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True Cost of Workers Compensation
Self-Insured Groups:
Myth vs. Reality
Self-insured groups are best suited for employers for whom the prevention and management of work injuries is a high priority. SIG's offer greater control and support for employers. They encourage initiative and innovation.
Myth: Self-insured groups often fail.
Reality: Self-insured groups have been successful in over 30 states over many decades. There are hundreds of successful SIG programs for private employers that do not rely on government money and deliver service and cost containment to members year after year.. Information on SIG's across the United States can be obtained from the Self-Insurance Institute of America (www.siia.org)
Myth: If I join a Workers' Comp self-insured group and another business in the group has a catastrophic claim - such as a fatality or a paralysis - I will have to pay more money.
Reality: Self-insured groups are employer pools – excess losses for one member are indeed absorbed by the rest of the pool. CHSI-managed self-insured groups are generally protected against catastrophic injuries by excess insurance coverage with ‘A’ rated excess insurers. The excess carrier covers all costs of all claims that come from a single occurrence, whether it is 1 claim or 100 (such as an earthquake), to statutory limits. The group pays an initial amount, typically $500,000, called the Self-Insured Retention (SIR). Catastrophic injuries do not in themselves require further funds from group members. While excess insurance policies can have lower limits, such as $25M of coverage, CHSI managed programs have coverage to statutory limits - complete coverage.
Myth: All self-insured groups are the same.
Reality: Workers’ Compensation self-insured groups vary widely. Aside from dramatic differences in state requirements, program design and management is driven by the objectives of the founding businesses. Some employers form groups due to the lack of reasonable insurance coverage for their business sector. Employers may form groups due to the poor claims handling practices of insurance companies or chronically poor response to their issues. Some groups choose to be small and exclusive, others choose to have a larger footprint and benefit from lower expenses. All private sector SIG's have to compete with insurance companies to some degree, depending on their market segment
Myth: If another self-insured group falters, my group and my business can be forced to pay for their liabilities.
Reality: In the states in which CHSI operates, self-insured groups are ultimately supported by the tangible net worth of members. This means that any group needing additional funds must collect the funds from within its own membership. California has additional back-up for self-insured employers – the California Self-Insurers’ Security Fund – which steps in if any self-insured entity cannot meet its obligations. More about the Security Fund here.
Myth: If I join a self-insured group, I could be responsible for what happens in the group before I join or after I leave.
Reality: Self-insured group members only share responsibility for their time of membership. If a member decides to leave the group, their claims liabilities stay with the group, just as they would with an insurance company. Generally speaking, if a "special assessment" is issued by the group, you would only be subject to the assessment for the years you were actually in the group.
Myth: Self-insured groups are unrated and can therefore be a problem for members who need to be with an insurer that has an A.M. Best 'A' rating.
Reality: CHSI-managed self-insured groups have met all ‘A’ paper requirements for members, via the excess carrier, since the first group was formed in 1996. In addition to the ‘A’ paper of their excess insurance carriers who stand behind the SIG’s, the financial and operational controls of the groups and validation of their financial health by state regulators have satisfied all requirements.
