Workers Comp Self Insurance Qualifiers
Most of the Workers Comp self insurance qualifiers center around the employer’s ability to have enough money to pay claims.
One of our most requested services is to see if self insurance is a valid option for a large company. If your company is considering the switch to self insurance, there are five questions to consider before switching to paying out-of-pocket for Workers Comp claims.
1. Will your company qualify with your respective state Workers Compensation Board or Industrial Commission? With so many companies filing for bankruptcy, the state agencies are much more picky than in the past. There are minimums that must be satisfied before even applying. For instance, many states have a minimum liquid assets requirement of $500,000.
2. Will your company have enough of a budget cushion in case your first self insured year is much more costly than forecasted? We have rarely seen this happen, but it is a risk that may possibly need to be funded.
3. Is your company prepared to do a RFP (Request For Proposal) to find a TPA (Third Party Administrator) to process your Workers Comp claims? It may not be a wise choice to have your current insurance carrier handle the claims through their TPA unit.
4. Is your company or governmental unit prepared to assign the task of tracking the funds spent by the TPA? Unlike normal Workers Comp insurance, the task of monitoring the TPA will be a laborious task.
5. Is your E-Mod low at this point? Self insurance may possibly be more expensive if your governmental unit or company has a low E-Mod such as a .6 or .7. E-Mods this low may counteract all the overhead that is charged by insurance carriers. This area will require a large amount of financial analysis to compare low E-Mod regular Workers Comp insurance to self insurance.
I could add a few more to the list. I may add in another post later this week on this subject.
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