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Self-Insurance - Group

Similar employers join together to insure themselves.;

Overview
Group self-insurance requirements vary from state to state, but typically allow employers of similar employment types to group together to insure themselves.

The groups usually form "
trusts" which are organizations of similar employers that band together to provide less-expensive insurance coverage for workers injured on the job with the understanding that, if money ran out, the employers - and not a traditional insurance company - would be responsible to cover shortfalls.
 
Groups desiring to self-insure must receive approval from the appropriate state regulatory agency prior to paying benefits. Group self-insurance may provide lower costs for its members or "policyholders," but may also result in assessments for employers if the group's losses exceed its "premium" and it cannot meet its obligations.
 
Approximately 32 states allow group self-insurance. Indiana generally does not with two exceptions:

Indiana Public Employers Plan (IPEP) is a non-regulated insurer that could be considered in the group self-insurance category.

Public School Corporations can create insurance trusts ("school trusts" or "school pooling"). Effective 5/14/08, the Indiana Department of Insurance implemented Final Rule LSA Document #07-144(F) which adds 760 IAC 1-75 to create regulations for the insurance trusts.

Section 5(c) of the regulation requires carriers to report data to the ICRB: “the primary or excess insurer shall report data required by IC 27-7-2-28.1 to the ICRB for the risk pool and for each individual risk pool participant.”

Section 7(b) of the regulation requires that the ICRB produce experience ratings upon request: “(b) If the risk pool offers worker's compensation through an insurer, the trust administrator shall maintain and provide, at the request of the risk pool participant, the accurate individual risk pool participant's own distinct experience modification factor calculated in accordance with the rules of, and acceptable to, the ICRB.”

Section 14 of the regulation requires these notices:

(a) The application for participation and the participation agreement must contain the following statement: "This is a fully assessable contract. In the event (the Risk Pool) is unable to pay its obligations, participating members will be required to contribute through an equitable assessment the money necessary to meet any unfulfilled obligations."

 

(b) Every application and coverage form must contain the following notice: "Your coverage is issued by a Risk Pool. The Risk Pool is regulated by the Indiana Department of Insurance. State insurance guaranty funds are not available for your Risk Pool."

More Information
The Institute of Work Comp Professionals has an article on its website titled "The Good, The Bad, and The Ugly of Workers' Compensation Group Self Insurance Funds" that dicusses the pros and cons.

The Educational Service Center Risk Funding Trust (ESCRFT) provides a link to an analysis done in June 2006 titled "Pooling in Indiana: Buyer Be Aware of Risks vs. Rewards"

As of January 2010, ESCRFT was made up of 20 individual school corporations throughout the State, along with seven (7) Educational Service Centers, also geographically spread. ESCRFT contracts with Marsh USA (Indianapolis) as administrators of the pooling program, and with JWF Specialty, a division of Old National Insurance, as TPA's for all lines of coverage in the pooled program.

Related Files

The material in this document has been prepared and shared for informational purposes only and should not be relied upon as legal advice on any particular situation.