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We op ill 2anada 513 Little Canada Road, Little Canada, MN 55117.4600 (651) 766 -4029 FAX: (651) 766 -4048 www. ci.litf le- canacl a. nn n. us MEMORANDUM TO: Mayor Blesencr Members of the City Council FROM: Joel Hanson, City Administrator DATE: Februa3yi9, 2010 RE: Work Comp Deductible Our Worker's Compensation policy with the League of Minnesota Cities Insurance Trust (LMCPn) is up for renewal (4/1/2010). We have the option of choosing a deductible for this plan. For the past few years, we have chosen a $2,500 per occurrence for medical cost deductible. 13y choosing this option, we have received a 7.5% premium credit (It was 8% for 2009) and that saved us $1,868. Since 1990, we have never had a claim that reached that amount in totality, much less in medical costs. But, as is often stated when reviewing investments, past performance is not a guarantee for future results. The additional deductible options areas follows: $5,000 11.0% savings or $2,750 based on an expected premium of $25,000 or $875 additional over the $2,500 deductible option. $10,000 15.50% savings or $3,875 or $2,000 additional over the $2,500 deductible option. Since 1990, the City has had a total of 21 filed work comp claims. Of those, four had no costs associated with them. The largest total claim was $1,422.33 in 1990. The largest medical claim was $1,149.54 (same claim already referenced). Total medical costs ineulxed since 1990 equal $5,039.68. Based on this information, we would have been very safe at the highest deductible option. However, one claim can destroy this analysis. While our group has had excellent experience, 1 can't guarantee a bad claim won't occur during the policy tertn. From a payback standpoint, if we have no claims for 2.58 years, we fund the $10,000 deductible. The payback in assuming the additional $7,500 of risk over our current deductible level is 3.75 years ($7,500 divided by $2,000). Staff believes a higher deductible may make sense. We do not think it is unreasonable to increase our deductible to the $10,000 level. I-Iowever, we are retaining more risk by doing so. We would like to tell us where your comfort level lies, 2 1 MAYOR 13i11 I3lesener COUNCIL Rick Montour John Kcis Michael McGraw Shelly Boss ADMINISTRA'11QR Joel R. 1- Janson