Self-Insured Workers Compensation
In a simple sense, self-insurance is when a large business acts as its own insurance company. It typically takes a very large employer to do this. There is great scrutiny by individual states with regard to self-insured companies. The states want to protect the employees due workers compensation benefits.
The employer must act as an insurance company and hire a third party administrator to pay claims and set reserves.
Companies avoid some of the costs normally found with fully insured coverage. They also take advantage of the cash flow of claims dollars reserved but unpaid.
Risks High claims experience can result in higher costs than a fully insured program.
Alternatives Fully insured programs are typically higher cost - with lowest risk. Captive insurance programs, high deductible programs, and loss responsive programs can save money, but there is always the risk that poor experience can cost more.
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