Does it matter whether workers’ compensation benefits are paid directly by an employer or by an insurance company? I think it does.
Here is what injured workers should know about self-insured employers in Nebraska and how self-insurance can affect their workers’ compensation claim.
What is self-insurance?
Self-insurance means an employer pays workers compensation benefits directly from company funds. Typically an employer pays premiums to an insurer who pays out benefits.
Because self-insureds bear the entire cost of a work injury they tend to be more hands on in managing workers compensation claims. Many self-insurers have internal workers compensation coordinators who communicate with doctors and go to medical appointments with workers.
How to know if your employer self-insured for workers compensation?
You can skip to the end of this post and check. You can also call the Nebraska Workers’ Compensation Court at 402-471-6468. But if you are calling an someone in a risk management department at your employer about benefits, your employer is probably self-insured
Some self-insureds contract out to third-party administrators such as Gallagher Bassett and Sedgwick. (Sedgwick was criticized for giving Iowa Governor Kim Reynolds a ride to an Iowa State bowl game in a company jet.)
How does self-insurance effect your claim?
Most employers who are self-insured for workers compensation are also self-insured for health insurance. Typically, health insurance will shift the costs of work injuries onto workers compensation insurance. But when an employer is paying for both health and workers compensation insurance, employers will try to shift the cost to the least expensive form of insurance. Usually it costs the employer more to pay through workers compensation than it would through health insurance.
More importantly employees often incur significant out of pocket costs of injuries are shifted onto health insurance.
Self-insurance may also impact settlement value. Any employer that is self-insured for both workers’ compensation and health insurance typically values future medical benefits less than an insurance company. Self-insureds argue that they will bear the cost of the injury either through workers’ compensation or health insurance.
Interaction with employment law
As mentioned earlier, self-insureds tend to be more hands on in managing claims. I believe this can make such employers more vulnerable to retaliation claims as terminations are often used as an excuse to reduce or not pay workers’ compensation benefits. Self-insureds are also more apt to ask for so-called global releases of workers’ compensation and employment law claims. Global releases often require the employee to resign their employment. Often times a resignation is the only way that an employee can get fair settlement value for future medical care if they are employed with a self-insured.
Differences in regulation
Workers compensation insurance is regulated by the Nebraska Department of Insurance. Self-insureds are subject to regulation by the Nebraska Workers’ Compensation Court. The court regulates both claims practices and the solvency of self-insureds at NWCC Rules 69-76.
The risk of bankruptcy is another important difference between self-insureds and employers who carry outside insurance. If an employer goes bankrupt, the employee is still covered by workers’ compensation insurance. If a workers’ compensation insurer goes bankrupt, then a guaranty fund should pick up coverage. But if a self-insured goes bankrupt, the injured worker is less likely to get full compensation.
Who is self-insured for workers’ compensation in Nebraska?
Here is a list of approved self-insureds from the Nebraska Workers Compensation Court.