Why Should an Employer Consider Self-Funding Their Workers' Compensation Plans?

As inflation and increasing global risk push up the cost of coverage, a powerful tool has gained traction in recent years: partial or total self-funding of workers' compensation.

In an article featured on InsuranceThoughtLeadership.com, Nick Ververis, Regional Principal of OneDigital's Property & Casualty Practice, shares his expertise around self-funding workers' compensation plans and how it helps employers gain more control over coverage, claims management and associated costs.

Partially self-funded workers' compensation programs offer greater financial control and cash management by allowing companies to only pay for actual, incurred claim expenses, reducing the need for fully valued traditional insurance premiums. This approach fosters a more robust safety culture as companies see precisely where their premium dollars are going and become more invested in preventing workplace accidents and injuries to minimize claims and costs.
 
— Nick Ververis, Principal, OneDigital Property & Casualty

In the article, Ververis walks through a case study of Wheeler Health, a healthcare and human service provider, who saw two positive impacts by partially self-funding their workers' compensation plans: it helped manage the financial burden (workers' compensation expenses had soared to nearly $1 million for a $25 million payroll) and gave the client a more active role in claims management. Savings have run into the millions of dollars over the past decade. If Wheeler remained on their fully insured plan, their annual workers’ compensation costs would hover around $1.8 million to $2 million today.

The article then asks, "Why don't all groups take advantage of this solution?" Ververis shares:

While the financial benefits of well-designed partial or fully self-funded workers' compensation plans are extraordinary, they aren't that common. Some possible reasons are a general lack of understanding and limited product knowledge. Quite frankly, it’s also less profitable for insurance companies when clients move to this type of plan.

By tailoring their self-funded plans, companies can align workers' compensation strategies with industry-specific needs and risk profiles, optimizing coverage and cost-effectiveness. This transformative model can also greatly enhance employee wellbeing, productivity and organizational resilience. Employers with a substantial payroll, a solid commitment to workplace safety and a desire to reduce workers' compensation expenses should consider this option.

Read the full Insurance Thought Leadership article here: Why to Self-Fund Workers' Comp.

Want the full story on how Wheeler Health saved millions by self-funding their workers' compensation plans? View the full case study here.