Meeting Date:           June 16, 2003                                     Budgeted: Yes           

Program/Line Item No.: Personnel -

Staff Contact:             Cynthia Schmidlin                              Workers’ Comp Insurance

                                                                                                Cost: $63,782

General Counsel Approval: N/A

Committee Recommendation: The Administrative Committee reviewed this item on June 10, 2003 and recommended approval.

CEQA Compliance: N/A


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.


Special Districts Workers Compensation Authority - Rates have increased 61% for field staff, 57% for office staff, and 51% 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.