City council voted Tuesday evening to begin negotiations on a contract with a third-party administrator for workers' compensation claims.
Claims have been processed internally for years.
That system has significant drawbacks, City Manager Rob Mayes said.
"This is another example of our move to a more professional management," he said. "It would be very difficult for a city employee to deny a claim to another employee. There's nothing illegal (about the old system), it's just not the best way to manage the program."
The city is self-insured on workers' compensation claims up to $500,000, and buys an additional $79,444 of coverage as an emergency safeguard for claims that exceed the limit, he said.
Contracting the services to a third party will translate into less cost for the city because the city will be eligible for a better rate from its insurance company, Mayes said.
That rate is not yet known, he said.
A new system has been needed for some time, said Lyle Williams, the city's Human Resources director.
"Companies want to see a third-party administrator," he said. "It gives them assurance of objectivity. It just makes sense on a lot of levels. For the last several years, I'm told, the city's insurance broker has been saying that we need a third-party administrator."
The city processes about 98 workers' compensation claims per year, according to city documents.
Although the number of claims may not be high, processing them internally takes up valuable employee time in an already understaffed department, Williams said.
"(Contracting out is) ultimately a win, win, win," he said.
The third-party administrator is expected to cost the city around $20,000 to $25,000 per year, but a more accurate assessment of the budgetary impact was not made public because of the ongoing negotiation process, Mayes said.
The administrator will review all workers' compensation claims, approve or deny claims, pay disability benefits on approved cases and obtain medical verification on continuing disability. The city has 713 full-time and 267 seasonal or part-time employees.
The contract will begin on Feb. 1, according to the city documents.