TOWN OF TONAWANDA: Town shedding comp costs [Tonawanda News, North Tonawanda, N.Y.]

Feb. 23--In an effort to cut costs, the Town Board has approved a deal that will send worker's compensation claims to an outside firm.

The move comes after months of deliberation in the board's insurance committee over what can be done to offset a staggering $2.5 million each year. Brian Baty, president of B.M.A. Consulting Services, helped the committee run through its options in going from self-insuring the claims to farming the work out to another company. As municipalities exited the '80s, economic conditions and the laws allowed municipalities to handle the claims internally.

"Back in the early '90s, the most anybody could make on worker's compensation in a week was $400," Baty said.

But things have changed substantially, and with the town potentially looking at payouts of $1,000 to individual claimants each week when new laws take effect this July, leaders are looking to cap the problem off as soon as possible.

After requesting proposals from the state's two insurers, Baty said one flatly refused to reply given the town's tough situation. The other, Public Employer Risk Management Association, quoted a $1.6 million price tag for two years of coverage.

The board agreed to the terms, which allow the town to hand off all of its worker's comp claims from the day the contract is signed and leave PERMA to handle the administration. But not everyone on the board was happy with the way things turned out.

Councilman Dan Crangle said the board rushed into the deal without considering other options before making its decision. In particular Crangle felt Willis insurance, which the town uses for its other insurance needs, didn't get a fair chance to present an alternative.

"We went to one individual (PERMA), he presented his proposal, and they were supposed to get back to Willis and they never did," Crangle said.

Couniclman Joe Emminger said Willis issued a proposal that was reviewed by the insurance committee, but that the company doesn't provide the full-service product that PERMA offers.

"Willis wouldn't have done the work," Emminger said. "They would have hired a third-party administrator and advised us for $10,000 to $12,000 a year."

The town had previously used First Niagara Bank as a third-party administrator, but both Emminger and Crangle agreed that system was inefficient and unsatisfactory. As an alternative to signing over the operation to PERMA, Charles Naughton, director of labor relations, said it would be possible for the town to handle all of the claims. But he was quick to add that saying it's possible doesn't make it easy.

"Self-funded is fine if you're going to properly administer the program. But our program hasn't been properly administered for some time," Naughton said.

Naughton tried to tackle the task last August, but quickly found that his office simply isn't equipped to handle the workload. During the Town Board's informal session, he recommended hiring new people to start a risk management department if the town wants to keep the responsibility for its own claims.

With time of the essence and the town spending up to $170,000 each month in claims, Emminger said the board wasn't inclined to go in that direction with no guarantee of success. So with Crangle voting against the measure, the rest of the board approved it Monday night.

That still leaves the town on the hook for benefits that have to be paid to about 160 claimants who filed their documents before PERMA took over. Emminger said there is still room for debate over whether PERMA will be hired for an extra fee to work on those claims or if an outside agency will be used. Baty said the town could save as much as $800,000 when all of the claims that are able to be closed out are finally finished, but Crangle was somewhat skeptical of those numbers as well.

It also didn't sit well with Crangle that First Niagara was getting the commission on the PERMA deal after doing such a poor job administering the town's claims for so long.

"I don't think we should be rewarding First Niagara with being the agent on it," Crangle said.

While he wasn't sure why, Emminger said PERMA refused to deal with Willis for insurance, leaving the town to seek out another agent for the deal. Even though Emminger agreed that First Niagara had botched the administration of the town's claims, he was confident that the same wasn't going to happen.

"The people handling us as a TPA are not the same people who will be handling our insurance. First Niagara is a big company," Emminger said.

Emminger added that there was no way to avoid an upfront cost with any decision the town made with worker's comp claims going forward, but express confidence that the town would see savings in the first six months under the new arrangement.

Contact reporter Daniel Pye at 693-1000, ext. 158.

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