Workers Compensation Large Deductible Policies – Are They A Bargain?
Are Workers Compensation large deductible policies worth a look for cutting costs? One great way to start is by going over the definition of these hybrid-types of policies.
The idea to write this article was generated from quite a bit of buzz on whether high deductible health insurance policies are a great avenue for providing health insurance to one’s family or business.
Many states have their own sets of rules on large deductible policies. The National Council o Compensation Insurance (NCCI) basically defines workers compensation large deductible policies as having a $100,000 or more deductible.
Many people in the insurance industry refer to a large deductible policy as any policy with a $250,000 or higher deductible. I have not seen many policies below the $250,000 but they do exist.
To write this article, I will have to talk in overall generalities as there are so many different types of deductible policies, I could write a book on the different ways to underwrite these policies.
One misconception is that some companies seem to think they are self insured of sorts with a large deductible.
A few differences between self insurance and workers compensation large deductible policies are your company:
- Has a Mod with large deductible policies, not so with self insurance (big surprise often)
- Files are being handled by a carrier, not a Third Party Administrator, you are still being insured
- Still pays a premium or file adjustment fee per $100 of coverage –many versions of this
- Can still “bust your deductible” without realizing it – the nasty aggregate deductible
An aggregate deductible is defined as the total claims volume deductible not per claim. A company may never reach the $250,000 deductible limit. However a rash of medium-sized claims will go over the aggregate deductible.
I have seen many large deductible programs survive for many years. The employers that seem to have troubling policy years are the ones that do not budget in enough for Risk Management and Safety.
I will not cover how the large deductible policies are charged and billed premiums due to numerous versions.
The bottom line – bargains do exist. Make sure you have the right advice before pursuing workers compensation large deductible policies.
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