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HomeMy WebLinkAboutCOM 0888.001 1998-2000 ~Nir os N~K Stephen K. Yamashiro Jay A. Sasan Mayor Safety Cnnrdiwt,,r 1lE Of.N'Y (gnuntg of (?na ii DIVISION OF INDUSTRIAL SAFETY Workers' Compensation Unit 35 Wailuku Drive • Hilo, llawaii 96720 • (808) 961-8344 Fax: (808) 961-8416 MEMORANDUM TO: James Y. Arakaki Chairman, Hawaii County Council FROM: Lester Ishado Deputy Corporation Counsel RE: Workers' Compensation Unit Staffing Communication No. 888 (Bill 312-00) DATE: August 31, 2000 This memorandum has been prepared in response to Councilman Curtis Tyler's August 22, 2000 request for a five-year projection on cost savings. A copy has been faxed to Mr. Tyler's office at his request. The County of Hawaii's Workers' Compensation Unit (herein, "WCU") is seeking approval of additional positions for a workers' compensation specialist III (SR-22) and a personnel clerk II (SR-15). The WCU notes the concerns of the Council, that (undisputed) workers' compensation benefits be paid in a timely manner. The WCU expects that additional staff will enable it to pay (undisputed) benefits in a timely and efficient manner. In this instance, since moneys are being paid out, it may be difficult to see the "cost savings" to the County. Please remember that the payment of Comm. No. File No. _ Ref, To: Ref, Date SEP 0 7 9008 James Y. Arakaki Chairman, Hawaii County Council Page Two August 31, 2000 (undisputed) workers' compensation benefits is mandated by statute, and the efficient and timely payment of benefits helps the County to maintain employee confidence and morale. The WCU expects that additional staff will enable it to scrutinize disputed claims more carefully, e.g. coverage, payment of temporary disability benefits (TTD), and payment of medical treatment. The WCU expects that additional staff will enable it to monitor and review the open cases more efficiently and to determine which cases can be settled and/or closed. The WCU is not suggesting that benefits be terminated solely as a cost savings measure. Experience has shown, however, that in some cases, benefits are not warranted and are being overpaid because the WCU does not have the staff to monitor and review cases on a regular basis. This could be costly. For example, an employee who is injured in 2000 and who is entitled to the maximum rate would receive annual payments of $27,508.00 in TTD benefits alone. The five-year cost projection for funding the workers' compensation specialist III position (SR-22) and personnel clerk II position (SR-15) is attached hereto for a comparison with the projected cost savings. The WCU did a quick review and sampling of open cases. The five-year projection for cost savings to the County begins with the identification of potential cost saving areas: 1. Review all cases over ten years old. There are approximately 80 cases that began prior to 1990. Review all cases over five years old. There are approximately 120 cases that began prior to 1995. Review all cases over two years old where benefits are paid on a regular basis. James Y. Arakaki Chairman, Hawaii County Council Page Three August 31, 2000 2. Identify those cases that may be closed with a minimum of paperwork. 3. Identify those cases that have continuing liability for the County and can be settled through negotiation. A quick review and survey of open cases shows that there are at least 30 to 40 cases in this category. Proceed to negotiate a settlement and close file. This number may increase as additional claims are filed. The WCU hopes to close 10 to 15 pending cases a year and to keep the number of new cases in this category down to a reasonable number. 4. Identify those cases that are disputed, deny coverage, and litigate. A quick review and survey of open cases shows that there are at least 30 to 40 cases in this category. Included in this number are some cases that have gone through a hearing and resulted in a favorable decision for the County, and that were then appealed by the employee. Also included in this number are some cases that warrant a deeper investigation. Proceed to litigate and close file. This number may increase as additional claims are filed. The WCU hopes to close 10 to 15 pending cases a year and to keep the number of new cases down to a reasonable number. Potential cost savings can be found in cases that were litigated at the Department of Labor and Industrial Relations. The WCU did a quick review and sampling of 12 cases in which the County received a favorable ruling. The cases were appealed (or are likely to be appealed) by the employees. A favorable appellate ruling in all 12 cases could save approximately $100,000.00 over a one-year period. The cost savings would increase as subsequent years are included. James Y. Arakaki Chairman, Hawaii County Council Page Four August 31, 2000 There is, of course, no guarantee on the outcome of any appeal. However, this sampling of litigated cases shows the importance of having sufficient staff to monitor, and when necessary, litigate disputed claims, and to recognize and resolve disputed claims in the early stages of a case. There are a similar number of cases that have not gone through hearing as yet. Potential cost savings can also be found in the cases that were settled through negotiation. See August 10, 2000 memorandum for a description of five cases with a cost savings of approximately $85,000.00. The WCU did a quick review and sampling of another 10 cases that show potential cost savings in the neighborhood of $85,000.00. Although there are large amounts of moneys involved, as described above, this Memorandum does not state or imply that the County will save hundreds of thousands of dollars in just one year. Some of the benefits paid out cannot be avoided. On the other hand, please remember that cost savings in one year are reflected in cost savings in the same case in subsequent years. The WCU expects that cost savings will cover the annual costs of the additional staff. A conservative estimate of cost savings projected over a five-year period is attached hereto. Regrettably, I will be on the mainland and unable to attend the next Council meeting. I hope that this memorandum adequately addresses your concerns. Please call me if you have any questions or comments. Thank you. Cc: Managing Director Ted Hong, Esq. Dixie Kaetsu Jay Sasan Workers' Compensation Projection Projection of Additional Cost of Adding Two Workers' Compensation Positions: The projected cost of adding two new positions is shown below. The W.C. Claims Specialist III and Personnel Clerk are funded for nine months in FY2001, and twelve months in subsequent years. Salary increases as approved for HGEA are factored in, as are step movements. Fringe benefits are estimated at 35%, which is the approximate average for the past five years, and includes FICA, retirement, health insurance, workers' compensation, and unemployment insurance. Salary Fringes Total 2001 44,784 15,674 60,458 2002 62,228 21,780 84,008 2003 64,425 22,549 86,974 2004 65,063 22,772 87,835 2005 67,014 23,455 90,469 Costs: 303,514 106,230 409,744 Projection of Savings Attributable to Workers' Compensation Staffinq Increase: To be very conservative, assume that each year, $50,000 in savings is generated through a combination of closing out old cases and more careful review of new cases. The savings generated in each year will continue into the subsequent years. This results in a "snowball" effect, with, for example, a $50,000 savings in the first year resulting in a total savings over five years of $250,000. 2001 2002 2003 2004 2005 Cumulative 1stYear 50,000 50,000 50,000 50,000 50,000 250,000 2nd Year 50,000 50,000 50,000 50,000 200,000 3rd Year 50,000 50,000 50,000 150,000 4th Year 50,000 50,000 100,000 5th Year 50,000 50,000 50,000 100,000 150,000 200,000 250,000 750,000 Less costs (60,458) (84,008) (86,974) (87,835) (90,469) (409,744) Net savings (10,458) 15,992 63,026 112,165 159,531 340,256 Conclusion: Over five years, the estimated savings the County may realize as a result of adding the two new positions in the Workers' Compensation Unit is over $340,000.