Title
Recommendation to Authorize the City Attorney to Execute a Five-Year Agreement with LWP Claims Solutions, Inc. for Professional Services as the Third-Party Administrator of the City of Alameda’s Self-Insured Workers’ Compensation Program in an Amount Not-to-Exceed $1,306,453 for Five Years, Plus Related Medical Containment Costs and Program Charges. (City Attorney 61023040)
Body
To: Honorable Mayor and Members of the City Council
From: Yibin Shen, City Attorney
EXECUTIVE SUMMARY
The City of Alameda (City) has contracted with LWP Claims Solutions, Inc. (LWP) for Professional Services for services to administer the City’s self-insured workers’ compensation program since July 2021. The current agreement with LWP ends June 30, 2026. The staff is recommending that the City Council authorize the City Attorney to execute a renewal agreement with LWP for professional services as the Third-Party Administrator (TPA) of the City’s self-insured workers’ compensation program for the period from July 1, 2026 through June 30, 2031. The proposed annual claims administration fees and administration fees are as follows:
FY 2026-27 $245,631
FY 2027-28 $252,850
FY 2028-29 $260,285
FY 2029-30 $269,220
FY 2030-31 $278,467
Additional fees for medical containment costs, including bill review, case management, utilization review, and access to LWP’s proprietary provider network, as well as other program services will be billed on an as-incurred basis.
BACKGROUND
Workers' compensation, which is mandated by the State Labor Code, provides medical treatment coverage, temporary and permanent disability payments, survivor’s death benefits, and total disability pension benefits for employees, officers and elected officials suffering from an industrial injury or illness. The City self-insures for workers’ compensation and contracts with a TPA to administer claims. The TPA model allows the City to benefit from professional, experienced claims handlers who are able to draw on a large knowledge pool of past experiences and current trends to assist in reducing litigation costs.
The City has contracted with a TPA since 1976. In 2021, the City Attorney’s Office issued a Request for Proposals for Workers’ Compensation TPA to which nine companies, including LWP, responded. City staff considered various factors in making a final selection, including the annual claims administration fee, the cost for additional services (including bill review and utilization review), the staffing levels offered by the TPA as part of the flat annual claims administration fee (such as the account manager, the claims examiner and future medical examiner), the TPA’s experience working with public entities, the TPA’s recommendations for reducing the City’s overall expenditures on workers’ compensation claims, and recommendations by other current public entity clients. Based on these factors, staff recommended and Council approved LWP as the best qualified to meet the City’s needs and administer the workers’ compensation program. In 2021, the City entered a three-year agreement with LWP the option to renew for two years, which options were exercised in 2024 and 2025 respectively.
For the current renewal agreement, City staff recommends continuing to contract with LWP because of LWP’s familiarity with the City’s worker’s compensation procedures, LWP’s strong track record of performance over the past five years, and the specialized nature of the claims processing services that the City requires.
DISCUSSION
LWP has been in business for over thirty years and has extensive experience with self-insured municipalities. Based on LWP’s strong track record of performance over the past five years, staff believes that renewing this agreement with LWP will, over the course of the agreement, continue to promote financial stability and increase safety by reducing the current inventory of open claims, resolving future claims before the litigation stage and ensuring that injured City employees receive early aggressive and effective medical treatment.
LWP’s proposed annual claims administration fee is a flat fee to be paid in twelve monthly installments. The fee covers claims administration, claim review meetings, litigation management, and reporting to the excess insurer. The City’s account will be assigned to an LWP account manager, a claims supervisor, an indemnity examiner and a future medical examiner. The annual claims administration fee for the upcoming five-year agreement is: $240,631 for Fiscal Year (FY) 2026-27, $247,850 for FY 2027-28, $255,285 for FY 2028-029, $264,220 for FY 2029-30, and $273,467 for FY-2030-31. These fees represent a zero percent increase over FY 2025-026 for year one (1) under the renewal agreement, a three percent (3%) increase for years two and three (2 and 3), and three and a half percent (3.5%) increase for years four and five (4 and 5).
LWP’s proposed annual administration fee is a flat $5,000 fee. This fee covers bank charges, storage fees, loss reports, on-line system access, preparation of reports, Medicare and other reporting, and e-bill services.
In addition to the claims administration services, and consistent with the City’s existing contract with LWP, LWP will offer medical cost containment services. These services include medical bill review, utilization review, and case management services for selected individual claims as well as access to LWP’s proprietary Medical Provider network for cost and quality of care advantages. The fees for these services are separate from the annual claims administration fee and administration fee under the agreement and are billed on an as-incurred basis. The goal of these additional services is to reduce the overall cost to the City for medical care and comply with State Medical Fee schedule while ensuring injured City employees receive appropriate, effective, and high-quality medical care. LWP also offers investigation, indexing, and subrogation services that are billed on an as-incurred basis. For the last three program years, these additional services, including the medical cost containment services referenced above, averaged approximately $104,000 annually. (Note this figure excludes indemnity payments, medical costs, and legal expenses.) It is anticipated that these costs can be absorbed by the City’s existing budget allocation for such services.
ALTERNATIVES
• Authorize the City Attorney to execute the agreement.
• Choose not to approve the agreement with LWP and instruct staff to seek a different TPA provider or cease TPA services altogether. This option could result in a gap in coverage of workers’ compensation administration services as well as delayed medical treatment and claim resolution given that the current TPA agreement with LWP expires on June 30, 2026.
FINANCIAL IMPACT
Should City Council approve the agreement with LWP, the proposed budget for the claims administration and administration fees for TPA services for FYs 2026-27, 2027-28, 2028-29, 2029-30, and 2030-31 are listed in the amounts listed in the chart below.
|
Fiscal Year |
LWP Claims and Annual Administration Fee |
|
2026-27 |
$245,631 |
|
2027-28 |
$252,850 |
|
2028-29 |
$260,285 |
|
2029-30 |
$269,220 |
|
2030-31 |
$278,467 |
As discussed above, additional fees for medical containment costs, including bill review, case management, utilization review, and access to LWP’s proprietary provider network, as well as other claims services will be billed on an as-incurred basis and can be absorbed into the City’s existing budget. The FY 2026-27 appropriations were approved in June 2025 during the Biennial Budget process and will not need to be updated. Budget appropriations for future years will be requested during the appropriate budget cycles.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code process for approving contracts. This action is subject to the Levine Act.
ENVIRONMENTAL REVIEW
This action is not a project for the purposes of the California Environmental Quality Act (CEQA) pursuant to CEQA guidelines section 15061(b)(3) as there is no possibility that this action may have a significant effect on the environment.
CLIMATE ACTION
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Authorize the City Attorney to execute a five-year agreement with LWP Claims Solutions, Inc. for professional services as the Third-Party Administrator of the City of Alameda’s Self-Insured Workers’ Compensation Program in an amount not to exceed $1,306,453 for five years, plus related medical containment costs and program charges
Respectfully submitted,
Susie Kim, Risk Manager/Deputy City Attorney
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibit:
1. Service Provider Agreement