representing 195 claims in FY 2023-24 compared to 135 in the previous year.
An aging workforce has long been cited as a potential liability for the city’s program, and the city’s employee demographics were listed as a factor again in this year’s report. The report noted that cumulative trauma injuries, common in aging workforces and resulting from repetitive physically or mentally demanding tasks over long periods, accounted for 52% of new claim filings during FY 2023-24, up from 49% the previous year.
"During FY 2023-24, 71% of sworn employees off work for six months or longer were 45 years or older," the report stated, highlighting the demographic challenges facing the city's workforce.
Despite these challenges, the city reported some success in claim management. While the open claim inventory grew to 592 claims, this 6.9% increase was significantly smaller than the 20.2% rise in claim frequency, demonstrating what officials called "efficient inventory control."
The city continues to implement several cost control measures. Its "Wow, that's Fast" program, designed to reduce litigated workers' compensation claims from sworn personnel, has shown promising results since its implementation in July 2014. The program has served 572 employees and reduced litigation rates for Police and Fire Department claims by 8% over the past decade.
According to the report, the average claim cost for program participants was $35,458, compared to $101,631 for litigated claimants — a reduction of $66,173 per claim. The total program impact was estimated at up to $37.9 million in savings.
The city's Return-to-Work Program also demonstrated success, placing 67 injured workers in temporary light duty assignments during FY 2023-24. This allowed the city to recoup 4,399 lost days and save an estimated $925,000 in temporary disability costs.
A pilot program using a third-party administrator (TPA) for the Department of Transportation's workers' compensation claims has yielded positive results. Total liabilities for DoT claims declined from $7.4 million to $3.9 million by July 30, 2024, while total expenses decreased by $975,106 from FY 2016-17 levels.
Given these successes, city officials are evaluating the potential expansion of the TPA model to additional departments, focusing on non-public safety departments. The forthcoming Request for Proposal for Workers' Compensation Claims Administration Services will include an option for TPA to manage claims for all departments except Police and Fire.
The report noted that sworn public safety employees present unique challenges for workers' compensation management, as they receive enhanced benefits not available to other city employees, including injury presumptions, 100% of pay while recovering from injuries (compared to 66% for non-sworn personnel after salary continuation ends), and higher permanent disability payments.
Looking ahead, city officials anticipate future increases in self-insured retention program liabilities due to rising costs associated with cumulative trauma claims, particularly among retiring public safety personnel. As of June 30, 2024, 14% of the city's sworn public safety employees were eligible for service retirement, with 32% of all sworn personnel in the Police Department either eligible now or within the next five years.
The annual workers' compensation report is prepared by Risk Manager Oles Gordeev as part of the Finance Department's oversight of the city's self-insurance and commercially purchased insurance programs.
