The Hemet City Council, after much discussion over changing their workers’ compensation insurance carrier, chose a program to self-insure and pay up to a $250,000 deductible per occurrence relying on past experience of low claims.
The city determined the high deductible or excess program presented by the California Joint Powers Insurance Authority would be a better choice, as in the past the city has had low workers’ compensation insurance claims.
At the May 12 city council meeting, the council directed staff to evaluate the options of primary or excess workers’ compensation programs with membership in the CJPIA. The council adopted a series of resolutions that approved the city’s membership in the CJPIA, with the caveat that staff return with an evaluation.
At the May 26 meeting, the JPIA staff provided a breakdown of the trends of the city’s workers’ compensation claims and the forecasted costs at various self-insured retentions.
The council reviewed the different costs of excess SIR programs ranging from the high cost of $972,200, with an SIR “deductible” of $150,000, to the low cost of $772,900 with an SIR of $250,000 per occurrence. The council learned if the city opts into the excess program, the $45,000 state assessment would be an additional cost and the staff would need to reserve a dollar amount to pay claims up to the designated SIR.
It was explained that if the city were to carry the $250,000 SIR from the excess program, the average total expenditure on claims would be $1,024,376 per year. There is a difference of $49,376 between the primary program and the lowest cost $250,000 excess option.
The report noted that depending on the council’s desired approach to risk, it can opt to pay more up front and risk having to cover the costs of an exceptionally high year, or it can opt to pay less up front and potentially experience budget savings if the city has a good year.
The council decided to take the lower cost option in a 5-0 vote, hoping for lower claims in the coming years. The CJPIA membership includes meetings with an expert coming to the staff and explaining how best the employees can prevent hazards and injuries so they won’t have to take off work and draw workers’ compensation that is usually less pay than their salaries.
The council’s decision will have no impact on the general fund budget. Workers’ compensation insurance fees are deducted from employees’ paychecks each pay period with the employer helping to pay a part of those fees.
In other business, the council approved a resolution to award Concrete Paving Inc. the 2019-2020 Accessible Sidewalks and ADA Ramps Project throughout the city. The budgeted project is set at $233,172.50. The council authorized the finance director to re-appropriate $130,000 of Measure “A” Funds from the 2019-2020 Citywide Pavement Rehabilitation Project and the city clerk to record the notice of acceptance of the work by the city engineer.
Mayor Russ Brown told the council he before the meeting he appeared on Facebook to give local residents an update on the city’s response to the coronavirus pandemic with the emergency declarations still standing following the guidelines of the county and state health directors who last week declared the city proceed into the Stage 2 business reopening process with some “nonessential” businesses allowed to reopen so long as they follow the social distancing and hand-sanitizing mandates.
Tony Ault can be reached by email at email@example.com.