Your clients, or even your own firm, may be considering self-insuring to cover costs normally covered by health or workers' compensation insurance, but a recent poll shows that there's a certain amount of ignorance about the responsibilities and liabilities of a self-insured group's member firms—and that ignorance is growing.
It may seem like the ideal answer in a time of rising insurance premiums: join an SIG to avoid ever-escalating payments to outside companies for employee health insurance or workers' comp coverage. But there are caveats, too. In November 2010, the Contractors Access Program (CAP), a self-insured group of 252 small businesses that had gathered together to provide their own workers' compensation coverage through pooled resources, was declared in default by the California Department of Industrial Relations. That left member businesses—small contracting companies—on the hook for some $38 million in workers' compensation claims. The declaration was a wake-up call for many of the member businesses, which have been embroiled since in negotiating a court settlement for claims that otherwise could continue to be a drain on them for years.
In April of this year, the California Self-Insurers' Security Fund assumed liability for payment of another SIG's workers' comp liabilities, those of Mainstay Business Solutions. In this case the liabilities were estimated at $16.5 million.
The poll, designed to determine small business owners' knowledge and understanding of SIGs, was commissioned by Employers, a company that provides insurance coverage to small businesses, and conducted by ORC International. The findings are a bit disturbing, considering the proportion of current and former SIG members who apparently do not understand what they are liable for.
