Looking for opinion on a non-pension actuarial request

[Gary]

A friend called me and asked about self-insuring his company’s (180 employees) workman’s comp program.

He wanted me to determine some sort of funding schedule.

Does anyone know much about this subject?

A simple perspective would be to get a pertinent body of data based on the claims, amount of claims, coverage, etc. do an analysis and arrive at a funding plan. And put in caveats explaining the breadth of the study and its limitations.

Curious to know thoughts.

Thanks.

Gary

[GBurns]

I doubt very much that his State law allows this.

[MGB]

As GBurns said, state law needs to be examined. If the state allows purchase of insurance (instead of using a state fund), then, "self funding" means to set up a captive insurer, at which point you need to explore what the state law (and federal tax law) require for the insurer to sell policies to the public at a minimum in order to be recognized as an insurer.

It is possible that a state would allow direct self-funding, but most likely not.

I suggest they work with someone that is very familiar with their state law, which becomes very complicated if they operate in more than one state.

[Kirk Maldonado]

My understanding is that California allows self-funding (or at least did in the past), but imposed some pretty rigid funding requirements. As a result, I've been told that you have to be a very good sized employer (implying thousands of employees) for self-funding to make any sense.

[Ron Snyder]

Some states require using the state's pool; others provide for private insurers. Some of those who permit private coverages permit self-funding.

The best information I have found on the web for workers compensation is at NCCI NCCI although there are many sites that provide information

It appears that self-insured workers’ compensation coverage is permitted but a bond of 125% of the private self-insurer’s estimated future liability (minimum $200,000) must be posted.

IF the employer already has a self-funded medical plan and a white collar (or other low workers comp utilization) workforce, it may make sense to consider adding "24-hour coverage" to the self-funded health plan to satisfy workers compensation. However, most companies don't really get into self-funding (due to the possibility of adverse selection) until they have a "true actuarial group" of 500 or more employees to cover.