According to an annual report released Tuesday and a review of that report by the Santa Monica Daily Press, Santa Monica’s workers’ compensation program saw a significant 29.5% increase in total liabilities during the 2023-24 fiscal year, largely driven by three catastrophic claims that accounted for $7.9 million of the $8.2 million total increase.

According to City Finance Director Oscar Santiago, total program liabilities reached $36 million by June 30, up from $27.8 million in the previous fiscal year. Despite this sharp increase, the city’s self-insured retention program liabilities showed stability, decreasing slightly by 0.4% to $24.3 million – their lowest level in a decade.

However the SMDP review said that the report does not go into detail regarding the catastrophic claims but it does say one originated from the police department and two came out of the fire department. These departments have historically represented the highest risk categories for workplace injuries among city employees according to the report.

Program expenses also increased dramatically, jumping 29.2% from $13 million to $16.8 million. Medical payments experienced the most significant growth, increasing by 71% year-over-year. This surge was largely attributed to dramatic increases in hospital fees, which rose 264%, and nursing/home care payments, which skyrocketed 652%.

“These increases were primarily due to catastrophic claims requiring extensive medical care,” Santiago noted in the report. “In contrast, routine medical costs, measured by doctor’s fees, remained relatively stable with a 4% increase year-over-year.”

The report also highlighted a concerning reversal in claim frequency trends. Following a post-pandemic decline that reached a ten-year low of 245 claims in FY 2022-23, new claims jumped 20% to 294 in FY 2023-24. The Police Department was identified as the primary driver of this increase, with its employees filing 96 claims — a 35% increase from the previous year.

The severity of claims has also worsened. Claims involving lost time and/or litigation increased from 55% to 66% of total claims, representing 195 claims in FY 2023-24 compared to 135 in the previous year.

Despite these challenges, the city reported some success in claim management. While the open claim inventory grew to 592 claims, this 6.9% increase was significantly smaller than the 20.2% rise in claim frequency, demonstrating what officials called “efficient inventory control.”

According to the report, the average claim cost for program participants was $35,458, compared to $101,631 for litigated claimants — a reduction of $66,173 per claim. The total program impact was estimated at up to $37.9 million in savings.

The city’s Return-to-Work Program also demonstrated success, placing 67 injured workers in temporary light duty assignments during FY 2023-24. This allowed the city to recoup 4,399 lost days and save an estimated $925,000 in temporary disability costs.

A pilot program using a third-party administrator (TPA) for the Department of Transportation’s workers’ compensation claims has yielded positive results. Total liabilities for DoT claims declined from $7.4 million to $3.9 million by July 30, 2024, while total expenses decreased by $975,106 from FY 2016-17 levels.

Given these successes, city officials are evaluating the potential expansion of the TPA model to additional departments, focusing on non-public safety departments. The forthcoming Request for Proposal for Workers’ Compensation Claims Administration Services will include an option for TPA to manage claims for all departments except Police and Fire.

Annual Report: Santa Monica Workers’ Comp Claims Surge