The City's Workers' Compensation Program functions as a self-funded insurance program for employees. The program ensures that employees who sustain valid work-related injuries will receive all benefits provided under state statute and City policies. The Program currently maintains a self-funded with a third-party administrator (TPA) status as defined by the State of Missouri Department of Insurance and Division of Workers Compensation. The Program provides injured worker benefits through the Workers' Compensation Fund. Each City Fund pays premiums into this Workers' Compensation Fund. Payments from the Fund cover the following items:
• Medical claim costs;
• Excess reinsurance premiums;
• Cost of bonds required by the State;
• Third Party Administration (TPA);
• Nurse Case Managers; and
• Pharmacy costs.
The City currently purchases excess workers' compensation insurance coverage for claims exceeding $1,000,000 per accident. The $1,000,000 retention limit is for the life of the claim. Once the City incurs more than $1,000,000 in workers’ compensation costs for an accident, the excess workers’ compensation insurance policy will reimburse the City for incurred claim costs.
Typically, recovery under workers' compensation is the sole remedy in Missouri for injuries to employees suffered in the workplace, but there are limited situations where an employee may sue his/her employer for damages that are outside the workers' compensation coverage. Employers' Liability coverage protects the City against lawsuits due to employment-related accidents, injuries or illness due to the City's negligence.
Safety National Casualty Corporation (Safety National) provides the City's current excess workers' compensation insurance program with an estimated premium of $149,290. Safety National's program includes a $1,000,000 deductible per accident. The City is responsible for this deductible before the excess workers' compensation insurance would start reimbursing the City for claim costs associated with an employee's work related injury. Safety National’s program currently provides the City with $2,000,000 Employer Liability coverage.
As part of the renewal process for the City's workers' compensation insurance program, staff requested the City's broker, Lockton Companies, Inc. (Lockton) provide the City with a proposal from the City's current excess workers' compensation insurance company. The City's current self-insurance program has a $1,000,000 deductible for each accident. The $1,000,000 deductible has been in place since July 1, 2007. This insurance program provides coverage based on the City’s fiscal year.
Lockton provided staff with a renewal proposal from Safety National. The Safety National proposal included a seven percent (7%) increase in annual premium for the upcoming policy period. This premium increase results from a six percent (6%) increase in the premium rate and a one percent (1%) increase in the City’s payroll. Originally Safety National wanted to increase the premium rate by ten percent (10%) due to the City’s increased loss experience and adverse loss developments on some claims. When Safety National found out that Lockton was in the initial stages of conducting a Claims Cost Control review of the City’s loss data, this proactive project to address the City’s loss experience issues was enough justification for Safety National to reduce their premium increase to six percent (6%).
In a pre-renewal strategy meeting with Lockton, it was agreed it was not in the City’s best interest to jump to a different insurance carrier after only a few years with Safety National. As long as Safety National agreed to fair renewal terms, Lockton recommended maintaining the current relationship with the company. Taking into consideration the adverse development in the past year of at least one claim with Midwest Employers Casualty, the prior insurance carrier, and the large claims recently incurred on year’s insured by Safety National, the renewal quote was competitive. The Safety National’s proposal is approximately $42,000 less than the premium the City paid to Midwest Employers Casualty for the same insurance coverage in fiscal year 2015-2016.