Self-Insured Plans: Workers' Compensation - most cost-effective option for some employers In a self-insured plan

Similar in both concept and in scope to the self-insured health plans for group coverage, self-insured workers' compensation plans can be the most cost-effective option for some employers.

In a self-insured plan, a company will assume the financial risk of paying for claims and associated administration costs. The policy will be managed by a TPA (Third-Party Administrator) to minimize the cost of claims, and if little or no claims are paid out, the client will stand to benefit by profiting from the difference in their payout versus the premium they would have paid to an insurance carrier that would calculate premium to allow for their own profit margin. The employer can choose to limit their risk up to or a little over the amount they would have paid in premium under a fully insured program by purchasing stop loss coverage at any point.

A hired TPA (Third-Party Administrator) handles claims, payments and the day-to-day administrative tasks of the self-insured benefits packages. The TPA will use the same coverage model followed by traditional insurance carriers to comply with the complex state regulations and minimize the cost of claims. Some of their cost containment methods may include:

  • PPO (Preferred Provider Organization) - A nationwide network of affiliated physicians who participate in this healthcare network providing quality care and significant savings
  • PBM (Pharmacy Benefits Manager) - A nationwide network of participating pharmacies providing extensive savings on prescription costs
  • Hospital & Lab Network - A network of participating Hospitals & Laboratories providing additional savings on those costs.

Through the combination of these elements, as well as numerous other cost containment measures, the TPA will be in the position to administer plans just as equivalent to the level of a standard fully insured insurance plan while minimizing cost to the employer.

The cost of a self-insured plan is determined by many factors and may depend on the number of employees, the risks involved, the particular industry being served and previous claims history. Being that there are many Federal and State guidelines dictating the requirements for companies seeking to self-insure, along with administration fees and other monetary requirements such as collateral, significant analysis must be made to determine the cost-effectiveness of such an option to a specific employer, prior to embarking on this path.

Broad Coverage Service specializes in analyzing the challenges of each company and determining whether the application of a self-insured plan is prudent - and will work with clients to choose the appropriate TPAs and providers in an effort to create a quality workers’ compensation program while keeping costs low for employers.