Self Insureds And The Workers Comp System - Misconceptions Part IV

My company will easily qualify for Self Insurance.

We often hear this remark or estimation as companies are looking to self insure. In a few cases, this may be true. Most of the time qualifying can be a daunting task.

There are usually four minimum requirements by a state's Insurance Commissioner to become self insured. Sometimes a state may require more than these four.

1. Minimum asset amount - for instance - $500,000 in liquid assets
2. Self Insurance Bond - in case the company defaults
3. A qualified/licensed TPA to handle the claims
4. Reinsurance at a certain amount

The insurance commission may require even more stringent rules than the previous four examples. There have been so many different self insured employers default on claims paying that I think the states will become even more difficult to self insure in for Workers Comp clams.

The most famous case that I have read about over the last two months is Mervyns going under quickly and not being able to pay their Workers Comp claims. The state of California has a guaranty association/fund that allows the claims to be paid by the fund.

The one from above that sometimes confuses employers is #1. The states want to make sure that there are enough hard assets to avoid a small company such as a temporary employer from defaulting.

Employers that have already qualified for Self Insurance and employers that are trying to qualify for self insurance for the first time both face heavier scrutiny that ever due to the economy that we are experiencing.