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Self-Insurance Quiz Answers – Did You Make The Cut?

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Self-Insurance Quiz Answers

If you wish to take the quiz first without seeing the answers, please go here.  State-specific answers are OK even though these quiz questions were meant as generic as each state has its own unique self-insurance rules and regulations.

Many of the answers can be found by using the search box on the J&L website.

  1. Are large-deductible programs considered self-insurance? Why or why not?   No, large-deductible insurance is not technically self-insurance.  One of the most important aspects is that large-deductible programs still have their claims reported to the Rating Bureaus for Experience Modification Factor (E-Mod or X-Mod) calculations.
  2. Do any states not allow workers comp self-insurance? If so, which ones? All states allow self-insurance.  I try not to give out blanket answers such as “all” or “none.”  The key here is that states have a large variability in their requirements.  
  3. How are claims paid when a self-insured has a bankrupt status? Self-insureds will usually provide a bond or Letter of Credit that is “cashed in” whenever a self-insured cannot pay its own Workers Comp claims.  The state usually has an assigned TPA to process the claims.  That is why the self-insureds must carry a large bond or Letter of Credit to become self-insured.  Many states have a self-insured guaranty fund that administers the moving of the claims from the self-insured TPA to the guaranty fund’s TPA. 
  4. What is the most expensive part of a workers comp self-insurance program?  The most expensive part of a self-insurance program is the indemnity, medical, and Allocated Expenses that are paid on each claim.   The other part of the process that becomes expensive very quickly is that a Letter of Credit or bond must be specified for each state of operation.
  5. What is the #1 mistake that J&L sees with companies that are pursuing workers comp self-insurance?  Thinking that just because it qualifies for self-insurance does not mean that an employer should become self-insured.  Vanity costs $$.
  6. What is reinsurance? What two main loss values are covered by reinsurance?  Reinsurance is purchased by a self-insured which covers a large claim that reaches a certain per-claim level(such as $250,000) or an aggregate of claims level (i.e. $2,500,000.00).
  7. What is the first hurdle that your company must clear to qualify with a state as a self-insured? The level of liquid assets in a certain state is usually the first qualification listed in the rules.  In other words, if a company does not have enough assets in a certain state, how will they pay their Workers Comp claims?
  8. Can a self-insured also have a regular voluntary market workers comp policy? Yes, many of our clients are self-insured in one state but do not qualify for self-insurance in another.  The client employers purchase workers comp policies in states where they cannot be self-insured.
  9. Are there any state-imposed penalties for switching back from self-insurance to a large deductible or voluntary market policy? No, not that I know of – the main concern is that the employer has some type of Workers Comp policy to cover an incident. 
  10. How often should a workers comp self-insured perform a claims and reserve level review?  Our suggestion is at least monthly.  Having online access enables ad-hoc claims reviews at any time. 

Answers to Bonus Questions

These two Bonus self-insurance quiz answers will help your score if you answered them correctly.

Bonus #1 – Which insurance industry personnel become beyond critical for assessing whether or not to become self-insured and to project the incurred costs of the program?  Actuaries and in turn, Risk Managers should have the final approval.  

Bonus #2 – Can an employer use an offshore captive for a workers comp self-insurance program?  Yes, the feasibility study and tax implications should be covered extensively before placing a self-insurance program into an offshore captive.  The micro-captives have received a large amount of attention from the IRS.  

If you disagree with any of the self-insurance quiz answers, please add a comment below.

Pic Self-insurance quiz answers students taking test
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6 Responses

  1. What a great self-insurance quiz! Although I got all the answers correct (including the bonus questions), I found this information useful for anyone who is new to the “self-insurance” side of things.

    Self-insured programs can be very confusing and complicated and your article/quiz is going to help educate a lot of people.

    Great job!

  2. My brother suggested I might like this blog He was totally right This post actually made my day You can not imagine simply how much time I had spent for this info Thanks

  3. Jen, thanks for your comment. I was trained in the carrier environment many years ago. Shifting to a self-insured world was an eye-opening experience for me. The self insured quiz was requested earlier this year by our self insured and governmental clients. Have a good Holiday season!

  4. Thanks I have just been looking for information about this subject for a long time and yours is the best Ive discovered till now However what in regards to the bottom line Are you certain in regards to the supply

Related...

James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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