There are regulations all over the country that require businesses of all types to provide workers’ compensation coverage for their employees. These programs provide payment for medical attention, rehab therapies, and disability coverage when an injury occurs while on the job. With self-insured workers comp, an employer assumes the financial responsibility of the workers’ compensation benefits for those who were hired. Each claim is paid out of pocket, rather than paying an insurance carrier a contracted premium rate.
Limitations for Self-Funded Coverage
Although there are more than 6,000 entities operating across the United States under a self-insured plan, there are some states that have prohibited companies from pursuing this option. Instead, these states require that an approved commercial or state-funded workers’ comp policy be secured.
Reasons for Choosing Alternative Coverage
According to Caitlin Morgan Insurance Services, there are several reasons why a company would choose this option,
- There are more opportunities to control costs.
- It ensures injured employees receive timely and appropriate care.
- The pay as you go plan helps maximize a company’s cash flow.
Not all employers can assume the risk of a self-insured compensation claim. It must have the cash flow (or financial resources) to be able to pay for the potential claims. The situations of the incident, injury, or associated costs can be unpredictable, so thoroughly weigh your options when deciding on employee injury coverage.