Workers Compensation Self-Insurance Regulations in Risk Financing
This release of Risk Financing features updates to
the summaries of state
regulations for self-insuring workers compensation.
In order to guarantee that employers have the financial ability to satisfy
the benefits payable to employees for on-the-job injuries, self-insurance
of workers compensation is closely regulated. All states have their own
workers compensation laws with which employers must comply (Texas and Oklahoma
being the only exceptions with their alternative provisions). Most states allow
employers to self-insure the risk instead of buying workers compensation
insurance. Employers must obtain approval from every state in which their
self-insurance programs are to apply (with the exception of a few states'
exemptions for public entities).
The current updates include the results of our research of permitted options
in the event a workers compensation self-insurance program is terminated
(voluntarily or involuntarily). Each state's summary now includes an item
titled "Self-insurance Replacement Allowed." It addresses whether or
not a state has specific rules or legislation that allows an insured to
transfer the outstanding liabilities from a terminating self-insurance program
to an insurer, including known claims and incurred but not reported claims. Our
initial research finds that many states do not have specific regulations on the
issue. Many states allow regulators to determine if adequate provisions for
payment of all outstanding liabilities are in place at the time of a
termination. For those, the response in the summaries in Appendix C is
"not prohibited by statute." Our efforts to establish more certainty
on this issue are ongoing. Note that in addition to state regulations, group
self-insurance programs have their own rules for members when their
participation is terminated.
In addition to the item on "Self-insurance Replacement," the
summaries list many of the other major requirements of the various states that
allow self-insurance for workers compensation, including the following.
- The materials that must be submitted with an application for
self-insurance
- Security requirements
- Requirements for excess workers compensation insurance
- Fees for initial applications and renewals
- Taxes and assessments charged to self-insureds
- Reporting requirements
- Minimum employer size, premium, and net worth requirements
The summaries also list the name and contact information of each state
agency responsible for regulating self-insurance, as well as the state's
web address for online information.