CHSI - Leading in Workers' Compensation Self Insured Groups

CHSI Self-Insured Groups

CHSI designs and manages self-insured groups in Workers’ Compensation to deliver premium value to employers at a wholesale cost. Self-insured groups are cooperatives – members pool the money they would typically give to an insurance company so they can have greater control over how that money is used. While insurance companies profit from the money they receive from the companies they insure, CHSI takes those dollars and makes them work for the employer member.

CHSI creates programs to bring competitive advantages to the smaller employer that they would not normally enjoy. Whether it is professional nursing support on every claim or one of a kind technology for businesses, CHSI looks to increase profit margins for its clients through Workers’ Compensation programs. A well designed self-insured group will insulate employers from dramatic pricing increases in the insurance marketplace, as well as the additional long term costs that result from poorly managed work injury claims.

Self-Insured Programs Versus Traditional Insurance Companies

Insurance companies may not always have the same incentives as employers. For example, insurers can earn more money when claims stay open longer because they make their greatest revenue from investments. Traditional insurance programs can be a better choice for some employers who are not comfortable sharing risk. It is important for every employer to understand that whatever form of coverage they choose, it is claims that will drive their long term cost, so they should look for the best program available. Claims can deprive a company of talent and delivery capability, leading to lost revenue, and increase operational expense.

How Self-Insured Groups (SIGs) work

No time to read? Watch this video instead: Six Minutes to Understanding SIGs

The Group

Each member pays into the pool according to their own payroll and experience, just as they do with an insurance company. The pool absorbs the costs of all members – if a member has poor claims experience during a year, it is absorbed by the pool. A member does not need to pay “extra” because they individually have had a bad year. Certified actuaries are used to predict losses and to support the development of rating plans that will fund the group correctly.

Claims are administered by an independent professional management company, know as a Third Party Administrator (TPA). As program manager, CHSI provides cost containment, underwriting, financial and technological services to deliver best outcomes. The authority for a self-insured group lies with its Board of Trustees, representing the employer membership. CHSI reports on all aspects of operations to this Board, from Fortune 100 level financial statements to detailed tactical planning.

When a self-insured group controls its costs well, it can develop excess surplus that it may return to members. These returns are sometimes called “dividends” – not really the correct term, as self-insured groups are non-profit organizations – but the concept is to return every possible dollar to the member when it can be done safely and securely.

Just as members of self-insured groups can be eligible for the return of excess surplus created by the program, they also share responsibility for the costs of the program. The Joint & Several Liability agreement defines that responsibility. More on SIG Joint & Several Agreements.

If a self-insured group needs to collect additional funds for future claims costs, each member contributes according to their relative size in the group. For example, if the group’s actuary determines that the group needs to add $300,000 to its pool, the group could do this either by raising its rates to all members or by having a “special assessment.” In this example, a member who was contributing 1% of the overall pool would need to pay an additional $3,000 in such an assessment.

Complete and Total Coverage

Self-insured group members are protected against catastrophic claims (fatalities and very serious injuries) through excess insurance coverage secured for the group. In the event of such a claim, the group pays the initial Self-Insured Retention (SIR), typically $500,000, and the excess insurance carrier will pay all additional costs for the life of the claim. This coverage extends to all claims that come from a single occurrence. For example, if there was an event that produced two fatalities and five serious injuries, the group would pay a total of $500,000 for all of the claims. From that point the excess insurance carrier would pay for all claims costs, no matter how many millions of dollars were involved (statutory coverage).

Some excess insurance policies do not have statutory coverage. They may have a limit, such as $25M. All CHSI managed self-insured groups, however, have statutory coverage in place.

Another form of coverage that can be included in excess insurance policies is called aggregate coverage. This type of coverage provides payment for claims when a group has much higher claims costs than was predicted. An example of aggregate coverage would be $3,000,000 of coverage for the self-insured group if its loss ratio (claims costs divided by contributions) reached 100%. Not all excess policies have this coverage.