Alternative risk financing for workers compensation A number of alternatives to the standard workers compensation policy and financing method have been appearing in the marketplace over the last few years. The cost of providing workers compensation benefits to employees has become a burden that employers are no longer able to bear without that cost threatening the survival of the very organization itself.
At a time when many medium-to-large companies are operating on razorthin profit margins, the cost for workers compensation benefits cannot always be passed on to the customers. As a result, a number of innovative financing methods have been developed. Four of the most prominent methods include: self-insured pools, captive insurance companies, promissory note arrangements, and integrated employee benefits/workers compensation plans.
While the reasons for developing and using these alternative plans are essentially driven by cost, simply devising a new plan will not solve this problem. The cost of workers compensation benefits is attached not only to higher medical costs and employee wages, but also to the increasing number of accidents, in both severity and frequency, that happen in the workplace.
Methods of loss reduction are a real key to providing innovative financing methods. Each of the alternative financing methods mentioned above should …