Taking Control: How Non-Profits Can Benefit from Workers' Compensation Self-Insurance Groups
Church, Frederic C., Jr., The National Public Accountant
The traditional approach to workers' compensation has long disturbed the executives and board members of many non-profit organizations. The whole system is incongruous.
When there is an on-the-job injury, even a long-time, loyal employee immediately becomes uneasy, wondering if he will be treated fairly by the organization. Why should a good employee have such doubts? Why should an organization be viewed with suspicion by an injured employee? Yet this is exactly what occurs far too often.
The problems stem from flaws in the workers' compensation system. The injured employee and the employer almost inevitably view each other with distrust. Employers often feel that on-the-job accidents are fraudulent, a way for an employee to get a "free ride." And the injured employees sense a wall coming down between themselves and their employer if they are hurt. There is often a lack of communication between the injured workers and employers, a situation that can result in unnecessary employee anxiety.
This "we-they" dichotomy creates the suspicion in the employees' minds that they are not being dealt with fairly. When this happens, the next step is to hire a lawyer who may prey upon these fears, further separating the employee from the employer and escalating the costs.
The adversarial situation also creates a bothersome double standard, Non-profits make every effort to be sure their clients are treated in a caring way. But the moment when their employees need their understanding and support the most, they can get the impression that being injured has changed their status, that they have done something wrong, and that the organization has turned its back on them.
The solution to controlling costs and to making possible a mutually beneficial relationship between an injured employee and the employer requires a reengineering of workers' compensation. Aside from governmental reform, the primary means of effecting significant change is for non-profits (as well as businesses of all types) to take charge of their destinies. One of the most effective ways is to form a private insurance company, commonly known as a self-insurance group.
The self-insurance group alternative makes it possible for non-profits to become directly involved with the governance, investments, underwriting, risk financing and risk management services. There are a number of significant benefits of a self-insurance group for non-profit corporations.
Gain control over the insurance program
Unfortunately, it is not uncommon to feel victimized by the traditional insurance approach to workers' compensation. Decisions are made "somewhere else." The injured worker's claim is placed in the hands of someone who is a stranger to both the employer and the employee.
The self-insurance group process gives the members actual ownership of the claims process since they are responsible for designing policies and procedures to meet their specific requirements.
Reduce losses by implementing sound prevention strategies
The major step in reducing costs is to eliminate every possible on-the-job accident. The value of safety programs has long been recognized. Self-insurance groups take safety issues very seriously by requiring that appropriate programs be designed and implemented, such as catastrophe planning, preparing procedures manuals, offering regular training, conducting site inspections and providing for awards and recognition activities.
Reduce costs by examining program expense components
Insurance premium invoices tend to mask both actual costs as well as an understanding of what the insured is receiving for the payment in terms of specific components. In other words, the customer does not receive an itemized bill.
Participation in a self-insurance group gives the owners the opportunity to review and understand the individual cost elements and to determine the most appropriate ways to control those costs. …