The City self funds loss exposures that are predictable, where it is not cost effective to purchase commercial insurance, and where losses do not threaten its financial stability.  However, there are potential issues that present significant exposure to the City’s financial stability, are somewhat unpredictable, and lend themselves to being commercially insured.

The specific line of insurance covered here is the excess insurance policy for workers’ compensation.  With the assistance of its broker (Wells Fargo Insurance Services, USA), Management Services has marketed the coverage with an eye on value (broadest coverage for the most competitive premium).

The City continues to work to control losses and limit exposure in the workers compensation self-funded program by working closely with internal departments and meeting monthly with the third party administrator of claims and the managed care organization to manage claims and risk as efficiently and cost effectively as possible.  The Wellness program is also aimed at reducing risk factors that lead to these types of claims.  In marketing the City excess insurance policy this year as with past years, staff was challenged with increasing Self Insured Retention levels for Police and Fire, which has been steadily increasing across the board for public entities in Nevada.

There is an extremely limited market for companies willing to offer excess insurance for workers’ compensation programs that include Police and Fire in Nevada due to the presumptive benefits (Heart/Lung/Cancer/Hep C) mandated by state law.  A spreadsheet detailing the policies is attached.  In summary, premium changes from the previous policy period are as follows:

Premium:            Increase of $ 92.00

Self-Insured Retention:                Increase for Police and Fire employees from 2 million dollars to 3 million dollars per claim or occurrence;

                                                The Self-Insured Retention for all other employees went down from 2 million dollars to 1.5 million dollars.

The total estimated premium depicted on the attached spreadsheet may be adjusted upward or downward, depending on variations in actual exposures throughout the course of the policy year.

Coverage Changes

Self-Insured Retention:

The Self-Insured Retention levels offered for Police/Fire has risen in response to the risk exposure from Nevada law that mandates presumptive coverage of heart disease, lung disease, and certain cancers and communicable diseases.  There are a number of factors impacting the rising costs of this legislatively mandated coverage.  Medical inflation, average monthly wage inflation, legal provision for scheduled annual increases in wage compensation, and expanded benefit coverage by legislative changes and supreme court case law all influence the claims liability for the City and the excess insurance carrier.  In addition, increased loss history has factored into the changes in coverage this policy year.

While the Self-Insured Retention increase for Police and Fire is significant, staff believes this is the best policy available in the limited marketplace for excess insurance for the workers’ compensation program.

1. The City Council may approve the item as recommended.
2. The City Council may reject the recommendation of staff.
3. The City Council may choose not to approve the purchase of insurance policies for 2015-2016, but direct the City Manager further.

I move to approve purchase of excess insurance policy for workers’ compensation for fiscal year 2015-2016 and authorize the execution of required policy documents by the Contracts and Risk Manager as recommended.