Under California law, employers must have worker’s compensation insurance policies in place to cover their employees. The state also allows certain employers to self-insure. This is called a Self-Insurance Program (“SIP”).
Which Employers Can Self-Insure?
California has specific guidelines in place that determine whether an employer can self-insure. First, employers who want to self-insure must go through an application process through the Office of Self-Insurance Plans. The employer must have $5 million in shareholder equity, have an average net profit of $500,000 per year during the last five years, and must have certified independently audited financial statements.
If Employers Are Self-Insured, What Benefits Must They Provide to Injured Workers?
In California, self-insured employers are required to provide injured workers with the same benefits that the workers would receive if the employer had a traditional worker’s compensation insurance policy. These benefits are prescribed by statute. The self-insured employer must also hire a third-party claims administrator for the first three years that they qualify as self-insured. The employer is subject to periodic audits by the Office of Self-Insurance Plans (“OSIP”) to ensure that benefits are properly administered.
Benefits most commonly associated with worker’s compensation include:
– Medical expenses. This can include, but it is not limited to, doctor’s visits, prescriptions, emergency medical care, surgeries, physical therapy, and necessary medical supplies such as crutches or wheelchairs.
– Lost wages. Worker’s compensation generally provides workers with some of their lost wages if they meet certain guidelines.
– Disability payments. If workers are temporarily or permanently disabled as a result of their on-the-job injury, they may be eligible to receive disability payments.
Self-Insured Employers Are Subject to Yearly Reporting
The road to self-insurance can get complicated. For example, self-insured California employers must provide specific reports each year to the Office of Self-Insurance Plans along with an actuarial study and audited financial statements. OSIP is most concerned with ensuring that self-insureds are solvent and can meet their financial responsibilities under the workers compensation laws. As such, the annual report must include the amount of money in claims paid in indemnity and medical, future liability related to claims that are still open, the average number of employees and total wages for each, and a list of open claims.
For more information on the self-insured workers compensation process and to determine whether it is a fit for your business, contact experienced insurance lawyer Drew E. Pomerance today.
