Excess Insurer Reporting Standards for Work Comp Self-Insured

Self-insured employers seldom are totally self insured. Almost all self-insured employers will have an excess insurer who is responsible for any workers’ compensation claim that exceeds a predetermined cut-off point for self insurance. The reason for this cut-off point is to prevent a catastrophic claim from causing financial damage to the employer.

 

 

Excess Insurer Cut-Off Limit Ranges

The determination for when an excess insurer is needed depends on the size of employer and the available financial access of the employer to meet the statutory financial obligations incurred in compliance with the workers’ compensation laws. For some smaller self-insured employers, the cut off limit might be $250,000 or $500,000, while a large company with substantial assets might not have an excess carrier involved in their work comp claims until the catastrophic claim payments reach $2.5, or even $5 million on a claim.

 

Excess insurers normally require the self-insured employer to report to them any claim that has reached 50% of the self-insured employer’s cut off point. For example, if the employer is self-insured for the first $250,000 and the excess carrier must pay all claim cost over $250,000, the excess carrier will require the self-insured employer to report the details of the claim to them once the reserves reach $125,000.

 

In addition to the dollar amount where claims become reportable to the excess insurers, it is common practice for the excess insurer to require the self-insured employer to report all potential catastrophic injuries to the excess carrier, regardless of the dollar amount of reserves.

 

Catastrophic injuries that require reporting to the excess insurer normally include:

  • Spinal injuries resulting in paralysis
  • Brain damage with loss of cognitive function
  • Brain stem injuries
  • Third degree burns over 25% of the body
  • Second and third degree burns combined that cover over 50% of the body
  • Amputation of hand, arm, foot or leg
  • Total vision loss
  • Total hearing loss
  • Reflex Sympathetic Dystrophy
  • Post Traumatic Stress Disorder
  • Occupational diseases requiring organ transplants
  • Major accidents involving injuries to multiple employees at same time
  • Permanent total disability of an injured employee

The self-insured employer should consult with the excess insurer for a listing of the type of catastrophic claims that should be reported. The excess insurer may have additional catastrophic injury types that are not included in the above list.

The report of the catastrophic injury by the employer to the excess insurer should include all pertinent details about the claim.

 

The claim report should include a detailed discussion of the following areas:

  • How, when and where the injury occurred
  • The nature of the injury
  • The extent of the injury including the primary medical provider’s identification, the doctor’s diagnosis, prognosis, short-term treatment plan and long-term treatment plan
  • The anticipated date of maximum medical improvement
  • The probable level of disability the injured employee will incur
  • The amount already paid for medical bills and indemnity benefits
  • The amount of future reserves needed for future medical care and indemnity benefits
  • The potential for subrogation
  • The structured settlement company that will be utilized in the settlement process
  • The potential for a Medicare Set-Aside Agreement
  • Any other factor that may impact the total claim cost

 

The information needed by the excess insurer is in many ways similar to the information a workers’ compensation insurer would need if you were not self-insured. By reporting catastrophic claims timely and in detail to the excess insurer, the self-insured employer will have a smoother transfer of the high dollar claims when they are transferred to the excess insurer.

 

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2013 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 

 


Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional about workers comp issues.

The Alternative Market Can Give You Control In Workers Comp Savings

What is the Alternative Market?

 
The Alternative Market or Alternative Risk Transfers (ARTs) are insurance programs that typically keep some part of the risk instead of transferring all of the risk as in a “traditional” insurance policy. The Alternative Market has various types of programs like:

·         Self-insurance

·         Captives

·         Risk Retention and Risk Purchasing Groups (RRGs)

·         Rent-A-Captives

·         Sponsored Captives

·         Insurance pools

·         Association Groups


The purpose of all Alternative Risk Transfers programs is to recoup or retain the underwriting profit. Companies that invest in loss control and maintain tight controls on their claims often have lower losses. In the traditional market, the insurance carrier collects a premium and uses it to pay the losses of the good and the bad companies.

 
Self-insurance
 
Some employers self-insure through insurance pools. They set aside funds in anticipation of workers' compensation claims instead of buying insurance. This is a cost-saving method for safety-oriented firms. In states where this is allowed, many large employers self-insure. Many small businesses form groups to insure themselves and decrease risks.
 

Captives
 
This is an insurance company that is controlled by its owners. A captive usually insures businesses that are related to it through common ownership. The company pays premiums based on its own performance, not the industry’s performance. A captive's insured’s are its shareholders that control underwriting policies, price risks, set investment policies and direct the company. 
 
 
Risk Retention and Risk Purchasing Groups (RRGs)
 
These are captives that write only liability coverage.  An RRG with a federal charter can write liability coverage in any state where it is registered without having to become a licensed carrier in each state or use a fronting company. This can reduce the costs of crossing state boundaries. Some states allow reciprocal risk retention groups, which are an unincorporated association of individuals or entities that exchange insurance contracts through an attorney-in-fact, which acts as an agent or manager. In a reciprocal, profits and losses are allocated back to each member. The income and related income tax reverts back to the members. This can be a tax advantage to groups where the members are non-profit companies.
 
 
Rent-A-Captives
 
These are popular with medium-sized companies. Here the policyholder is insured by a captive without owning it. A captive rents its capital, surplus, and license to the policyholder and usually provides administrative services.
 
 
Sponsored Captives
 
These are a type of rent-a-captive that is not created by its insured’s’, who have no control or ownership in the captive. Sponsored captives allow businesses to insure their own risks without establishing their own captive.
 
 
Insurance pools
 
These are joint underwriting operations where the participants assume a predetermined and fixed interest in all business written.
 
 
Association Groups
 
An association captive is owned by members of a common industry or trade. Participation is limited to members of the association.

 
Summary
 

Companies that participate in Alternative Risk Transfers programs, especially captives that own their own insurance company, realize more control by paying only the claims they incurred and not the losses of bad companies.  Profits on invested surplus (the underwriting profit) go to the group’s members or captive owner rather than an insurance company.

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com Contact mstack@reduceyourworkerscomp.com

 


WORKERS COMP MANAGEMENT MANUAL:  www.WCManual.com

VIEW SAMPLES PAGES

MODIFIED DUTY CALCULATOR:  www.LowerWC.com/transitional-duty-cost-calculator.php

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

How The Alternative Market Can Reduce Your Workers Comp Costs

 

What is the Alternative Market?
 
The Alternative Market or Alternative Risk Transfers (ARTs) are insurance programs that typically keep some part of the risk instead of transferring all of the risk as in a “traditional” insurance policy. The Alternative Market has various types of programs like:
 
·             Self-insurance
 
·             Captives
 
·             Risk Retention and Risk Purchasing Groups (RRGs)
 
·             Rent-A-Captives
 
·             Sponsored Captives
 
·             Insurance pools
 
·             Association Groups
 
 
The purpose of all ART programs is to recoup or retain the underwriting profit. Companies that invest in loss control and maintain tight controls on their claims often have lower losses. In the traditional market, the insurance carrier collects a premium and uses it to pay the losses of the good and the bad companies.
 
 
Self-insurance
 
Some employers self-insure through insurance pools. They set aside funds in anticipation of workers' compensation claims instead of buying insurance. This is a cost-saving method for safety-oriented firms. In states where this is allowed, many large employers self-insure. Many small businesses form groups to insure themselves and decrease risks.

 
Captives
This is an insurance company that is controlled by its owners. A captive usually insures businesses that are related to it through common ownership. The company pays premiums based on its own performance, not the industry’s performance. A captive's insured’s are its shareholders that control underwriting policies, price risks, set investment policies and direct the company. 

 

 
 
Risk Retention and Risk Purchasing Groups (RRGs)
 
These are captives that write only liability coverage.  An RRG with a federal charter can write liability coverage in any state where it is registered without having to become a licensed carrier in each state or use a fronting company. This can reduce the costs of crossing state boundaries. Some states allow reciprocal risk retention groups, which are an unincorporated association of individuals or entities that exchange insurance contracts through an attorney-in-fact, which acts as an agent or manager. In a reciprocal, profits and losses are allocated back to each member. The income and related income tax reverts back to the members. This can be a tax advantage to groups where the members are non-profit companies.
 
 
Rent-A-Captives
 
These are popular with medium-sized companies. Here the policyholder is insured by a captive without owning it. A captive rents its capital, surplus, and license to the policyholder and usually provides administrative services.
 
 
Sponsored Captives
 
These are a type of rent-a-captive that is not created by its insureds, who have no control or ownership in the captive. Sponsored captives allow businesses to insure their own risks without establishing their own captive.
 
 
Insurance pools
 
These are joint underwriting operations where the participants assume a predetermined and fixed interest in all business written.
 
 
Association Groups
 
An association captive is owned by members of a common industry or trade. Participation is limited to members of the association.
 
Summary
 

Companies that participate in ART programs, especially captives that own their own insurance company, realize more control by paying only the claims they incurred and not the losses of bad companies.  Profits on invested surplus (the underwriting profit) go to the group’s members or captive owner rather than an insurance company.

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com Contact mstack@reduceyourworkerscomp.com

 


WORKERS COMP MANAGEMENT MANUAL:  www.WCManual.com

VIEW SAMPLES PAGES

MODIFIED DUTY CALCULATOR:  www.LowerWC.com/transitional-duty-cost-calculator.php

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

The Best Tidbits of News from the Workers Comp World

Here are the best Tidbits of news from the Workers Comp world this week:

 

Broadspire® Donates $100,000 to the SOS Children's Village


Broadspire, a Crawford Company and leading third party administrator of workers compensation claims, liability claims and medical management services, recently raised $100,000 for the SOS Children’s Village – Florida during its 2012 Charity Golf Tournament. The second annual event, sponsored by 36 of Broadspire’s vendor partners, had record attendance, with 104 golfers enjoying a beautiful day on the course at the Diplomat Resort and Spa in Hollywood, Fla.  Read More…

 

Medcor Client Hosts 112th U.S. Open Golf Tournament

Medcor congratulates its triage client, The Olympic Club, on hosting the 112th U.S. Open Golf Tournament, which took part this weekend in San Francisco.  As they took care of the tournament, Medcor triage nurses were on standby to take care of their employees!  The Olympic Club is the oldest athletic club in the United States and has hosted many local, regional, national and even international championships.Read More…

 

14th Annual Federal Workers Compensation Conference – July 25 – 27th, Atlanta, Georgia

The 2012 14th Annual Federal Workers' Compensation Conference brings together professionals from multiple Federal departments and agencies, including the Department of Veterans Affairs, United States Postal Service, Department of Homeland Security (TSA), Federal Bureau of Prisons, Department of Defense, Social Security Administration and the National Park Service, to name a few.  Read More…

 

Self-Insurance Institute of America, Inc. (SIIA) Schedules Series of Webinars 

The Self-Insurance Institute of America, Inc. (SIIA) has scheduled a series of webinars to update its members on current legislative/regulatory developments related to stop-loss insurance and discuss the association’s response strategy. Participants will also learn how they can support SIIA’s efforts. Read More…

 

News From Lexis Nexis.  

Quoted from weekly Lexis Nexis Newsletter published by Robin E. Kobayashi, JD, Lexis Nexis Legal & Professional Operations,  robin.e.kobayashi@lexisnexis.com



THE GREAT COMPROMISE

Stahl, JohnMany Work-related Disabilities Go Uncompensated: Compromising "The Great Compromise", by John Stahl, Esq. Evidence that many workers' compensation claimants have not received payments under "The Great Compromise" – the bargain that traded the right to sue employers regarding employment-related harm for the right to timely and appropriate benefits – has prompted calls for reform. An article written by Emily A. Spieler and John F. Burton, Jr. in the June 2012 American Journal of Industrial Medicine analyzed this situation.  Read More…



LARSON'S SPOTLIGHT: TORT ACTION

Tom Robinson thumbnail

Survivors of Deceased Employee Allowed to Bring Tort Action Against Uninsured Employer, by Thomas A. Robinson. In a 4-3 decision, the Supreme Court of Missouri recently reversed the decision of a state trial court that had held a workers' compensation award against a statutory employer barred a wrongful death claim against the deceased employee's uninsured employer. Finding that deceased employee's survivors had not made an election of remedies when they obtained the workers' compensation award against the statutory employer, the majority of the state high court held that the plain language of Mo. Rev. Stat. § 287.280.1 allowed…Read more about this case and other cases involving Illegal Aliens, Benefits for Old Workers, and Non-Dependent Spouse.



STUART COLBURN TO SPEAK AT NATIONAL WORKERS' COMP CONFERENCE

LexisNexis has partnered with the National Workers' Compensation Conference to create an enhanced legal track for attorneys and other workers' comp professionals.Stuart Colburn ColorLexisNexis author Stuart Colburn will be speaking on several panels, includingCausation, Misclassification, and the New Mobile Workforce. View the program agenda. Overall, there are 15 members of the Larson's National Workers' Compensation Advisory Board speaking at this event. You don't want to miss this conference! Take advantage of the special discount for all LexisNexis Workers' Compensation Law Community members. Community membership is free at our site.




Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com Contact mstack@reduceyourworkerscomp.com

 

 

 

 


WORKERS COMP MANAGEMENT MANUAL:  www.WCManual.com

VIEW SAMPLES PAGES

MODIFIED DUTY CALCULATOR:  www.LowerWC.com/transitional-duty-cost-calculator.php

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

Self-Insurance and High Deductible Plans Give Employers More Control

In pure self-insurance, an employer sets aside the money necessary to pay for all future losses. The amount of money necessary is calculated using actuarial information, insurance data, and the “law of large numbers” to calculate the probability of loss and the cost of expected incurred losses. If the employer does not have the available capital to place in reserve for future losses, self-insurance is not a viable approach to controlling risk.
 
 
Self-insurance for workers compensation benefits the employer in several ways, including:
 

1.     Lowering the overall cost of insuring for risk. The portion of the insurance premium that would be the profit for both the broker and the insurance company is retained by the employer. The amount of money set aside for the self-insured risk is used for paying claims and administering the claims management program.

2.     Providing better claims management. The claims can be either self-handled or administered by a third party administrator (TPA) where the TPA adjusters follow the directions and suggestions of the self-insured employer. It gives the employer more control over the claims handling situation.  (WCxKit)

3.     Lower claim cost and claim adjusting expenses. The TPA, especially a local and or regional TPA, can be flexible in designing and pricing the claims administration services.

4.     Self-insured employers also have a vested interest in the return-to-work program, ergonomics of the workplace, and having integrated safety programs.

 
With the benefits of self-insurance, you would think all employers would want to self-insure workers compensation. The barrier most employers run into is the ability to self-insure for catastrophic losses. While many employers can set aside money for routine, day-to-day workers comp claims, the actuarial determination of the amount of money necessary to set aside for catastrophic losses is more difficult to ascertain. Often the employer can place into reserves the amount of money for one catastrophic loss; but what happens if the employer has multiple catastrophic workers comp claims?
 
 
Full self-insurance is seldom possible. For a company to be fully self-insured in a viable manner, they must be able to cover all future losses, even the remote possibility of multiple catastrophic losses. Often employers elect to either have a self-insured retention or a high deductible, or a combination of the two.
 
 
To be “self-insured” but also cover the exposure for catastrophic claims, employers often determine the level of self-insurance they can afford. The company then purchases excess insurance to cover the risk of loss over and above a specific threshold. For instance, with a self-insurance retention, the employer administers and pays all claims under a set dollar amount. For an example, $500,000. When the total cost of the claims exceeds $500,000, the excess insurer reimburses the portion of the claims over $500,000.
 
 
Another approach for a self-insured employer unable to set aside the necessary reserves for catastrophic claims, is a large deductible program. In a large deductible program the employer purchases a policy of insurance from an insurance company. The employer is responsible for reimbursing the insurance company for each claim in the policy period up to a dollar limit. The employer will also have a maximum amount of exposure for all claims combined.
 
 
To illustrate: the employer reimburses the insurance company the total amount paid on each claim under $500,000 (the large deductible amount), but when the insured pays a total of $2,500,000 (a stop-loss limit) on all claims, the insurance company takes over and pays all further claim costs during the policy period. The allocated loss adjustment expense (the cost of handling the claim) is often included in the claim cost in the large deductible program. (WCxKit)
 
 

Self-insurance can be an excellent way to reduce the overall cost of insurance. Properly designed and administered, a self-insurance program can have a significant positive impact for the employer.


Author Rebecca Shafer
, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. See www.LowerWC.com for more information. Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
 

Our WC Manual is the BEST: www.WCBook.us
 
 
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
 
©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.

Texas Division of Workers Compensation Approves 14 for Self Insurance

 

pic10The Texas Department of Insurance, Division of Workers Compensation (TDI-DWC) approved one initial application and 13 renewals of certificates of authority, to self-insure for workers compensation claims for a one-year period under the TDI-DWC Self Insurance Program to 14 companies employing approximately 188,000 employees in Texas.

 

 

Under Texas law, certain large, private companies can self-insure for workers compensation claims, while retaining the protection of the Texas Workers Compensation Act for the company and for its employees. To qualify, a company must have a minimum workers compensation insurance unmodified manual premium of $500,000 and meet other requirements subject to annual review.(WCxKit)

 

 

According to the Texas Department of Insurance, certified self-insurance is a program that allows private employers in Texas to self-insure for their workers compensation losses – it is allowed because workers compensation coverage is not mandatory in Texas. Employers wanting to self-insure apply to the TDI-DWC and, if approved, pays its own workers compensation losses.

 

 

The companies affected by the most recent self-insurance certificates are:

  1. AAA Cooper Transportation, Dothan, AL
  2. American Electric Power Company Inc., Heath, OH
  3. Archer-Daniels-Midland Company, Decatur, IL
  4. Baker Concrete Construction Inc., Monroe, OH (new to program)
  5. FedEx Ground Package System, Inc., Pittsburgh, PA
  6. Hyatt Corporation, Chicago, IL
  7. Limited Brands Inc., Columbus, OH
  8. Lockheed Martin Corporation, Fort Worth
  9. Parker-Hannifin Corporation, Cleveland, OH
  10. Poly-America L.P., Grand Prairie
  11. Sam Kane Beef Processors Inc., Corpus Christi
  12. Union Tank Car Company, Chicago, IL
  13. VF Corporation, Greensboro, NC
  14. Wal-Mart Associates Inc., Bentonville, AR

 

 

Among the qualifications for self-insurance in Texas are the following:

  1. A private employer with operations in Texas.
  2. An estimated unmodified manual insurance premium of at least $500,000 in Texas, or at least $10,000,000 nationwide.
  3. Presentation of audited financial statements.
  4. Qualifying Credit/Debt ratings.
  5. A qualifying Tangible Net Worth to Long Term Debt ratio of 1.5 to 1, with Minimum Tangible Net Worth of $5 million.
  6. Posting of a minimum security deposit of $300,000.
  7. Posting of excess insurance in the amount of $5 million per occurrence.
  8. Submission of an “Application for Certificate of Authority” to SIR; and
  9. Payment of a non-refundable $1,000 application fee.

 

In other news, the TDI-DWC will be hosting some educational sessions on pharamacy closed formulary. The sessions are open to are for all Texas workers compensation participants, including health care providers, pharmacists, insurance carriers, claim adjusters, case managers, and attorneys. The free sessions provide information on the new TDI-DWC pharmacy closed formulary rules, adopted in December 2010 for both certified workers compensation network (network) and non-network claims with dates of injury on or after Sept. 1, 2011. The sessions will provide information on the definition and application of both the open and closed formularies.(WCxKit)

For more details, visit the TDI-DWC Events and Training Calendar on the TDI website at www.tdi.texas.gov/wc/events/index.html.

  1.  Abilene  Nov. 10, 2011
  2.  Amarillo Oct. 25, 2011
  3.  Austin  Oct. 20, 2011
  4.  Beaumont Nov. 17, 2011
  5.  Bryan  Nov. 30, 2011
  6.  Corpus Christi Nov. 3, 2011
  7.  Dallas*  Nov. 8, 2011
  8.  El Paso  Oct. 18, 2011
  9.  Houston** Nov. 15, 2011
  10.  Laredo  Nov. 3, 2011
  11.  Lubbock Oct. 25, 2011
  12.  Lufkin  Nov. 17, 2011
  13.  Midland Nov. 10, 2011
  14.  San Angelo Nov. 10, 2011
  15.  San Antonio Oct. 27, 2011
  16.  Tyler  Nove. 30, 2011
  17.  Waco  Nov. 30, 2011
  18.  Weslaco Oct. 25, 2011
  19.  Wichita Falls Nov. 30, 2011

 

This information was provided by attorney Stuart Colburn, a Shareholder at Downs Stanford in Austin, Texas. Colburn has extensive experience in all phases of dispute resolution before the Texas Department of Insurance, Division of Workers Compensation and in district courts across the state. Stuart represents clients regarding workers compensation, non-subscription, subrogation, and bad faith litigation. He is the founder and the first chairman of the State Bar of Texas (SBOT) Workers Compensation Section; course coordinator for the SBOT the Advanced Workers Compensation Seminar; and course coordinator for the Texas Workers Compensation Forum. He can be reached at:  scolburn@downsstanford.com

 

Our WORKERS COMP BOOK:  www.WCManual.com

 

WORK COMP CALCULATOR:  www.LowerWC.com/calculator.php

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SUBSCRIBE:  Workers Comp Resource Center Newsletter

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

 

©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact

 

Could Your Texas Company be Large Enough to Self-Insure for Work-Related Injuries?

Nothing in the following article should be construed as legal advice. If your company is considering opting out of workers compensation in Texas, please consult with a Texas attorney who can guide you through the jungle of not having workers compensation coverage.
 
 
 
Texas is the only state in which an employer can choose “to go bare” when it comes to workers compensation insurance. It does eliminate the cost of workers compensation insurance, but exposes the employer to the very real possibility of being sued and having to defend from the allegations that the negligence of the employer caused the injuries to the employee. To avoid that possibility, employers in Texas who do not have workers compensation will often offer a non-subscriber plan that provides the employee with both medical coverage and disability benefits when the injury occurs within the scope of the employment.
 
 
The non-subscriber plans are often referred to as “Voluntary Employee Injury Benefit Plans” and are normally written in both English and Spanish. The plans are written to comply with federal Employee Retirement Income Security Act of 1974 (ERISA) as the non-subscriber plans are considered an employee welfare benefit plan.
 
 
5 Things Texas Non-Subscriber Plans Usually Provide:
1.      Full medical benefits for any work related injury.
2.      Short-term wage replacement benefits.
3.      Long-term wage replacement benefits.
4.      Death benefits.
5.      Dismemberment benefits.(WCxKit)
 
 
The plans usually have an introduction and specify who is eligible for coverage. It states the employer is a “non-subscriber” to the Texas Workers Compensation Act and advises employees there is no coverage for workers compensation, but the plan provides the benefits outlined above and will provide the benefits without regard to whose fault the accident was. The official address of the plan administrator will be given along with the telephone number for the plan administrator and the business hours of the plan administrator.
 
 
When the Texas employer with a non-subscriber benefits plan hires a new employee, they offer the employee the option to join the non-subscriber plan. If the new hire elects to join the plan, the employee is given an enrollment and waiver agreement wherein the employee joins the non-subscriber plan and is eligible for all benefits available under the plan. In addition to becoming eligible for the plan's benefits, the employee acknowledges he or she is giving up any right to benefits under the Texas Workers Compensation Act and is giving up any rights to sue the employer for any benefits not provided by the non-subscriber benefit plan.
 
 
The plan will spell out the conditions under which the employer will pay to the plan participant’s income benefits and how the income benefits would be calculated. Short-term disability benefits are usually capped at 52 weeks (one year) while long-term disability benefits are often for 156 weeks (three years). The amount of short-term disability benefits is usually calculated by taking the average weekly earnings for a set number of weeks prior to the injury and multiplying the average weekly earnings by a percentage (often 70 percent or 75 percent) to obtain a short-term disability payment amount. The weekly amount will be capped at $1,000 or some other amount regardless of the plan participant's pre-injury average weekly earnings. Long-term disability will be calculated in the same manner, but is often at a slightly lower percentage (60 percent or 65 percent). Short-term benefits normally start after a non-paid waiting period which is usually a week or a set number of “business days.”  Long term disability benefits are only paid when the plan participant has exhausted all short-term disability benefits.
 
 
The non-subscriber plans will pay 100 percent of all necessary medical care, but will limit medical care to the physician or medical facility specified by the plan administrator. The plans also allow the plan administrator to change the designated medical facility at any time. Unapproved medical providers are only paid for when emergency medical care is needed. When a plan participant receives medical care, the plan participant can be required to submit to drug and alcohol testing at the time of the medical treatment. Medical care is provided until the plan participant reaches maximum medical improvement, dies, or is terminated for cause by the employer.
 
 
Death benefits are often based on a one-size fits all approach with a stated lump-sum amount to be paid to the beneficiary(s). The lump sum will often be broken down into a set percentage (often 10 percent) being paid immediately to the beneficiary(s) and the remainder of the lump sum being paid in monthly installments over a set number of year (often 5 years).
 
 
The non-subscriber plans also have a dismemberment chart which specifies what percentage of the death benefit will be paid in the event of the loss of limbs, hands, feet, fingers, eyesight, and hearing.(WCxKit)
 
 
If the Texas non-subscriber plan sounds a lot like workers compensation coverage, that is because it is designed to mimic workers comp. The employer is basically providing free medical coverage for on-the job injuries and disability insurance for on-the-job injuries, but maintaining more control over the benefits provided. If you feel your Texas company is large enough to self-insure for work-related injuries, a Texas non-subscriber plan might be the answer, but definitely consult with your employment law attorney before starting a non-subscriber plan.

Author Rebecca Shafer
, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing, publishing, pharmaceuticals, retail, hospitality, and manufacturing. See www.LowerWC.com for more information. Contact: RShafer@ReduceYourWorkersComp.com.
 
 
Our WC Book: http:// http://www.wcmanual.com

 
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
 
©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.

The Role of Self Insurance In Failing Economic Times

With the extended downturn in the economy, most workers’ compensation insurance companies find themselves with a combined loss ratio in excess of 100, which means they are losing money. When insurance companies start losing money, they start raising their premium rates. In response to rising insurance cost, many employers are considering self-insurance for their workers’ comp coverage.

 

The financial considerations for self-insurance include lower insurance cost, lower claim adjusting cost, better claim management, and lower state assessments. Other considerations include better integration of safety programs, better employee relations, and better management control.

 

Lower Insurance Cost

The lower cost of insurance is the initial reason most employers consider self-insuring. When an employer purchases insurance from an insurance company, the amount paid for the insurance premium includes:

  1.  The cost of claims.
  2.  The cost of administering those claims.
  3.  The operating expenses of the insurance company.
  4.  The insurance company’s profit.

 

By self-insuring employers eliminate the insurance company’s profit and the insurance company operating expenses (but assumes additional operating expenses of their own).

 

The employer is able to self-insure because the amount of workers’ comp losses are predictable based on experience. By knowing the amount of predictable losses, the employer self-insures for those amounts and purchases an excess insurance policy only for the losses deviating above the norm. Thus, the self-insurer purchases less insurance than would be purchased through a full-coverage workers’ comp insurance policy.

 

Lower Claim Adjusting Cost

While the Fortune 500 companies operate their self-insurance programs in many states, most self-insured operate in one state or a few states. Smaller operations allow them to use the services of the smaller third party administrators (TPA) able to provide excellent claim services at prices below what national and international TPAs must charge. The smaller local or regional claim administrators are more flexible in crafting and pricing the claims administration program to the needs of the self-insured employer.

 

Better Claim Management

When the insurance company adjuster is handling an employer’s workers’ comp claims, the adjuster tend to want to do things his/her own way. While an employer may make recommendations and suggestions to the adjuster, in the end the adjuster follows the instructions of the claim office supervisor, not the employer’s wishes. When the TPA’s adjuster is handling the workers’ comp claim, the self-insurer/employer the boss. The recommendations, suggestions, and directions provided by the employer will be closely followed by the TPA adjuster.

 

Assessments and Taxes

The cost of state assessments and taxes are included in the insurance policy from the workers’ comp insurer. The insurance carrier pays required assessments not levied on self-insurers. These include: the state assigned risk pool, the second injury fund, and insurance guarantee fund. When these assessments are levied on the self-insured they are lower because the insurance company assessment is based on premiums while the self-insured pays the assessment base on claim payments.

 

However, assessments do not always go in the favor of the self-insured company. Some states require self-insured companies to pay into a state self-insurance insolvency fund to cover claims from self-insurers who are insolvent.

 

Safety Programs

Companies switching to self-insurance almost always improve their safety programs to reduce or eliminate as many workers’ comp claims as possible. The employer who properly manages the loss prevention program will find the cost savings from workers’ comp self-insurance to be substantial.

 

Integration between the self-insurance program and the loss prevention program is much more complete within the employers who self-insure. When the insurance company is paying the claims, the motivation to prevent injuries is there but is not felt strongly. There is a greater motivation to get the most out of the loss prevention program when your company is paying the claims.

 

Employee Relations

A side benefit to the self-insuring employer is the ability to build better employee relations when an employee is injured. Employees often find comfort in the fact that their employer is in contact with them and it will be their employer making the decisions on their workers’ comp claim rather than an adjuster of an insurance company.

 

Management Control

Self-insurance often blends into the management philosophy of many employers who feel more comfortable being in control of the cost of the corporation. The self-insurance program allows the employer to participate actively in the claim management process and the associated cost of the claims. (workersxzcompxzkit)

 

Summary

Self-insurance allows the employer to reduce the cost of the workers’ comp insurance program. The self-insurer benefits from lower insurance premium/loss cost, lower claim handling cost, has better claims management, and lower assessment and taxes. The self-insurer also benefits from a more integrated safety program, better employee relations, and stronger management control. For more information on self-insurance programs, please contact us.


Author Rebecca Shafer,
 Attorney/Consultant, President, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. Contact:  RShafer@ReduceYourWorkersComp.com  or 860-553-6604.

FREE WC IQ Test: http://www.workerscompkit.com/intro/
WC Books: http://www.reduceyourworkerscomp.com/workers-comp-books-manuals.php
WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php
TD Calculator: http://www.reduceyourworkerscomp.com/transitional-duty-cost-calculator.php

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers’ comp issues.


©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com

 

NEW YORK Workers Comp Board Tax Practice Ruled Unconstitutional

A state judge ruled New York’s Workers’ Compensation Board was unconstitutionally taxing financially sound insurance trusts. 
 
On April 14, acting state Supreme Court Justice Kimberly O’Connor ruled the 2008 laws should be considered unconstitutional, as were the Workers’ Compensation Board’s assessments.
 
According to The Business Review of Albany, 13 self-insured groups sued after the board increased assessments in order to cover approximately $450 million of losses incurred as the result of other, unrelated trusts that defaulted and are accused of fraud.
 
Self-insured groups encompass employers in the same industry who pool their premium payments to pay for claims. The 13 groups involved in suing the state represent more than 7,000 public and private employers.
 
The workers’ comp board is appealing the ruling. By doing so, it freezes any impacts of the ruling while an appellate court reviews the matter.
State laws enacted two years ago altered how self-insured workers’ comp groups are regulated. The 13 healthy trusts claim the new laws were the reason their assessments increased so dramatically. (workersxzcompxzkit)
In 2007, the 13 groups had an aggregate assessment of $104,000. In 2008, assessments went up to $11.1 million. Due to the new law, the groups decided to dissolve, claiming the altered law made them uncompetitive.

Podcast/Webcast: Occupational Health Strategies
Click Here:

WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.

© 2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ ReduceYourWorkersComp.com.

Know the Difference Between Lost Time and Medical Only Claims – Shades of Gray

One of the country’s  largest Third Party Administrators (TPA) got into an embarrassing situation about a decade ago on the self-insured program of a Fortune 500 company. The embarrassing situation? The TPA did not know the difference between a medical only claim and a lost time claim when it came to billing. 
 
The risk management of the self-insured company noticed its allocated loss adjustment expenses (various claim related expenses including the cost of claims handling) was much higher than anticipated. The cause was an increase in the number of lost time claims and a decrease in the number of medical only claims. Claims the self-insured company thought should have been billed as medical only claims were being billed as lost time claims. The claims servicing agreement between the TPA and the self-insured company called for medical only claims to be billed at $125.00 each and the lost time claims to be billed at $950.00 each. The extra billing of $825.00 per claim was making a major difference in the allocated loss adjustment expenses of the self-insured.
 
The resulting fall-out from this embarrassing situation was the TPA had to re-think its billing structure for workers' compensation claims. Historically TPAs bill a flat rate per file on self-insured programs, with one rate for medical only claims and a second rate for lost time claims. This allows the self-insured programs to estimate their allocated loss adjustment expense. This approach worked well when the injured employee went to the doctor, was treated and released to return to work with no time lost from work. This approach also worked well when the employee was off work for an extended period of time, eventually recovered and returned to work. What got the TPA into trouble were the work comp claims not fitting neatly into either category.
 
What do you call the claim where the employee is dedicated to his employment, works through his injury, never misses a day from work, but receives a 5% permanent disability rating?   What do you call the claim where the employee is off work less time than the state mandatory waiting period, but due to a burn or severe laceration has a scar and is entitled to disfigurement compensation? What do you call the claim when the employee never misses any time from work for her injury, but continues to treat weekly with her chiropractor for years?
 
Claim category definitions now used for billing purposes normally include Incident Reports, Medical Only Claims, Enhanced Medical Only Claims, Other than Medical Only Claims, and Occupational Disease Claims. Each claim category definition has a flat rate dollar amount billed for handling a claim.   The following is how some TPAs are now defining claim categories.
 
Incident Reports
An incident report (also called Record Only) would be appropriate when no payment is contemplated. The incident is reported in order for the TPA to make a record of it by inputting the data into the risk management information system being used. An incident report would be entered into the system without a reserve as no payment would be made. 
 
Incident reports examples include an employee receiving a paper cut and a band-aid but no medical treatment off the premise, or a book falling off a bookshelf and hitting the employee, but the employee continuing to work without medical treatment.
 
Medical Only
A medical only claim is any claim involving medical attention, but no time lost from work beyond the state mandated waiting period, and does not include any permanency of injury. Any treatment at a medical facility or treatment by medical personnel off the premise of the employer qualifies the claim for medical only status, regardless of whether or not a bill is generated and regardless of who pays for the medical care. 
 
The medical only claim includes the receipt of the claim by the TPA and data input into the risk management information system about the claim, plus the reserves set to pay the claim. If no medical bill is provided to the TPA, the TPA can closed the claim without payment, but the TPA will still be paid for the handling of the medical only claim.
 
Enhanced Medical Only
This is the claim definition category most TPAs adopted in recent years to deal with the medical only claims entailing more work than the typical medical only claim. An enhanced medical only claim will be any medical only claims where the medical treatment of the employee continues for six months or longer, or the cost of all medical care exceeds $1,500.00. The enhanced medical only claim also includes the receipt and data input into the risk management information system about the claim, plus the reserves to pay the claim.
 
Other Than Medical Only
Notice the title for this claim definition…….it does not say Lost Time claims. This claim category definition would include any claim not fitting the definition of incident report, medical only claim or enhanced medical only claim. This includes all lost time claims beyond the state mandatory waiting period, any claims with permanency and any claims with disfigurement (in the states requiring  monetary compensation for disfigurement). 
 
Claims requiring investigation are included in the “Other Than Medical Only” category. This could be the investigation of compensability, or subrogation, or the degree of permanent injury or any matter in dispute. Also, the handling of claims with light duty restrictions where there is a loss of wage earning capacity are classified as “Other Than Medical Only.”
 
Occupational Disease Claims
This claim definition category includes medical only, enhanced medical only and other than medical only claims which are obvious occupational diseases like asbestosis and black lung. This category would also include those states classifying repetitive trauma as an occupational disease claim. (workersxzcompxzkit)
 
Summary
The claim servicing agreement between the self-insured company and the TPA should have definitions of claim categories to eliminate the potential for the embarrassing situation discussed above. Please note no two TPAs define claim categories exactly the same.

Author Rebecca Shafer, Risk Consultant/Attorney, President, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. She can be contacted at: RShafer@ReduceYourWorkersComp.com or 860-553-6604.

Podcast/Webcast: Occupational Health Strategies
Click Here:

WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php


Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.
 
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ ReduceYourWorkersComp.com.

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