CertifiedRiskManagers.com

Information

Large Deductible/Self-Insured Worker’s Compensation Plans

Robert J. Marshburn, CRM, CIC, ARM

With the rising costs of worker's compensation coverage, many employers are considering alternate types of worker's compensation programs, including self insurance. We work with clients to develop large deductible plans that combine the benefits of a typical deductible plan with the flexibility of self insurance. Unlike self insurance, however, the employer is protected from catastrophic losses by means of a large deductible plan of reinsurance.

The Insured (employer) takes the responsibility for the actual payment of all claims within the deductible amount by providing funds to an independent Third Party claims Administrator (TPA). We use quality, experienced, “A” rated carriers to provide worker's compensation excess insurance for any claim which exceeds the deductible.

We pre-screen and pre-qualify TPAs who have established a track record for efficiency and effectiveness in controlling work comp costs. Our primary concern is about the professional capabilities of a TPA, including being compiling and transferring claim data in compliance with data reporting requirements to the State to comply with self insured requirements.

The insurance coverage provided is statutory per occurrence worker's compensation coverage excess of the agreed per occurrence deductible. The minimum deductible is typically $250,000 to $350,000 depending on the business and their loss history and Risk Management protocols. When a higher deductible is chosen the excess premium drops significantly. Actual amounts are detailed in our feasibility study. In some cases we can also provide statutory coverage excess of an annual aggregate retention (often called the “aggregate attachment”). In simple terms, this means that when the paid losses from the current policy period exceed an agreed amount, the excess carrier begins paying further losses from that year on a first dollar basis.

Depending on the financial strength of our Client, the excess carrier and State requires collateral which will range from a small percentage to 100% of the actual expected losses for the policy period. The collateral requirements are specified in our feasibility study.

As with all self insurance, a large worker's comp deductible program is not right for all large employers. However, for those willing to assume risk and work aggressively with a competent Risk Manager and TPA to control their losses, a self insured with deductible plan offers significant cash flow and program control advantages. Just how much savings?

Typical savings can run from 20% to as much as 60% in the overall cost of risk depending on how well losses are controlled. Savings are often realized even under a “worst probable case” scenario. This, of course, represents significant amounts of money and is usually well worth the costs to investigate.

Our feasibility study includes the following:

· Consulting with our client

· Gathering of all necessary information

· Negotiating with prospective excess carriers

· Arranging for a proficient Third Party Administrator for claim handling and State filings

· Determining suitability for the client

· Providing the client with a written report

· Requirements of participation

· Estimated potential savings based on our analysis

If the client decides to participate in the program, we stay on as consultants to implement and oversee the effective installation and ongoing operation of the program and manage the total cost of risk. This includes the things necessary to provide the set up and transition to self insurance:

· Working directly with the insured to assemble the needed information

· Accurately and completely preparing documents necessary to comply with Carrier and State set up and filing requirements

· Providing Certifications necessary for State approval

· Effecting a smooth transition for the client with internal set up and integration with the Third Party claims Administrator

As Nationally recognized Experts, Consultants, and Educators specializing in solving Risk Management cost control issues, we are happy to help you with a personalized program to protect your bottom line in this rapidly changing area.

If you would like to retain our consulting services for a customized feasibility study for your firm with our large deductible worker’s comp programs, please contact us.

Home I Biographical Profile I What we do I Consulting Services I Useful Information I Fee Schedule I Contact Us

May not be used or quoted without written permission.