Beyond 60-Days: Audit Shows Late Fees Add Up for L.A.
By Michelle Logsdon - November 2, 2001An audit released Oct. 30 by the Los Angeles City Controller shows the city paid nearly $800,000 in penalty payments for workers’ compensation claims in the last year-and-a-half. Twenty-five percent ($200,000) of those payments were avoidable according to the report.
Penalties are assessed if workers’ compensation benefits are not processed within 60-days according to California Labor Code.
City Controller Laura Chick told adjustercom.com, “That money comes out of the General Fund. Any waste of a dollar is a dollar too much on something of no value.”
Personnel department officials who responded to the report were concerned about the small sample size of 33 penalty cases and stated that the overall penalty amounts were minimal. The department’s written response states, “While we agree that a zero-defects process is a goal toward which the City should strive, we do not believe that the City pays or is liable for an unreasonable amount in penalties given the amount of checks processed on an annual basis.”
The $200,000 in avoidable payments equaled less than one percent of the payments made during the audit period of July 1999 to February 2001.
“Insurance companies and lawyers don’t need public dollars. Tree trimmers, police, and public works—those things are what taxpayers want their money to go to, not late payments,” said Chick. “I know many communities that could use $200,000 right now.”
The city used Firm Solutions as its third party administrator (TPA) until early 2001 when the company was replaced by Cambridge Integrated Services Group, Inc. The change consolidated the city’s police and fire department claims. That significantly reduced the city’s annual workers’ compensation bill that is currently in the neighborhood of $120 million.
City personnel process all other claims. Cambridge has reimbursed the city for two penalties caused by its staff. The city is withholding payments to Firm Solutions for the amount of penalties incurred during its tenure.
Chick said the processing delays could be attributed to several issues including a cumbersome system of analysis and a shortage of staff at the city and the TPA. “We do not have an adequate number of adjusters to the number of claims.”
The personnel department and the controller’s office plan to work together to improve the system through extensive reviews of the process to outline problems.
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