Purchasing Workers' Compensation Insurance

Whether or not an employer decides to become self-insured depends on several factors. A self-insured employer may realize financial savings by avoiding insurance premiums and having the ability to manage their own workers’ compensation claims.  However, self-insured employers take on all costs associated with a work-related injury, such as wage loss, medical benefits, specific loss benefits, and accept the financial risk of potential workers’ compensation claims.  The costs associated with being a self-insured employer can be significant due to the risk and uncertainty of potential workers’ compensation claims.  In the event of a catastrophic work injury or large claim, a self-insured employer remains liable for workers’ compensation on injuries or disease exposures occurring during its period of self-insurance.

The bureau is responsible for: ​

• Processing the applications and renewals of employers seeking to obtain or maintain self-insured status for their workers' compensation claims.​
• Determining whether a potential self-insured applicant has the financial strength to be self-insured.
• Determining how much security a self-insured employer must set aside to guarantee payment of workers' compensation benefits to their injured workers.​
• Utilizing the security from defaulted self-insured employers to pay benefits to injured workers.​ If a self-insured employer’s security is exhausted, its workers’ compensation claims are paid from funds obtained through assessments.
• Ensuring the applicant’s proposed excess insurance provides an adequate level of protection to cover the losses from a catastrophic event.
• Ensuring that the applicant’s Self-Insured Retention (SIR) liability limit provides an adequate level of protection for losses from a catastrophic event.

To be considered for the self-insurance program, an employer must have 1) been in business for at least three consecutive years prior to the application, 2) been incorporated or organized under the laws of a state of the United States, and 3) an adequate accident and illness prevention program.

For more information regarding self-insurance requirements, please see 34 Pa. Code § 125.

For more information regarding accident and illness prevention program requirements, please see  34 Pa. Code §129.

An employer seeking to be self-insured must submit an application with the supporting financial and insurance documents in WCAIS.

WCAIS (Workers' Compensation Automation and Integration System) is the web-based application that is used by all PA workers’ compensation stakeholders.  The system enables electronic communication, claims filing, and document management.  WCAIS may be accessed at https://www.wcais.pa.gov/

The application shall include the following:

• Audited financial statements for the prior three fiscal years. 
• Securities and Exchange Commission (SEC) Form 10-K or equivalent form for the last complete fiscal year.
• Health and safety program information 
• Incurred workers’ compensation loss experience for the prior three completed policy years.
• Listing of open and closed claims & case reserves 
• Credit ratings (Moody’s, Fitch, and S&P)
• A renewal applicant that has retained the services of an actuary to project the total value of its outstanding liability may submit the actuary’s report with its application.
• A report for each employer requesting self-insurance on a form prescribed by the bureau and provided to each employer requesting self-insurance summarizing the existence of the accident and illness prevention program required under section 1001(b) of the act (77 P. S. § 1038.1) and regulations promulgated thereunder.
• A listing for each employer requesting self-insurance, in a bureau-prescribed electronic format provided to each employer requesting self-insurance, of the employer’s Pennsylvania workers’ compensation claims incurred as a self-insurer, including claims currently in litigation, and information such as payments and reserves on each claim. The listing must include:
  • (i)   All open claims at the time of submission
  • (ii)   All claims closed on or after September 11, 2010
  • (iii)   Case reserves provided in the listing must be established according to instructions on forms prescribed by the bureau and provided to each employer requesting self-insurance
• Additional data as requested by the bureau
• The required fee payable to the “Commonwealth of Pennsylvania”.

For more information, please see 34 Pa. Code § 125.3.

An accident and illness prevention program is a program designed to help self-insured employers find and fix workplace hazards before workers sustain an injury. The program requirements include, but are not limited to:

• A safety policy statement
• A designated accident and illness prevention program coordinator
• Assignment of responsibilities for developing, implementing, and evaluating the accident and illness prevention program
• Program goals and objectives
• Methods for identifying and evaluating hazards and developing corrective actions for their mitigation
• Mechanisms for employee involvement, such as a workplace safety committee
• Established safety rules and methods for their enforcement
• A detailed list of the program requirements is found in 34 Pa. Code §129

You may call us at (717) 772-1636 or email us at RA-LIBWC-RPRTS-AUDIT@pa.gov for assistance.

The application or renewal should be filed with the bureau a minimum of three months prior to the requested start date your company wants to be self-insured; usually, the date of your policy’s renewal date.

The bureau will not issue a decision on the application until all required documents and payments have been submitted.  Please be advised that an applicant is required to maintain workers’ compensation insurance until the self-insurance application is approved.

Renewal applications are due no later than three months prior to the expiration of the current permit.  

A permit is valid for one year.  The bureau may grant extensions to permit the filing of financial statements or other data required for the next renewal application.

The cost for the initial application is $500.  The cost of a renewal application is $100.  There is an additional charge of $500 for each affiliate or subsidiary added to the initial application and an additional $100 for each affiliate or subsidiary renewing.

The amount of security that a self-insured employer is required to provide is determined by the bureau.   A self-insurer’s security may be adjusted annually or more frequently as determined by the bureau. Both private and public self-insured entities must put up some type of funds to ensure outstanding claims can be paid in case of default by the entity.

The following forms of security are acceptable:

• Surety Bond – A written agreement to guarantee that a self-insured employer pays benefits.  It permits the bureau to draw on the bond to pay claims following a default or bankruptcy of the self-insured employer.
• Letter of Credit - A letter from a financial institution guaranteeing payment of benefits. Upon the default or bankruptcy of a self-insured employer, the bureau can draw on the letter of credit to pay claims.
• Trust - A dedicated account established to provide funds for payment of benefits. Upon the default or bankruptcy of a self-insured employer, the bureau can draw from the trust to pay claims.

SIR is the maximum amount of benefits a self-insurer pays without reimbursement from the insurer under an aggregate excess insurance policy or a specific excess insurance policy.

A self-insured employer is generally required to have SIR.  Self-insured employers with significant quick assets (assets that can be converted into cash within a short period) may be exempt.  The bureau recommends that a self-insured employer carry $500,000 in SIR.

A self-insured employer who fails to renew or decides to withdraw from the self-insurance program is known as a “runoff self-insurer”.  A runoff self-insurer remains liable for the workers’ compensation injuries that occurred during its period of self-insurance. Additionally, the employer is required to obtain workers’ compensation insurance to cover all future work injuries.

A group consists of several similar employers who jointly create a funding source for their workers’ compensation claims.

• All members are jointly and severally liable for the expenses and obligations of the fund and each member’s workers’ compensation liabilities incurred while it is a member of the fund.
• Each member contributes to the fund to pay claims expected to be incurred in the upcoming fund year.
• If they have a projected surplus amount in their fund, they can request that dividends be returned to their members.

A runoff self-insured employer is typically required to maintain security until:

• The runoff self-insurer provides evidence that its liability was assumed under a self-insurance loss portfolio transfer policy, or
• If the runoff self-insurer has made no payments on its liability over the past two years and all claims against the runoff self-insurer are closed.

Yes.   A runoff self-insurer that is a private employer may request an adjustment of the amount of security.  The request must be 1) in writing, and 2) submitted with the annual runoff report. 

If a self-insured is sold, it must submit a renewal application to continue its self-insurance status.

If a company amends its articles, charter or agreement of incorporation, association, partnership, or sole proprietorship to change its identity or business structure, it must promptly notify the bureau in writing of that action.

A self-insured company must promptly notify the bureau in writing of any material adverse changes to its financial condition that occur after the date of the most recent financial statements submitted with its last application.

Yes.  However, the claims service company (aka TPA or third-party administrator) must be registered with the bureau.  Additionally, the claims service company must have adequate facilities and employ competent staff to provide claims services in a manner that fulfills a self-insurer’s obligations under Pennsylvania’s Workers’ Compensation Act and Occupational Disease Act.

Yes.  A self-insurer must provide the bureau with a contact person who will be the liaison with the bureau regarding 1) the self-insurance application, 2) the self-insurance program, and 3) assessments.  The contact information shall include the name, title, address, phone number, and email of each applicable contact person. The self-insurer shall give written notice of a change in contact person, address, or telephone number within ten (10) days of this change.