Self Insureds And The Workers Comp System - Misconceptions Part VII

I thought that these three should be grouped together.  These are similar misconceptions about Workers Comp self insurance. 

• PEO's are self insurance.
  
• We are in a large deductible program with a high retention level. That makes us the same as a self insured.
• Captives are self insurance.

PEO's (Professional Employment Organizations) are not self insurance in any way, shape, or form. An employer's employees are actually employed by the PEO.  The employees are rented back to the employer.  The employer pays a group-discounted rate as the PEO conglomerates many employers.  PEO's are more of a modified temp-to-perm agency.  PEO's are much more like a regular Workers Compensation insurance arrangement than self insurance. 

Large deductible programs may look like self insurance, but they are not in a few areas.  Your company will still receive a published E-Mod.  This is very surprising to some Workers Comp large-deductible employers that think they are out of  Workers Comp premium system.  If your company's reserves on a certain claim or an aggregate of all your claims exceed a certain figure, you will pay premiums the same as if you were not self insured. 

Captives may or may not be self insurance.  The recent IRS rulings on captives make them more similar to a self insurance program than the previous rulings.  I will likely add to this one as the IRS rulings are made on captives.  The insurance reserves and payments being tax deductible are a very attractive inducement to use captives.  The one area that is not similar to self insurance is the employer has no control over the TPA that the captive uses for claims.  We have sometimes seen very deficient claims service with the TPA that the captive chooses to use to handle their claims.