CHSI - Commitment. Honesty. Service. Innovation.

Self-Insured Groups: Myth vs. Fact

Myth:Self-insured groups are financially risky.

Reality: CHSI managed self-insured groups are well funded with strong financial management. CHSI is SAS 70 audited, ensuring the highest quality of internal controls, and the programs routinely pass regulatory audits. There is risk sharing in self - insured groups-members sign an indemnity agreement agreeing to share responsibility with other members in the event that further funds are needed. The other side of this commitment is that members may receive excess surplus - funds not needed for claims and expenses. There are many protections in place to ensure that members are safe from additional expenses - excess insurance, financial audits, detailed financial reporting and board oversight, superior claims performance, expert underwriting. The risk to employer members of CHSI managed self-insured groups is very low.

Myth: If I join a Workers' Comp self-insured group and somebody else in the group has a catastrophic claim - such as a fatality or a paralysis - I will have to pay more money and it could threaten my business.

Reality: Self-insured groups are employer pools - excess losses for one member are absorbed by the rest of the pool. CHSI managed self-insured groups are fully protected against catastrophic injuries by insurance coverage with 'A' excess insurers. The excess carrier covers all costs of all claims that come from a single occurrence, whether it is 1 claim or 100 (such as an earthquake). Each group pays an initial amount, such as $ 500,000, called the Self-Insured Retention (SIR). Catastrophic injuries do not in themselves require further funds from group members.

Myth: All self-insured groups are the same.

Reality: Workers' Compensation self-insured groups vary widely. Aside from dramatic differences in state requirements, the quality of program design and management is group specific. In the relatively small number of cases where self-insured groups have experienced significant financial difficulty, the program administrator and their operational model have almost always been the primary factor. CHSI is SAS 70 certified. Boards of Trustees receive Fortune 100 quality financials on a monthly basis. CHSI and its managed programs work closely with regulators and have passed state audits without recommendations.

Myth: If another self-insured group falters, my group and my business can be forced to pay for their liabilities.

Reality: In the states in which CHSI operates, self-insured groups are ultimately supported by the tangible net worth of members. This means that any group needing additional funds must collect the funds from its own membership. California has additional back-up for self-insured employers - the California Self-Insurers' Security Fund - which steps in if any self-insured entity cannot meet its obligations.

Myth: If I join a self-insured group, I could be responsible for what happens in the group before or after I join.

Reality: Self-insured group members only share responsibility for their time of membership. If a member decides to leave the group, their claims liabilities stay with the group, just as they would with an insurance company.

Myth: Self-insured groups are unrated and therefore they can be a problem for members who need to be with an insurer that has an A.M. Best 'A' rating.

Reality: CHSI managed self-insured groups have met all 'A' paper requirements for members since the first group was formed in 1996. In addition to the 'A'  paper of their excess insurance carriers who stand behind the SIG's, the financial and operational controls of the groups and validation of their financial health by state regulators have satisfied all requirements.

Myth: Self-insured groups have failed in many states.

Reality: Self-insured groups have, in relative terms, had a better track record than insurance companies in terms of continuance of business in states. In cases of self-insured group failures, the issue has always been an absence of administrative and underwriting integrity by the program administrator. CHSI maintains strict controls in all of its administrative processes, works closely with its actuaries on maintaining rating integrity and has routinely passed its state audits without recommendations for corrections.

CHSI supports licensing for administrators and strong regulatory oversight.