For a growing number of employers, a self-funded workers compensation insurance plan makes sense. Larger private employers may opt to cover wage replacement and medical benefits out-of-pocket to individuals injured on the job. This approach can give the employer more control over costs while enabling the business to more closely manage care.
Smaller businesses may form a group and develop their own plan that shares fees and pools liabilities. Large or small, businesses may create a customized plan that meets state requirements with the assistance of a workers compensation insurance broker. Employers interested in a self-funded plan need to provide thorough and accurate information and meet solvency standards. This packet may include:
- Appropriate actuarial reports
- Loss history
- Employee verification
Where to Start
A minimum security deposit is necessary to implement a program, as well as a minimum amount of excess insurance. Excess insurance is either specific or aggregate. Specific puts a cap on losses paid for a single occurrence, while aggregate offers coverage after a cumulative loss limit is exceeded. Applicable fees and taxes also apply. An invested workers compensation insurance broker will work to help employers control costs by encouraging certified safety programs for employees, and by coordinating the best private provider network contacts.
Self-funded plans may provide a cost-effective alternative to traditional workers compensation plans for many businesses. It is recommended that employers take some time to review their businesses to see if a change is to their advantage.