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My employer is self-insured; what does that mean?

On Behalf of | Jul 16, 2021 | Workers' Comp |

Our state is known for a lot of things, like miles and miles of beautiful beaches, scenic drives, wineries, etc. But, what many injured workers are discovering is that California now leads the nation in workers’ compensation self-insurance programs. This has led those injured works to ask what does that mean?

By the numbers

In 2019, according to the California Department of Industrial Relations, Office of Self-Insurance Plans, there were 3,613 active self-insurers in the state. These employers covered 2.3 million California workers and over $120 billion in total payroll, which paid ou nearly $1.5 billion in payments. But, by the beginning of this year, the number of active self-insurers in the state ballooned to 7,152 California employers.

Traditional workers’ compensation programs

Under the traditional model, known as the guaranteed-cost policy, a company hires a third-party insurance carrier for a fixed annual premium. For that fixed annual premium, that insurance carrier ensures the employer against all possible workplace liability. And, to price these policies, insurance carries calculate all known and possible risks. Then, they calculate in their “costs,” like marketing budget, overhead, administration costs and profit. And, in 2018, according to the Workers’ Compensation Insurance Rating Bureau, that final fixed annual premium amount is 37 percent costs. That is a huge percentage of the premium.

Cost savings and employer control

Self-insurance, on the other hand, allows companies to do two things: (1) save the “costs” from their insurance budgets; and (2) craft an insurance program to their own needs.  And, of course, this is regulated by the state and the company must be granted a Certificate of Consent to Self-Insure. But, once they pass the regulatory hurdles, the company does not need to involve an insurance company at all. They get to select who will administer their program, set the program’s priorities and resources and dictate how the program will work.

The problem

Of course, for those employees now trying to navigate their company’s “customized” self-insurance program, they have probably figured out that, for some companies, the employee’s needs are not thought of in the planning stage. This is why it is so important for those San Jose, California, injured workers to contact a workers’ compensation attorney immediately.