03-29-2012 Council Agenda - Laserfiche WebLink

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LMCIT staff also provided the following statements for your consideration: Y Cities can potentially save money under a retro as compared to the guaranteed cost option. They can also end up paying substantially more. Even if a city performs well for the first couple years under a retro, the city probably wants to consider setting those savings aside or have a fund available if the retro turns south. Workers' compensation claims can be unpredictable. There's always the chance the claim that's seemingly innocuous initially balloons up and leaves the city with an unexpected hill. `v We've had cities that have received $50,000 -- $100,000 bills from claims with a date of injury 10+ years out. The retro adjustments continue until all claim activity from that agreement period ceases permanently or the retro plan is closed out. The close out option is available 5 years after the first adjustment is made for that year and the charge decreases each subsequent year until 16 years after the first adjustment, when the retro year can be closed out for no charge. WC claims continue to develop and have a long tail. Newer claims have a higher development factor /likelihood of developing ultimately than do older claims, In this case, although the cities performance under the retro plans as of 2/29/12 looks good, we should note it is more likely there will be some claim development and the premiums under retro options will go up rather than down. Historical, we have been a very safe work group. However, all it takes is one bad claim that could make us regret this decision. Staff's recommendation is that Retro Option 1 is superior to our current 810,000 deductible. The other alternative would be to lower our deductible to minimize bad claim exposure, but our savings decrease dramatically. ($4,381.90 premium savings for the $10,000 deductible versus $1,208.80 for the $5,000 option.) 2