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.
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 minimum security deposit is determined as described in Rule 316.1. Effective July 1, 2013, the minimum deposit is $1,253,000. 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.
The New York State Legislature amended the Workers' Compensation Law on March 31, 2011 which enacted significant changes to the existing group self-insurance program. Governor Cuomo signed the bill into law on April 1, 2011 as Chapter 57 of the Laws of 2011.
The changes to the Law repeals the current provisions of the Law authorizing group self-insured trusts and replaces them with a new program that allows only the most financially stable group trusts to continue to offer coverage. Any existing group that met the new criteria had to reapply and qualify under these new provisions.
These changes became effective January 1, 2012.
Groups that met the minimum qualifications outlined under the new legislation were allowed to continue to offer coverage provided they met and continue to meet the new provisions of the Law, including security deposit posting requirements outlined therein.
Groups that did not meet the new criteria were terminated effective December 31, 2011 and their members had to provide alternate coverage for their employees.
The current program, called the Self-Insured Group (SIG) Program is limited to the groups that met the new provisions and chose to continue their program under the amended Law. In accordance with the amended Law, no new employer groups can be approved to self-insure.
Opportunities for membership in an existing SIG are further limited to the homogeneity requirements of the current Self-Insured Groups.
For information regarding active and terminated groups, please access the group status report.
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.