Inspector general criticizes New Orleans' workers' compensation ...

New Orleans needs to do a better job of managing its workers' compensation program, the office of the inspector general said in a report released Thursday. In response, Mayor Mitch Landrieu's administration said?it has made significant changes to the program this year and will take or consider other measures to improve its performance.

The OIG report examined the city's management and oversight of its self-insured workers' compensation program between 2008 and 2011. During that period the city spent an average of $16 million on workers' compensation expenses per year.

The analysis found that the city did not effectively manage the?program and did not exercise oversight?commensurate with its financial impact, Inspector General Ed Quatrevaux said.?"If the city is going to self-insure,"?he said, "it needs to behave like an insurance company and reduce risk by implementing a comprehensive safety program designed to prevent employee injuries."

Employees who are injured on the job are entitled to payment of their medical bills, compensation for lost wages and, when necessary, death benefits for their survivors.

New Orleans self-insures itself for such claims, and the report says this approach is typical for large employers because it allows them to avoid paying significant premiums to insurance companies. By definition, however, self-insured entities "assume financial liability for any losses resulting from employee accidents," the report notes.

Rather than managing the program itself, the city contracts with an outside firm to administer it. From 2000 to February 2012, that firm was Cannon Cochran Management Services Inc. Hammerman & Gainer Inc. has administered the program since March. In addition, the city has transferred its entire risk management office from the Law Department to the Chief Administrative Office, and in May the former risk manager was terminated and replaced.?

The OIG report said it identified numerous problems with the?workers' compensation program in recent years, including:

• The city gradually discontinued several of its safety and loss-control initiatives and did not have a citywide operational safety plan in place as required by state law.
• The city did not select outside legal counsel and vendors through an open and competitive procurement process.
• The city did not have adequate internal controls in place to oversee vendors and ensure that all incurred charges were necessary and accurate.
• The city did not have adequate metrics in place to manage its compensation program effectively and evaluate the third party administrator's performance.

"We concluded that the city did not effectively manage its workers' compensation program commensurate with its financial impact and did not take sufficient measures to prevent employee injuries," the report says.

The report notes that the city "has made efforts to make improvements to its workers' compensation program during the course of this evaluation. However, additional actions are needed to remedy problems identified in the findings."

During 2008-11, the report says, the city paid $67.4 million in workers' compensation claims, with $37.3 million in payments going to Fire Department personnel and $22.9 million to police officers. Under state law, it notes, firefighters with at least five years of service who develop heart or lung disease are automatically eligible for workers' compensation benefits, without having to show that the disease resulted from their work.

In responding to the OIG report, Chief Administrative Officer Andy Kopplin disputed the finding that the city does not have useful metrics in place to monitor the compensation program, saying that the city is working closely with?the third-party administrator?on that. He agreed that an outside audit of the compensation claims is long overdue and said one will take place soon.

Although the city has not had a safety engineer since 2008, Kopplin said, "it is incorrect to assume that those responsibilities are currently going unfulfilled," and he said the city is developing an operational safety plan that will cover all departments, not just police and fire.

Source: http://www.nola.com/politics/index.ssf/2012/12/post_507.html

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