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BACKGROUND The administration of a workers' compensation program is very complex due to numerous legal mandates and other requirements for processing claims. The consequences of errors are the imposition of penalties on employers, increased financial responsibility, and poor employer-employee relations. Thus, smaller and mid- size cities typically utilize the services of a qualified third-party administrator that employs experienced and certified staff, and who interfaces with medical and legal personnel representing injured employees, to manage their workers' compensation programs. These third-party administrators have the expertise to handle the unique challenges and compliance requirements of the specialized field of workers' compensation claim administration. The City initially entered into a professional services agreement with Innovative Claims Solutions, Inc. (ICS) in 2001. When the agreement expired in 2011, the City issued a Request for Proposals to consider providers of administrative services for the workers' compensation program. ICS participated in the process and was again selected by the City as the third-party administrator. The City entered into a professional services agreement with them and the agreement expired on June 30, 2014. DISCUSSION The City has been very pleased with the claims administration provided by ICS. In addition to providing excellent customer service to injured workers, ICS's streamlined processes and responsiveness to City staff (who coordinate the administration of workers' compensation program internally) allows the program to function effectively. Annually, the City has received modest fee increase requests from ICS for claims administration, as allowed in the professional services agreement. This year, after discussion and negotiation with ICS, the annual increase request is 10%, due to the higher number of active claims experienced by the workers' compensation program. City staff anticipates conducting a Request for Proposal process to solicit proposals for the administration of the City's workers' compensation program in 2015, prior to the expiration of the agreement with ICS. In conclusion, staff is recommending the City extend the agreement with ICS by an additional year effective July 1, 2014 and expiring on June 30, 2015. Submitted by: Fiscal Review: Approve by: ulie Yua iu Emily Wagner Nelson Fialho Assistant ity Manager Director of Finance City Manager Attachments: 1. Amendment to Professional Services Agreement with Innovative Claims Solutions, Inc. Page 2 of 2