Pros and cons of self-insured workers’ compensation, and Georgia rules
Georgia, like many other states, allows certain employers to “self-insure” workers’ compensation claims rather than obtaining insurance from a third-party insurance company. In short, being self-insured means that the employer will be responsible for paying the medical bills and lost wages of employees injured on the job instead of a third-party insurer.
Currently, Georgia’s State Board of Workers’ Compensation regulates and licenses approximately 300 companies and 100 governmental entities that self-insure. These self-insured entities include major companies and organizations like Dollar General, Southern Company Gas, Emory University, Ford Motor Company, Delta Air Lines and Harrison Poultry, as well as local government agencies such as Atlanta Public Schools, Atlanta Housing Authority, and the cities of Douglas, Atlanta, Valdosta, Roswell, Brunswick City, Savannah and Waycross.
Altogether, a significant portion of Georgia’s workforce is employed by companies that are “self-insured” when it comes to workers’ compensation.
What’s the process to self-insure in Georgia?
In order to be self-insured, the employer must establish the financial capability of resolving workers’ compensation claims in order to be accepted as a member of the Georgia Self-Insurers Guaranty Trust Fund.
To become self-insured, a company must complete the following steps:
- Submit an application to the Georgia State Board of Workers’ Compensation. This process will include filing duplicate copies of the application, providing 3 years of financial statements for the business and a $500 application fee.
- The State Board will forward the application to the Georgia Self-Insurance Guaranty Fund, which will make a recommendation to the Board on whether or not the application should be accepted.
- The State Board holds final authority over acceptance of the application. If the application is approved, the Board will issue the provisions under which the self-insurance application has been accepted. These conditions will include the security deposit the firm must pay to the Georgia Self-Insurers Guaranty Trust Fund and payment of the initial $8,000 assessment fee.
- After acceptance, the company must provide annual audited financial statements, file the Member Information Update Form and pay annual assessment fees that range from $1,000 to $4,000.
- The firm must also provide contact information to a designated representative within the company to the State Board as well as listing the contact person at the Georgia Claims Office or the Third Party Administrator (TPA) for Georgia.
- The Georgia Self-Insurers Guaranty Trust may claim the security deposit if the firm suffers insolvency. The funds may be used to satisfy future workers’ compensation claims made by employees of the dissolved business.
There is no “right” for a firm to self-insure in Georgia. Acceptance into the guaranty trust is dependent on whether the applicant business meets the State Board’s requirements for self-insurance.
What factors are considered in self-insurance applications?
The general guidelines that determine whether or not a company qualifies for self-insurance are clear. The company must:
- Have 150 or more employees
- Pay $250,000 or more in annual workers’ compensation premiums
- Have a total payroll in excess of $1.5 million
- Implement a satisfactory company safety program
- Have a history of financial solvency
- Operate in Georgia
- Have a history of compliance with Georgia workers’ compensation law
- Make a long-term commitment to self-insurance
- Establish a sound claims process (either by coordination with a Georgia TPA or through satisfactory internal administration)
- Provide annual audited financial reports
- Provide timely payment of benefits
To create a sustainable self-insurance system, the company must decide whether to administer claims internally or outsource this responsibility to a third party. If the company chooses to administer claims internally, the staff assigned to handle this task must be both qualified and receive sufficient company training and support to handle the job.
Bringing in an experienced TPA is usually the best choice when a company first becomes a self-insured entity. There will be many requirements that administrators must handle to maintain a working self-insurance system, and this process can be difficult without an established administrative infrastructure.
These duties include:
- Establishing bank accounts with a Georgia depository to assure that payments will be made in a timely manner,
- Filing regular reports with the State Board,
- Making sure the company stays in compliance with Georgia workers’ compensation law.
What are the pros and cons of self-insurance?
Many times, businesses and organizations can reduce their workers’ compensation insurance costs by self-insuring cutting out the “middleman” insurance company. Self-insurance also gives the company more control over the process.
As for the disadvantages of self-insurance, it does increase the risk that the company is exposed to. For example, the company can “get unlucky” and suffer a rash of high-cost medical claims from injured employees, putting the business in financial jeopardy.
Another problem with self-insurance is that it could put employees “at odds” with their employer. Sometimes, employees are reluctant to file workers’ compensation claims out of fear that an expensive claim will compromise their future at the company. This hesitancy is heightened when employers are self-insured because an injured employee’s workers’ compensation claim comes directly from company revenue.
How is medical treatment for injured workers handled when a company is self-insured?
How a self-insured company handles injured workers will have a profound effect on how employees perceive their company since there is no third-party insurance company to blame if something goes wrong. For example, companies are responsible for providing a list of qualified medical experts to injured workers.
Some self-insured employers opt to use an internal panel or a medical care organization (MCO) to make workers’ compensation medical decisions.
If the firm chooses an internal panel, it must include at least 1 orthopedic surgeon and 1 minority physician, along with 2 other qualified physicians. The injured worker must choose 1 member of the panel to treat their work-related injuries or illness, and they can make 1 change of physician request.
If an employer chooses to use an MCO, the organization must be approved by the Georgia State Board of Workers’ Compensation. Injured employees can also make 1 change of physician.
Does self-insurance mean a firm will directly pay workers’ comp claims?
Some companies obtain workers’ compensation insurance with an extremely high deductible. In this situation, the employer will be paying most claims for injury and lost wages from revenue and are effectively self-insured, but employees will still have to deal with a third-party insurer. However, the company will be making the bulk of decisions, unless a claim exceeds the deductible.
What happens if a self-insured company goes bankrupt?
If a self-insured firm becomes insolvent, employees can make a claim to the Georgia Self-Insured Guaranty Trust Fund. The purpose of this fund is to pay claims from security deposits provided to the trust by self-insured employers.
When to consult a Georgia workers’ compensation attorney
If you were injured at work or recently diagnosed with an occupational illness, and you discover that your employer is self-insured, we strongly recommend you meet with an experienced Georgia workers’ compensation attorney to learn more about your rights and responsibilities under the law.