Self-insuring workers’ compensation continues to be a successful and cost-effective business option for employers whose characteristics align with statutory qualifications. Whether it is a large employer self-insuring alone or a group of smaller employers banding together to form a self-insured group (SIG), there are several advantages to be gained from this practical, risk-funding alternative.
Good for the Employer
When employers choose to retain some of their own risks, they can lower the fixed-cost component and provide immediate cost savings. They often find that they not only have use of money that is not yet needed for claims, but they get to keep what is not needed at all. Additionally, alternative risk funding options, like self-insurance, allow employers to retain greater control and involvement, particularly over the claims process. Most self-insureds rely on a professional third-party administrator (TPA) to administer their claims. Working with these specialists allows them to tailor their claims and medical cost management to fit the unique characteristics of the employer.
Good for the Injured Employee
When employers have greater control of their claims process, they can find the best way to get claims resolved with their employees’ best interests in mind. Working with a TPA instead of an insurance company allows the employer to establish the service model, which is often more efficient and allows the program to adopt the culture of the employer. Better resources lead to a better quality of care, positive results and happier employees who want to return to work faster.
Good for the Industry
The option to self-insure allows niche carriers to offer specialized expertise as they are better positioned to understand the nuances. It also answers the need and demand for alternative-type coverage, offering a choice for workers’ compensation programs. Lastly, self-insured employers and SIGs are generally more engaged in the legislative and regulatory process. Legislators are more apt to listen to employers in their own state. This increased engagement benefits employers, employees and insurance companies.