A Self-Insurance Guide for Ohio Employers
The Ohio Revised Code requires that all employers with one or more employees have an active and current Workers’ Compensation Insurance Policy in place, typically through the Ohio Bureau of Workers’ Compensation (BWC). BWC grants select employees the right to become self-insuring employers, meaning that the employer administers their own workers’ compensation program and handles direct payments for all claims. The following information can help clear up any questions you may have about self-insurance and help you decide if it’s an option worth exploring.
What is self-insurance?
Self-insurance is a privilege the BWC grants to certain employers. Self-insuring employers directly pay compensation and medical costs for work-related injuries instead of paying premiums to the Ohio State Insurance Fund. Employers pay claims made by their employees, assume all liability and administer their workers’ compensation programs. Employers who are approved for and elect to self-insure are required to abide by the laws and rules of workers’ compensation as set forth in Ohio Revised Code 4123.35 and Ohio Administrative Code 4123-19-03.
Does my business qualify for self-insurance?
To qualify for self-insurance, employers must demonstrate the capability, both financial and administrative, to maintain a self-insured program. Employers wishing to apply for self-insurance should submit their application at least 90 days prior to the self-insurance coverage start date.
Additionally, employers must be able to demonstrate the following:
• Employ a minimum of 500 workers in the state of Ohio
• Have operated in Ohio for at least two years
• An active participant in the state insurance fund at the time of self-insurance application
• Five years of certified financial statements that provide full financial disclosure
• An organizational plan for the administration of workers’ compensation claims
What is the application process for self-insurance?
Due to the importance of workers’ compensation insurance, the application process for self-insurance is very involved and requires the submission of numerous application forms and supporting documentation. Submitting a complete application package will help avoid delays in the processing of your application.
The first step in the application process is to complete the initial application and related forms.
• SI-6: Initial Application by Employers for Authority to Pay Compensation Etc. Directly
• SI-38: Contract of Guaranty
• SI-44: Election to Withdraw from Claim Reimbursement Fund
• SI-16: Agreement Between Employer and the Ohio BWC Regarding Amount of Self-Insured Buyout
• AC-2: Permanent Authorization
Documentation needed for your application package includes:
• Five years of certified financial statements in accordance with Generally Accepted Accounting Principles (GAAP). This includes a balance sheet, a profit and loss statement, auditor’s opinion and all footnotes;
• A current organizational table showing all entities associated with the self-insurance applicant;
• The name, contact information and qualifications for the individual that will act as the Ohio workers’ compensation administrator;
• Organizational plan for the administration of the workers’ comp law;
• Proposed plan to inform employees of the change from a state-fund insurer and procedures employees must follow when filing for compensation and benefits;
• Secretary of State papers providing proof of registration to do business in Ohio;
• Information on your company’s risk- and claims-management procedures to establish a safe and more cost-effective workplace, including:
o Active senior management leadership;
o Employee involvement;
o Return-to-work practices;
o Communications affecting employee safety and health;
o Claims reporting practices;
o Coordination of safety and health practices;
o Written and communicated safe work practices;
o Written safety and health policy;
o Record keeping.
Additionally, public employers must submit responses to the following questions:
• What was the public employer’s bond rating as of the most recent fiscal year end?
• Has the public employer complied with all U.S. Securities and Exchange Commission (SEC) disclosures for the last five years?
• Has the public employer had any local government fund distributions withheld in the last five years?
• Has the public employer been placed on fiscal watch or emergency in the last five years?
• What were the unvoted debt capacities for the public employer for the two most recent fiscal years?
Completed application packages should be mailed to the Ohio BWC’s Self-Insured Department at least 90 days prior to the desired start date of self-insurance. The BWC will review all submitted materials and issue a written decision granting or denying self-insurance within 90 days. If denied, company’s may appeal the decision of the BWC to the Self-Insured Review Panel. If approved, the BWC will schedule a self-insurance orientation session for you.
Sheakley’s workers’ compensation experts have helped to transition more than 30 employers to self-insurance over the last ten years. Discover more about Sheakley and whether self-insurance is a good option for your company.
What are the costs of self-insurance?
Self-insuring employers do not completely avoid payments to the BWC. In addition to compensation and medical costs for workers’ compensation claims made by employees, self-insuring employers must still contribute to the BWC and other related departments and programs.
The BWC requires self-insurers to pay semiannual assessments to BWC based on a percentage of the employer’s claim payments. These payments help fund the administrative costs of the BWC and Industrial Commission of Ohio, as well as the self-insured employers’ guaranty fund (SIEGF), safety and hygiene services, and the self-insured surplus fund. During the first five years of self-insurance, the BWC will base your assessments on a percentage of indemnity payments related to your prior state-fund policy.
Once a year for three years, newly self-insuring employers must contribute six percent of the most recent annual payroll premium to the SIEGF. This helps to fund claims made by employees of self-insuring employers who have defaulted. Additionally, self-insurers must reimburse, on a semiannual basis, any Disabled Workers’ Relief Fund payments utilized.
What are the benefits of self-insurance?
The potential benefits of self-insurance could potentially far outweigh the out-of-pocket costs of participating in the program. A free analysis with a Sheakley representative can help you gauge whether the program will help you save money and keep your employees healthy.
Self-insurance can help you improve your business’ cash flow and reduce your workers’ compensation costs. Claims are paid as they occur, not upfront, allowing you greater control over your income and expenses. By not paying premiums that can include hefty markups, your workers’ compensation dollars can go further. You can maximize your cash flow while setting aside funds to pay for potential claims, allowing you to make investments to help grow your business.
Additionally, self-insurance can give you greater control in limiting potential risks. Since you are paying costs directly, you will be more motivated to take implement measures that reduce your exposure. Many self-insurers opt to enact expanded employee training, offer additional workplace safety programs, and conduct more frequent safety audits with the aim of reducing accidents, thereby reducing the amount out-of-pocket expenses.
Self-insurance with Sheakley
Sheakley offers self-insurance program administration and strategic claims management. Get your free financial analysis today to decide if SI is the right choice for your company. By becoming a self-insured employer with Sheakley, you could receive substantial savings and improve claims management.
Learn more about how working with Sheakley’s workers’ compensation experts can help you begin experiencing all of the benefits of self-insurance. Stay up-to-date on all things Sheakley by subscribing to our blog and following us on social media. Join in the discussion by commenting below.