11. APPROVE RESOLUTION AUTHORIZING
PARTICIPATION IN THE SPECIAL
DISTRICT RISK MANAGEMENT
AUTHORITY WORKERS’ COMPENSATION
Meeting
Date: June 16, 2003 Budgeted:
Yes
Program/Line Item No.:
Personnel -
Staff
Contact: Cynthia
Schmidlin Workers’
Comp Insurance
Cost:
$63,782
SUMMARY: The District’s current Workers’
Compensation Insurance through the Rural Special Districts Insurance Program
will be discontinued after June 30, 2003.
Therefore, the District must move to another workers compensation
carrier effective July 1, 2003. The
Special Districts Risk Management Authority (SDRMA) Workers’ Compensation
Program offers a sound and stable plan with excellent rates, as well as a
proven program for claims administration and staff training. Changing to SDRMA,
as opposed to returning to our previous workers’ compensation carrier, State
Compensation Insurance Fund (SCIF), would save the District approximately
$30,500 in FY 2003-2004.
RECOMMENDATION: Approve Resolution No. 2003-03 Exhibit 11-A, authorizing participation in
the Special District Risk Management Authority Workers’ Compensation Program,
effective July 1, 2003, and execution of the Fifth Amended Joint Powers
Agreement of the Special District Risk Management Authority. Approve Resolution No. 2003-04 Exhibit 11-B authorizing application to
the Director of Industrial Relations, State of California, for a Certificate of
Consent to Self Insure Workers’ Compensation Liabilities, declaring the
District as self-insured for worker compensation.
The Administrative
Committee met on June 10, 2003, and voted 2-0 to recommend approval of the
resolutions.
IMPACTS TO
STAFF/RESOURCES: A total
of $63,782 is included in the FY 2003-2004 budget for Workers’ Compensation
insurance costs, based upon SDRMA rates, effective July 1, 2003. This is $6,929 less than the $70,749
specified in the May version of the budget, a value based upon anticipated
rates for State Compensation Insurance Fund (SCIF). Actual SCIF rates,
effective July 1, 2003, would result in an annual Workers Compensation cost of
$94,329. Thus, the savings represented by a move to SDRMA would be
approximately $30,500 less than the cost of returning to SCIF.
BACKGROUND: The District changed workers compensation
carriers effective July 1, 2002, moving from State Compensation Insurance Fund
(SCIF) to Rural Special District’s Insurance (RSDI). The reason for this change was a rate
increase of approximately 80%, announced by SCIF in late May 2002. The newly formed Rural Special Districts pool
offered much lower rates, which have remained stable throughout the fiscal
year, while SCIF rates sustained a mid-year increase. The move has resulted in savings to the
District of approximately $27,000 during FY 2002-2003. However, the Rural Special Districts
Insurance Program will no longer be continued after June 30, 2003 and the
District must secure other workers compensation coverage in its place.
Staff research on workers
compensation insurance programs has found SDRMA to be the best program
currently available to the District. The California Special Districts
Association sponsors this program of collective self-insurance for the payment
of workers' compensation benefits on behalf of participating member
districts. Through the program, special
districts are able to pool premiums and realize the cost advantages of
self-insurance that have long been enjoyed by larger agencies of local
government. The SDRMA pool’s liability
is capped at $250,000 in claims, with additional stop loss insurance up to
$25,000,000 provided by outside insurance carriers. However, member agencies are not directly
required to pay for claims, as SDRMA has more than sufficient funds in its Loss
Fund to cover the pool’s responsibility.
Regular actuarial studies are performed to determine rates and assure
Loss Fund solvency. Additional monies
have not been needed to replenish the Loss Fund for 20 years.
SDRMA has provided the
District with property, auto, and general liability insurance coverage since
l996. Effective July 1, 2003, SDRMA will merge with the currently separate
Special Districts Workers’ Compensation Authority (SDWCA). This merging of
programs will pool resources, reduce administrative overhead, and enhance
excess insurance purchasing power, resulting in cost savings for both
plans. It also provides one-stop
services for all areas of liability.
SDRMA has a proven track record with the District of responsiveness to
customer needs, and a proactive risk management program with excellent safety
training support services.
The District will be required to enter
into a joint powers agreement for a 3-year membership in this program. Previous
workers compensation insurance coverage has been based upon one-year contracts.
SDRMA cannot give multiple-year rate guarantees because the outside carriers
providing reinsurance will not negotiate them in today’s market. However SDRMA
believes the 3-year agreement provides stability that benefits all members of
the pool. SDRMA also guarantees that
rate increases will not exceed the industry average in the letter attached as Exhibit 11 - C. An analysis of comparative rates from
2001 to 2003 shows that the Special Districts Workers’ Compensation pool has
been relatively stable during this volatile period of statewide workers
compensation insurance costs, with significantly lower rate increases than the
following competitors.
State
Compensation Insurance Fund
- Rates have increased 164% for field staff, 150% for office staff, and 146%
for staff performing permit inspections.
ACWA/Joint
Powers Insurance Authority
- Rates have increased 81% for field staff, 104% for office staff, and 59% for
inspectors.
One of the reasons for SDWCA rate
stability is the low incidence of accidents and injuries among pool members. In
the past 5 years SDWCA membership has grown 46%. However, claims have only increased 12%.
Other California districts covered by SDWCA include:
$
Monterey
Regional Waste Management District
$
Alameda
County Water District
$
Olivenhain Municipal Water District
$
Santa Maria Airport District
$
Santa Cruz Consolidated Communications Center
Insurance rates and services will be
monitored by staff over the next three years, with comparative analysis of
competing programs. If this coverage
does not prove to be satisfactory, the District can give a 90-day notice at the
end of the agreement period to return to SCIF or move to another more
competitive program.