Self-Insurance FAQ

 

Here are answers to some of the questions we hear most often.

 

How does Self-Insurance work?

  • With self-insurance, the employer or group of employers, set aside prescribed funds to cover costs for workers’ compensation administration, payment of benefits, claims management, loss control, managed care and excess insurance
  • Your workers’ compensation contributions (premium) are computed based on the expected losses for the group and then a budget allocation for expected workers’ compensation losses. Investment income is also earned on the funds
  • The employer, or Board of Trustees, selects a firm known as a Third Party Administrator (TPA) to provide claims and medical management services

What types of organizations can be self-insured?

  • Employers must be of like kind and quality per California regulations
  • Employers of all types; partnerships, corporations, municipalities, and associations can design and form a Self-Insurance or Group Self-Insurance programs
  • Affinity Group Administrators can assist in other forms of alternative risk financing programs as well

Is Self-Insurance for All Employers?

§         No. Many employers may find the active involvement in their workers’ compensation program more than they want to participate in

§         Joint and several liability will keep some from participating (Proper plan structure significantly mitigates this potential however)

§         Many employers do not have the required Audited or Reviewed Financial Statements

§         This is not a short-term commitment. These plans are implemented with multi-year commitments for all participants

 

What can I expect from Affinity Group Administrators?

  • Meet with you and your group to understand the financial objectives for your company and your "comfort zone" for assuming risk
  • Analyze your workers’ compensation losses to identify the trends and major sources of accidents and injuries
  • Review your current safety policies and programs
  • Upon completion of our analysis, we provide your group with options in the form of a completed formal Feasibility Study as well as our recommendations for TPA Services, Broker of Record services, Legal services, and providers to develop and enhance your safety program
  • Affinity Group Administrators will keep you informed every step of the way through the plan development, implementation and administration

What are the benefits of Self-Insuring?

     Operational

§         Improved employee/employer relationship

§         Flexibility and more control of claim handling, loss control and claim reporting

§         Flexible design plans to compliment operational changes

 

Financial

§         Cash flow through investment income on losses (traditionally retained by the insurance company)

§         Greatly reduced state assessments and fees

§         Administrative costs far less than insurance carrier overhead

§         Limited financial exposure with proper program structure

 

Cost stability

§         Minimal fluctuations in workers’ comp budgeting year-to-year

§         Annual renewal process eliminated

§         Not subject to insurance market changes

§         More control over long term costs

 

What else do I need to consider?

§         Will you meet the financial requirements of the State?

§         Are your workers’ compensation obligations large enough to make the commitment economically feasible?

§         Can you make the long-range commitment necessary to manage your program and make decisions critical to its success?

 

What is Risk Management?

§         State regulations require an active, comprehensive, loss prevention and safety program. Affinity will bring together the best in Loss Prevention and Safety to assist in complying with the State Regulations while providing you with the high quality, effective services you require

§         These programs are tailored to the needs of each group, not the needs of the insurance company

Five critical components in our process:

1.       We take the time to visit each of your facilities and conduct in-person interviews with your key staff members

2.       Analyze all of your exposures to determine the best course of action, and suggest effective risk management options

3.       Develop a plan that outlines the strategies for minimizing risk in accordance with your business and financial goals

4.       Implement a comprehensive risk management program, including loss prevention and avoidance, claim management and insurance options

5.       Monitor the risk management plan and measure its effectiveness through quarterly and annual loss control reviews and customized management reports, to ensure that your plan is meeting your specified goals

 

We bring you Solutions to the High Cost of Workers' Compensation


The Business Journal wrote about Group Self-Insurance in May 2003 and April 2004

Rising costs fuel new self-insurance options - Kelly Johnson

Reforms aside, firms flock to self-insurance - Kelly Johnson


  Reforms aside, firms flock to self-insurance Kelly Johnson
 
Description of Joint and Several Liability and How to Mitigate it.
State Requirements for Group Self-Insurance
What is the Feasibility Study?
Self-Insurance Self Test - Can You Qualify?