Transparency, employer control of benefit programs and eliminating carrier profit margins often top the list of why a business moves to self insuring workers comp. While these, along with limiting taxes, seem beneficial, a business needs to complete careful calculations before making the move.
How Self Insuring Works
Moving away from a fully insured carrier plan means the business funds the provided benefits and assumes any financial risks. Unlike a traditional plan that costs the same every month, a self-funded plan has fixed costs and fluctuating costs depending on usage. A third-party administrator is needed to ensure the success of the program. This administrator has the expertise to handle claims and review medical bills and utilization, helping the business continue to focus on the work it does.
Consider the Pros and Cons of Self Insuring
When considering self insuring workers comp, there are positives and negatives. A key benefit is helping employees receive care faster while still controlling costs. Since claims are paid as they happen, it eradicates upfront costs. On the flip side, employers pay for those claims. Since cash flow isn’t always fluid, a company needs to do its due diligence to ensure it is financially sound before self insuring any benefits.
Self insuring workers comp offers many benefits to businesses, but it also requires carefully weighing potential risks.