Product Update

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.