As an alternative to traditional workers’ compensation plans, self insured workers comp puts the financial risk of employee safety benefits on the employer. As called a self-funded plan, these employers choose to pay the costs of each claim filed directly out-of-pocket, rather than paying an insurance carrier or state-sponsored plan a fixed premium.
Limits on Self-funded Plans
There are several states that have denied companies the option of choosing a self-funded plan. Instead, these companies must purchase commercial insurance or take part in the state fun. In the other states that do allow self-funding, the company must have received approval from the appropriate regulatory body. Approval requires that a company meet established solvency standards and submit actuarial documentation.
Reasons for Self-funded Plans
Self-insurance isn’t a solution for every company. Employers looking to control their costs while still giving their injured employees access to timely, quality medical care may choose to fund their own workers’ comp plan. Employers can maximize their cash flow by paying claims as they occur rather than paying high premiums before an accident occurs.
Small and mid-sized businesses may not always have the cash flow needed to address claim costs. In these instances, it is best to work with an insurance provider that can extend coverage for workplace injuries. Look for a solution that protects your companies finances but still takes care of employee accident claims.