The Observation Deck

Here are the numbers:

2003 $476,473

2004 $724,856

2005 $802,171

2006 $1,497,153

Bill,

I find it interesting that you left out the 2007 YTD amount that was provided to you along with this information, which was $833,127. The City is projected to end the year slightly over $950,000.

Due to rising Worker's Compensation costs, as you've demonstrated, the City of Lakewood joined the Bureau of Workers' Compensation Self-insurance Program in 2006.

Therefore, the City incurred one of year of paying premiums and costs into two programs (retroactive and self-insurance) in 2006 in order to achieve cost avoidance benefits in future years.

As the City graduates from the retroactive program over the next 10 years, the premium costs will drop off each year, and the City will only be responsible for actual claims experienced. For example, 1996 and 1997 retroactive premiums have dropped off, and the City is liable for 1998-2005 (8 years). In 2008, 1998 will drop off, and the City will be responsible for only 7 years of retro payments, and so on.

Furthermore, the number 2007 year to date of worker's compensation claims within the City are far below normal.
2003 = 99
2004 = 94
2005 = 97
2006 = 95
2007 = 59 Year to Date

If anyone has any other questions about the City's worker compensation program, please let me know.

Jennifer Pae
Director of Finance

Jennifer,
You must have a buzzer that goes off on your computer everytime Bill posts. Thanks for always being the ying to his yang. It's like a local, financial point/counterpoint.

Shawn,

Its more like a feeling there is a disturbance in the force

Jennifer Pae wrote:Bill,

I find it interesting that you left out the 2007 YTD amount that was provided to along with this information, which was $833,127. The City is projected to end the year slightly over $950,000.

I did not provide the 2007 YTD information because I had no way of knowing what those costs would be until the year end.

Other information that I did not provide was the compensated time off for workers comp:

2003: $53,000

2004: $67,400

2005: $137,000

2006: $157,000

If the actual workers comp cost for 2007 is $950,000 that means 2007 costs will be about 220% greater than 2003.

I did not provide the 2007 YTD information because I had no way of knowing what those costs would be until the year end.

It never hurts to ask the source of public information requests the reasons behind year to year changes. You are allowed to do that.

In the case of Worker's Compensation, the City avoided approximately $175,000 in costs in 2007 if it had remained the solely in the retroactive program.

Other information that I did not provide was the compensated time off for workers comp:

Those costs were included in the numbers you provided.

Furthermore, the number 2007 year to date of worker's compensation claims within the City are far below normal.
2003 = 99
2004 = 94
2005 = 97
2006 = 95
2007 = 59 Year to Date

This is great but appears to be way off unless the claims come in much later. To what do you attribute this decrease? Is there a new safety program or what?

Hi Lynn,

Yes, we did a large scale safety assessment last year, and in my opinion, our third party administrator is doing an excellent job managing claims.

Other than that, we are not really sure why we are down to an average of 6 new claims a month, as opposed to 8 new claims a month in previous years. Whatever the reason, we certainly hope the positive trend continues.

Jennifer Pae
Director of Finance

Jennifer Pae wrote:Shawn,

Its more like a feeling there is a disturbance in the force

You're very good at this!

What was the premium rate for the 2003-2006 years?

Every employer has older experience ratings removed from their experience over time. Did the City pay to have the process accelerated?
If so how much was paid?

Is there a stop loss provision in the self insured program?

If so how much must the City spend before it is protected by the stop loss?

Why the increase in costs with a decrease in claims?

Were minor injuries not reported as workers comp claims but dealt with in house? That's not an accusation, there a good reasons to put on a band aid and send someone home for the day with pay. Is that the new policy?

If the City does not know why claims declined is there any reason to believe that they won't increase?

Does the City pay the claims and compensated time off and the premiums or are the claims and compensated time off paid out of premiums?

Is there a workers comp fund established to pay claims? If so is that fund separate from the general fund? If so what is the balance? If so is it fully funded?

You have always been very cooperative and forthcoming. The City is lucky to have you as its finance director.

Were some of these increased costs the result of Tom Noe / Coingate?

Hi Bill,

Here are the answers to your City of Lakewood Workers' Compensation Program questions compliments of Art Stehlik of KKS&G, the City's third-party Workers Comp administrator. Thanks Art!!

What was the premium rate for the 2003-2006 years?

Policy Year: 2003
Experience Modification: 0.80
Retro Minimum Prem Rate: 1.5018
Dividend Discount: 20%

Policy Year: 2004
Experience Modification: 0.91
Retro Minimum Prem Rate: 1.4814
Dividend Discount: 20%

Policy Year: 2005
Experience Modification: 1.1
Retro Minimum Prem Rate: 1.8476
Dividend Discount: None

Policy Year: 2006
Experience Modification: 1.37
Retro Minimum Prem Rate: 2.1209
Dividend Discount: None

Every employer has older experience ratings removed from their experience over time. Did the City pay to have the process accelerated?

No, the City did not accelerate the process and therefore did not pay to have this accelerated. The normal process for merit rating is to include the oldest 4 out of the last 5 years. Indemnity and medical costs are compared to the same 4 year period of payroll and expected loss rates. Every year one year is dropped and one year is added. The City of Lakewood Self Insured for workers compensation 3-1-06, consequently they are no longer merit rated by the Ohio BWC.

If so how much was paid?

None

Is there a stop loss provision in the self insured program?

Yes, there is a SIR (Self Insured Retention) level that the City has selected.

If so how much must the City spend before it is protected by the stop loss?

The City has selected a $500,000 SIR. This means that the City is responsible for the first $500,000 in any one incident. An incident can include injury to multiple employees. Since the City transitioned from the Retrospective Program to a Self Insured Plan, they have reduced their exposure in any one incident from approximately $600,000 in the retro (maximum claim limit plus increase in minimum premium), to $500,000 in the Self Insured Plan.

Why the increase in costs with a decrease in claims?

One major reason for the increase in claim and premium costs is the BWC offered Dividend Discounts for 2002, 2003, 2004 years. Both premium and claims costs were discounted due to the BWC’s over funded surplus.

One thing that is apparent is that many of the injured workers that had claims going back to 2000 and prior, filed for %Permanent Partial. There are significant %PP awards in 2005 on many years of prior claims. This is an award that can be filed with the BWC for a residual disability despite the fact that the IW is maintaining his normal job responsibilities. A large sum of this was paid out in 2005 and then billed by the BWC in 2006.

Were minor injuries not reported as workers comp claims but dealt with in house? That's not an accusation, there a good reasons to put on a band aid and send someone home for the day with pay. Is that the new policy?

In the State Fund Retro plan, all injuries that were treated by an outside medical facility were filed with the Ohio BWC. Now that the City is Self Insured, only lost time and contested claims have to be reported to the BWC. Hopefully this will reduce the number of frivolous %PP awards.

If the City does not know why claims declined is there any reason to believe that they won't increase?

The City makes every effort to encourage safe working conditions and will continue to do so.

Does the City pay the claims and compensated time off and the premiums or are the claims and compensated time off paid out of premiums?

When the City was in the State Fund Retro plan, the City reimbursed the BWC for the claims payment and in addition paid a retro minimum premium to the BWC. In addition, by Union agreement, the City continued wages for the Fire and Police in lieu of workers compensation. Since transferring to Self Insurance, 3-1-06, the City now does not pay the BWC any premium, but pays an administrative fee and the City pays the claims directly. This saves the City significant dollars in premium. The City still continues to pay wages for the Fire and Police in lieu of workers compensation pursuant to the Union agreement.

Is there a workers comp fund established to pay claims? If so is that fund separate from the general fund? If so what is the balance? If so is it fully funded?

Yes, there is a separate fund to pay claims, and it is separate from the general fund. The unencumbered balance as of 10/31/07 was $62,196. It is fully funded to cover the premium costs and the estimated claim expenditures. Financial Strength and Flexibility Strategy 3.2-2.2 is to "establish a reserve balance account designated for workers compensation liabilities" so that there are funds available to cover the $500,000 stop loss amount.

Hope that answers your questions,
Jennifer Pae
Director of Finance
City of Lakewood