A “significant employee injury” earlier this year left the North Platte City Council with two unpleasant choices: Pay $200,000 more in workers’ compensation insurance premiums or swallow a deductible increase from $1,000 to $100,000 per occurrence.
Council members chose the first option Wednesday night, voting 8-0 to pay nearly $1.5 million in 2018-19 premium bills from the League Association of Risk Management. That figure includes premiums for property and casualty insurance as well as workers’ compensation insurance, City Administrator Jim Hawks said.
City Attorney Doug Stack explained the negotiations that gave the city a choice — as opposed to simply swallowing a hundredfold boost in its workers’ compensation deductible — during a brief special meeting before the council’s public information session on its proposed half-cent sales tax increase.
Stack said LARM, a multicity insurance pool operated by the League of Nebraska Municipalities, initially imposed the $100,000-per-incident deductible in response to the injured employee’s claim. “We balked at the increase,” he said, leading to negotiations and an offer by LARM of a one-year, $200,000 premium boost instead.
Neither the council nor other city officials offered details of the incident, except to say it took place late in the 2017-18 fiscal year that ended Sept. 30. They remained in open session when Stack said an executive session wasn’t necessary unless they wanted more specific information.
Based on Stack’s information, the one-time, $200,000 premium increase would be the equivalent of two employee injuries in which the city had to cover the maximum $100,000 deductible before receiving any payment from LARM.
Stack and Hawks said calls to other insurers indicated the city wouldn’t save any money by dropping LARM, with which the city has been engaged in long-term litigation over unrelated insurance disputes.
“So it’s pay now or pay later?” Councilman Brook Baker asked.
“I think perhaps there’s a good chance we’d pay less now,” Stack replied.
Hawks said the employee’s injury took place early enough for him to build extra money for higher premiums into the 2018-19 budget, which the council approved Sept. 6. The final premium bill came within $30,000 of his estimate, allowing the city to reallocate other funds to cover the rest, he said.
But since one cannot predict when injuries might happen, “there’s basically no way to budget the way it was proposed,” Hawks said. “This way, we’ve at least got the insurance” without changing the $1,000-per-incident deductible.
Because the premium increase covers only the new fiscal year, Stack said, the city can negotiate with LARM or seek other coverage next year. Paying the higher premium won’t affect the city’s position in its pending lawsuit, he added.