As employers look for ways to reduce expenses, many might be tempted to sacrifice their employees’ benefits packages. Though it is possible to cut back on some of the costs, most companies will not be able to do away with workers’ compensation insurance. Thanks to government law, employee injury protection is a must-have for a majority of businesses. However, by changing to a self insured workers compensation plan, companies may be able to save money on expensive premiums.
The Way It Works
Self-insurance can be an affordable alternative to workers comp insurance. The employer pays each claim filed out of pocket rather than paying a premium amount each month or quarter to an insurance carrier or state-sponsored fund. Employers must qualify for these plans, and each state has a regulatory agency that sets the requirements for both application and approval. A few states do not allow self-funded plans, but for those that do, self-insurance can provide several benefits.
- Companies maintain more control over claim programs
- Improved control and management with safety and loss
- Greater cost effectiveness for small businesses
Self-insurance isn’t an ideal option for large businesses operating in industries fraught with injury and illness risks. However, small businesses who are able to manage the risks of injury may find that paying claims out of pocket are more affordable than fixed premiums.