Report on Self Insurance Groups
Understanding the Nature of Group Self Insurance
Group self insurance has certain characteristics of insurance and other characteristics of stand- alone self insurance, as well as characteristics unique to group self insurance. Like insured employers, members of a self insurance group (SIG) pay in advance to cover their projected liabilities for workers’ compensation benefits. Like self insured employers, members remain at risk. Unlike employers in either of the other models, members of a SIG are jointly and severally liable for the amounts required to pay the liabilities of all the members of the group, and they may be assessed to cover any shortfall in the group even if their own experience is loss-free. None of the three models are purely one type, since each model also involves some combination
of deductibles, experience ratings, dividends, deposits, and reinsurance.
Each model is
ultimately backed by a guaranty fund, either the California Insurance Guaranty Association (CIGA) for insurers or the Self Insurers’ Security Fund (SISF) for self insured employers and SIGs. The group self insurance model, however, is unique, and it creates its own challenges for legislative and regulatory oversight. Across the country, the methods for overseeing group self insurance are still being invented.
The reason the state takes on the challenge of overseeing a program for group self insurance is that this model has the potential to save money and reduce the adverse impacts of industrial injuries for both employers and injured workers. Furthermore, group self insurance may be able to serve public policy goals by providing appropriate incentives to participating employers. One of the persistent problems for policymakers has been the inability to deliver incentives to insured
For example, the permanent disability benefit adjustment known as ―bump-
up/bump-down‖ does not apply to small employers, in part because it would be the insurance company, not the employer, which would receive the direct savings when a disabled worker has been returned to the job. Return to work involves relationships and legal obligations apart from workers’ compensation. Workers’ compensation insurers are rightfully reluctant to become
overly involved in those incentives and insufficient programs are more likely
Smaller employers may be left with insufficient
resources to carry out to be found in large
public policy goals. Effective return-to-work self-insured employers, where the economic
benefits directly reach the employer and human personnel policies. Group self insurance has
resources departments can carry the potential to deliver similar
out enlightened incentives and
resources directly to smaller employers. hazards of group self insurance, it bears the interests of California employers and
While this paper mention that the workers.
will focus on the negative aspects and viability of group self insurance is in
Although group self insurance is not regarded as ―insurance‖ for purposes of the Insurance Code and is not under the jurisdiction of the Department of Insurance, it is, in essence, insurance. Group self insurance is fundamentally different from stand-alone self insurance. Group self insurance has the defining characteristic of insurance, which is the transfer of risk of an occurrence from one entity to another in exchange for a payment in advance of the occurrence.