Workers Compensation Blog

At one point in time, it was a standard feature of most workers compensation systems to have a Second Injury Fund (SIF) in place. A typical Second Injury Fund provides coverage for employers when an employee who already has a pre-existing injury or condition, and is hurt on the job that makes the pre-existing condition worse.

New York implemented the first Second Injury Fund in 1916, which paved the way for many other states to follow suit. The fundamental purpose of SIFs was to encourage employers to hire workers with disabilities, without fear of an injury impacting their work comp coverage. Prior to the establishment of Second Injury Funds, two scenarios would occur when a second injury arose:

1)      The injured worker would be limited to recovering benefits for the second injury alone or

2)      The employer would be obligated to pay benefits equal to the combined effects of the preexisting disability and the second injury

Neither of these options were good for either the employer or employee, so the establishment of SIFs made sense as a way to protect both parties and encourage proper hiring practices.

The costs of SIFs are spread out amongst all employers paying for workers compensation benefits in a given state, typically charged in a percentage tax built into a policy (in Missouri, the second injury fund tax is currently 3% of premium).

In the past 30 years, almost 20 states have discontinued SIFs for a myriad of reasons – all related to the fund experience financial strains. Some of the reasons for difficulties Second Injury Funds experienced include: the fund’s coverage extending beyond its initial intended scope; assessment/fees to supply the funds not keeping up with actual expenses and coverage payments; and the argument that a Second Injury Fund is no longer a necessary remedy to hiring practices since the inception of the Americans With Disabilities Act (ADA).

It is important to note that the many of the states that have discontinued their SIF still have assessments and staff in place as the length of the runoff for payouts takes quite some time to go away. Typically, these states will gradually phase down the assessment percentages as the payout amounts dwindle.

Here is a list of states that have eliminated Second Injury Funds:

Can a workers compensation retrospective rating plan be a good tool for larger accounts as the comp market hardens?

Many insurance companies and industry professional expect the workers comp market ot begin to harden this year (2012).  A hard market means that basic manual rates will increase for all risk regardless of their experience modifier or their prior losses.  The predictions are based on the combined loss ratios reported by insurance companies over the past few years as well as rates proposed by NCCI. 

As Retro Plan can be a good tool for employers with larger premiums- typically $250,000 and up.  These plans are basically a risk sharing arrangement between the inurance company and the insured.  The policy contains a minimum premium, a maximam premium, and a basic premium (the expected premium).  A rating formula is created for each risk and applied to determine premium based on actual incurred and reserved claim costs during the policy period.

Retro Plans can cost less than 50% of a standard, first dollar coverage policy when claims are controlled.  On the other hand, the maximum exposure (ultimate cost of the policy) may be greater than the standard policy in the event an insured has a number of costly claims.  Since most employers are risk takers anyway the thought of saving money for coverage and focusing on risk management should be a no-brainer.

A few companies have developed front loaded retro plans.  This type of program allows for the expected discounting to be applied during the policy period so employers can improve their capital position.  In some cases we have worked with carriers to provide Retro Plans on a Pay As You Go basis.  Class code billing rates are adjusted up or down each quarter to coincide with claim development.

As Retro Plans continue to increase in popularity, more insurance companies will endeavor to create new and innovative solutions to insurance employers in the United States.

The Hartford adapts XactPay program away from QuickBooks with XactPay Express

Several years ago The Hartford introduced the XactPay program exlusively for QuickBooks Users.  In 2011, The Hartford expanded the program to allow all employers with an Internet connection to use the XactPay program. When The Hartford XactPay Program was first launched it was exclusively designed to integrate with newer versions for QuickBooks payroll software.  The program required QuickBook users to download a module desinged to integrate with QuicBooks and automatically upload payroll data to The Harford.

After several years of disappointing results in terms of customers, The Hartford went back to the drawing board and designed a broader program called XactPay Xpress.

XactPay Xpress allows any employer with access to the Internet to report and pay their workers comp premium based on real time payroll.  All The Hartford Workers Comp customers are eligible for the program, but many agents don’t actively market the benefits.  After enrolling in the program, employers simply login an enter their payroll details into the system.  XactPay then emails and invoice and debits a bank account.

XactPay helps reduce the down payment for a policy and then improves cash management by spreading payments throughout the entire year.  Hartford does not charge any billing fees for the service.

WorkersCompensationShop is always trying to help employers find better ways to buy workers compensation coverage and is a proud partner with The Hartford XactPay.