How It Works
In a self-insured workers' compensation plan, the employer assumes the financial risk for providing workers' compensation benefits to its employees when a workplace injury or illness occurs. Employers pay the cost of each claim "out of pocket" as they are incurred instead of paying a fixed premium to an insurance carrier or to a state-sponsored workers' compensation fund.
Why It Works
Employers typically opt to self-insure a Workers’ Compensation plan because it provides them with more opportunities to control and lower fixed costs and ensure their injured workers are receiving timely and proper care. Employers have control over claims administration and safety and loss control efforts, which in turn enables employers to better mitigate and prevent losses.
Claims Administration
Self-insured plans can either administer claims in-house or subcontract the service to a third-party administrator (TPA). TPAs specialize in providing claims administration and loss control services for self-insured groups.