Consider group self-insured workers' comp: sharing the burden of keeping these worrisome costs under control.
New and more affordable models of workers' compensation coverage are becoming available to skilled nursing facilities to rein in these costs. Group self-insured workers' compensation programs are an alternative worth considering.
Group self-insurance allows similar companies or companies within defined industry sectors to join together and share both costs and benefits of mandatory workers' compensation insurance. Member premiums provide funding for any claims and expenses. Group members own 100% of group surplus, including interest income. In short, group program participants own both the assets and liabilities of the group.
A group program allows employers to determine with whom to share risk; provides incentive for efficient, cost-effective operations; and implements loss-control strategies and other means to reduce costs.
Individual organizations can determine which group members they should associate with by identifying their own standard industrial classification (SIC) code. This allows them to seek a group that covers their industry group. Also important is finding an administrator who carefully screens potential members through an extensive underwriting and pricing process to make sure their financial well-being, claims history, and risk factors will not undermine the group. Most administrators have specific criteria and underwriting guidelines that a prospective member must meet to become a group member of a select program. These guidelines are typically disclosed to prospective members during the quoting process and, if not, should be requested.
To minimize potential risks, all self-insurance groups have a "joint and several liability" clause in their membership agreements. In its simplest form, joint and several liability means that group members must share in any shortfalls that may result from the program's adverse loss experience. Specifically, if in a given year the group's claims or expenses exceed its premium or income, any resulting shortfalls must be corrected. Typically, this would be resolved via a renewal premium adjustment, just as in the standard market. However, groups can assess their members whereby each could pay a pro rata portion of the shortfall based on the ratio of their individual premium versus the total group premium.
The keys to success, and what makes employer members comfortable with joint and several liability, are controls and limits put in place to manage a program. For example, the group administrator periodically visits all members to ensure that they are providing safe and healthy workplaces to minimize on-the-job claims and injuries. Our company, CRM, assigns designated certified safety professionals who perform annual group member site visits to assess safety programs, provide safety and training action plans, and follow up to ensure that high standards are maintained. CRM also provides a group safety report card program to assure aggregate group compliance. In general, members are encouraged to keep a clean safety record which, in turn, limits claims, keeps premiums in line, and supports the group's overall financial well-being.
Based on my experience with the Healthcare Industry Self Insurance Program (HISIP) of California, one of five programs we administer, I believe that being part of a group self-insured program is an effective means for nursing home operators and other healthcare providers to realize long-term savings. There are several reasons for this besides improved safety procedures. Because HISIP is not required to use rates charged by all insurance companies--rates are based on the experience of the members--HISIP can offer savings over traditional insurance products. HISIP members own 100% of group surplus, including interest income on every premium dollar paid into the fund. Loss-control services and products that are not easily found in the standard insurance market are also available.
HISIP and the other groups each maintain a board of trustees composed of group members. CRM provides regular claims activity and financial reports to these boards and advises members on appropriate action, if needed. Through monthly reviews of loss and financial data, the trustees monitor their financial position in a more timely fashion than one would normally expect from a standard insurance carrier.
Finding workers' compensation insurance is becoming increasingly difficult and expensive for employers. I believe group self-insurance provides the opportunity for savings, stability, and the ownership of surplus dollars through innovative products and solutions to help companies solve the complexities of this mandatory insurance product.
Ari Baer is Accounts Manager for CA Healthcare Workers' Compensation Group, a full-service program agent for approved self-funded workers' compensation insurance programs based in Los Angeles. For further information, phone (323) 934-8160 or visit www.groupworkcomp.com. To send your comments to the author and editors, please e-mail firstname.lastname@example.org. To order reprints in quantities of 100 or more, call (866) 377-6454.