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Self Insurance - Workers' Compensation

An employer who wishes to self insure for workers' compensation can do so in one of two ways: (1) by becoming an individual self-insurer or (2) by becoming a member of a self insured group. Political subdivisions must also provide workers' compensation coverage to their employees, and they may elect to self-insure those benefits.

Individual Self Insurance - Workers' Compensation

An employer who wishes to self-insure on an individual basis for workers' compensation must submit the following as part of the application process:

• SI-1 Application for Self Insurance - Workers' Compensation;
• Original copies of the applicant's independently audited financial statements covering the three years immediately prior to application;
• Current payroll report of applicant broken out by classification code;
• Payroll history, broken down by classification code, for the last five years;
• Most recent carrier premium audit, with the current experience modification;
• Foundation documents (i.e. certificate of incorporation; partnership agreement; etc.);
• Applicant's safety program; and
• Incurred loss history of the applicant for the last five years.

If the applicant is deemed a good candidate for self-insurance, based upon all the information submitted, a conditional approval will be issued. Final approval will become effective when all documentation, as well as an adequate security deposit, have been received.

The amount of the initial security deposit will be based upon the current payroll report of the applicant broken down by classification code, and rates developed by the Compensation Insurance Rating Board (CIRB). The current minimum security deposit is determined as described in Rule 316.1, usually $624,000. Every year that the employer remains self-insured, the security deposit is reviewed for adequacy, based upon the payroll codes, CIRB rates, and the employer's reported incurred losses. If necessary, the employer must adjust the security deposit to adequate levels as determined by the Board. Failure to maintain security deposits in the amount determined by the Board may result in termination of the employer's self-insured status.

While actively self-insured, employers must submit the following information to the Office of Self Insurance on an annual basis:

• The most recent certified, independently audited financial statement;
• A payroll report filed by classification code;
• Statement of outstanding death and disability claims; and
• Statement of compensation and medical losses incurred by the self-insurer.

The Self Insurance Office will utilize this information to determine adequate security amounts for each self-insurer. Self-insurers must also report who their licensed third party administrator is if claims are not self-administered. Failure to meet any of the reporting requirements may result in termination of the employer's status as a self-insurer.

A self-insurer who has discontinued business in New York State, or has arranged for the payment of compensation by alternate methods (State Fund or carrier coverage), may terminate their status as a self-insurer at any time. The Board will maintain a security deposit for the discontinued self-insurer until all claims have been finally adjudicated and fully paid, and all expenses and assessments have been paid.

Group Self Insurance - Workers' Compensation

Joining a group is an alternative to carrier or State Fund coverage for employers who may not be able to self-insure on an individual basis. To qualify as a group self-insurer and to maintain authorization to operate as a group self-insurer, the group must: (1) include two or more employers that perform related activities in a given industry and that have been in business for a period of time which is acceptable to the Chair; (2) have and maintain an aggregate net worth of members which is at least one million dollars; and (3) have and maintain a combined annual payroll of group members which, when multiplied by the current rates promulgated by the New York Compensation Insurance Rating Board (CIRB), is at least $500,000.

Any group of employers seeking initial authorization to operate as a group self-insurer must submit the following as part of the application process:

• GSI-1, Application for Group Self Insurance - Workers' Compensation Law;
• Trust Agreement and By-Laws of the Group Self-Insurer;
• GSI-1.1, Application for Participation in Group Self Insurance Plan, and Participation Agreement, for each employer participating in the group;
• A description of the safety program, if any, proposed for the employer group;
• An actuarial feasibility study directed and certified by an independent qualified actuary;
• Information about the group's trustees;
• Information about the officers, directors and general managers of the group administrator;
• A report identifying the projected rate of contribution and assessments to be paid by each member for the first year of the group's operation, and the manner in which such contributions and assessments were calculated;
• A description of the group's organization for the administration of claims as well as the duly executed contract between the board of trustees, the group administrator and the claims administrator;
• Any duly executed contract between the board of trustees and either an attorney-at-law licensed to practice in New York State or a representative of self insured employers licensed by the Workers' Compensation Board pursuant to subdivision (3-b) or (3-c) of Section 50 of the Workers' Compensation Law, pertaining to the representation of group members before the Workers' Compensation Board; and
• Evidence of relevant experience from the group administrator.

If the applicant is deemed a good candidate for group self-insurance, based upon all the information submitted, a conditional approval will be issued. Final approval will become effective when all documentation, as well as an adequate security deposit, have been received.

The amount of the initial security deposit will be based upon the current payroll report of the group members broken down by classification code, and rates developed by the Compensation Insurance Rating Board (CIRB). Group self-insurers are required to establish and maintain trust assets in an amount that exceeds trust liabilities, as those terms are defined in Section 317.2 of the Rules and Regulations. Group self-insurers who fail to comply with this capitalization standard shall be deemed "under-funded" and shall immediately provide the chair with an acceptable plan of action as may be appropriate in order to make up the deficiency in a timely manner. Such under-funded groups may also be subject to any or all of the provisions set forth in Section 317.9 of the Rules and Regulations.

In the event of the insolvency of a group self-insurer, participating members would be held jointly and severally liable for the unpaid obligations of the group incurred during the time of the employers' participation. For this reason, employers interested in participating in a group should review all relevant documentation of the group self insurer, including, but not limited to: the group's independently audited financial statement; the trust document and by-laws; and the group's methodology for developing contribution levels.

Group self-insurers are required to notify the Board, on properly executed prescribed forms, any time employers join or leave the group self insurance program. In addition, group self-insurers must submit the following information to the Office of Self Insurance on an annual basis:

• A financial summary report in a form prescribed by the Chair;
• Certified, independently audited financial statements;
• Certified, independent actuarial report;
• A payroll report filed by classification code, for each group member and in aggregate.

The Self Insurance Office will utilize this information to determine that the Group Self Insurer is adequately funded. Group self-insurers must also report who their licensed third party administrator is if claims are not self-administered. Failure to meet any of the reporting requirements may result in termination of the group's status as a self-insurer.

[ Rules and Regulations ]

Political Subdivisions - Workers' Compensation

Political subdivisions that elect to self-insure their workers' compensation must file a Notice of Election (Form SI-26), together with a resolution from its governing body, which states that they have elected to provide workers' compensation benefits through self-insurance.

Political subdivisions that elect to self-insure their workers' compensation are exempt from posting security deposits, and they are not required to submit annual reports. However, political subdivisions must report who their licensed third party administrator is, if claims are not self-administered.