The proper use and implementation of large deductible programs for workers compensation can save insured organizations serious amounts of cash! But watch out for the surprises. Apparant savings can quickly disappear through improper determination of loss picks, poor claim management and collateralization problems.
Large deductible programs are for sophisticated insureds who typically chose deductibles between $100,000 and $1,000,000. Not for the faint of heart! And not for those employers without a sophisticated workers compensation management program.
The decision to participate in a large deductible workers compensation program should never be left to your insurance agent or to an employer lacking the means of proper collateralization or ability to control claims. They are simple in their make up but can develop into a complicated set of challenges for the unaware employer.
When these plans operate as they are designed they are an excellent way of managing an employers workers compensation costs. Unfortunately history shows they do not always work the way they are designed. and that’s when problems begin to develop.
Here’s a short list of associated problems:
- Employer Insolvency – When an employer becomes unable to meet their financial obligation under the plan. A financial obligation that may become an unsustainable burden.
- Insurance Carrier Insolvency – Questions arise about the payment of outstanding obligations, their relationship and effect on and response from any state guaranty fund.
- Claim Handling – Effiecency of claim reporting, self administered claims, claim processing, management and settlement and the effect on program performance all make an impact on the sustainability of a large deductible plan.
- Inappropriate Plan Design – The inappropriate use of deductible reimbursement policies purchased by the employer.
Each of these items can create significant problems when dealing with large deductible plans.
If you are interested in developing one of these plans for your company be sure you learn everything you can on how they work and find and work with experienced insurance carriers and brokers who have a history of designing and implementing appropriate programs. Remember, these plans when done right can be very good for the employer. But when they go bad can be devastating to all involved!
If you have questions about or problems associated with a large deductible plan or program be sure to contact an independent workers compensation consultant for assistance!
Hope this helps you out! Thanks!
