How Does Self-Insurance Work?

In a group Self-Insurance program a group of employers pool the money they would otherwise pay as premiums. The fixed or administrative costs and the variable costs or paid claims are funded from this pool of money.

Fixed costs include: Program administration, claims administration, safety/loss prevention services, marketing and sales, actuarial and accounting services, and specific and aggregate excess insurance. Variable costs include: Actual dollars paid on claims, Self-Insurers Security Fund and Special Compensation Fund assessments.

Whatever is not paid in fixed costs or variable costs is surplus and is returned to the membership - this is the fundamental difference between traditional insurance programs and Self-Insurance programs.

Why Self-Insure?
Control of indemnity payments producing SCF assessments of 1.9% of written premiums versus industry result of 6% saving $25,000 per year.

Group Self-Insurance is not a new concept in Minnesota, as it dates back to 1982. Since Self-Insurance was approved by the Minnesota Department of Commerce, the number of groups has grown to 22. Self-Insured Workers’ Compensation represents about 25% of the total Workers’ Compensation dollar in Minnesota. What are the benefits of self-insuring?

Overall, the businesses that have chosen to Self-Insure their Minnesota Workers’ Compensation with an approved Group have found they have total costs that are, on average, up to 15% less than the “Standard Market”.

  • Have more control of their claims costs and claims outcomes
  • Traditional Company = Profit for the Company
  • Self-Insurance = Dividend to YOU
You help in keeping prices lower

Each new prospective Fund member agrees to be committed to safety and return-to-work. The Fund’s Board of Directors has the authority to remove any member from the Fund for non-compliance.

Fund Safeguards

Group Self-Insurance programs do have joint and several liability. Greater Minnesota Self-Insurance Fund (GMSIF) addresses this by:

  • obtaining specific excess insurance to cap losses
  • obtaining aggregate excess insurance to cap the total losses for any single year
  • not allowing every applicant access into the Fund
  • only accepting financially sound companies as GMSIF members

Control Costs Group Self-Insurance for your Workers’ Compensation is a long term, cost effective alternative as it provides savings and price stability. Insurance companies are in business for a profit. Self-Insurance allows the profit to be retained by the members. Your commitment to employee safety keeps the cost of insurance down.

Control Price Stability With traditional insurance your Worker’s Compensation Premiums generally rise and fall based on the standard market. Self-Insurance provides Price Insulation as the members pay based on the actual claims costs of your group.

Control Who You’re Insured “With” Group Self-Insurance in Minnesota means you are insured with healthcare facilities like yours here, in Minnesota. The GMSIF Fund is managed by a Board of Directors that is made up of members of the Fund.