WELCOMEWELCOMETO THE

INDUSTRIAL COMMISSION

SELF-INSURANCE SEMINAR

BENEFITSBENEFITS

•CONTROL OWN COSTSCONTROL OWN COSTS

•NON-GOVT CAN DIRECT NON-GOVT CAN DIRECT MEDICAL CAREMEDICAL CARE

Commission Approval Commission Approval to Act as a Self-Insurerto Act as a Self-Insurer The Commission authorizes the The Commission authorizes the

employer to be self-insured; andemployer to be self-insured; and

Except as provided in R20-5-Except as provided in R20-5-1114, the employer posts 1114, the employer posts security in an amount as security in an amount as required under the self-required under the self-insurance rules.insurance rules.

PUBLIC ENTITY PUBLIC ENTITY REQUIREMENTSREQUIREMENTS

ANNUAL PAYROLL OF AT LEAST ANNUAL PAYROLL OF AT LEAST $2,000,000;$2,000,000;

TOTAL ASSETS OF $50,000,000TOTAL ASSETS OF $50,000,000

INDIVIDUAL EMPLOYER INDIVIDUAL EMPLOYER REQUIREMENTSREQUIREMENTS

MUST HAVE BEEN ENGAGED IN MUST HAVE BEEN ENGAGED IN BUSINESS IN ARIZONA FOR AT LEAST BUSINESS IN ARIZONA FOR AT LEAST FIVE YEARS BEFORE THE DATE OF THE FIVE YEARS BEFORE THE DATE OF THE APPLICATIONAPPLICATION

HAS AN ANNUAL PAYROLL OF AT LEAST HAS AN ANNUAL PAYROLL OF AT LEAST $2,000,000; INCLUDING THE PAYROLL OF $2,000,000; INCLUDING THE PAYROLL OF ALL SUBSIDIARIES THAT WILL BE UNDER ALL SUBSIDIARIES THAT WILL BE UNDER THE SELF-INSURANCE AUTHORIZATIONTHE SELF-INSURANCE AUTHORIZATION

HAS ASSETS OF $50,000,000 or HAS HAS ASSETS OF $50,000,000 or HAS $10,000,000 IN NET WORTH and A CASH $10,000,000 IN NET WORTH and A CASH FLOW RATIO OF AT LEAST .25FLOW RATIO OF AT LEAST .25

A.R.S. § 23-107 (D)A.R.S. § 23-107 (D)

Notwithstanding any other law, the Notwithstanding any other law, the commission may protect from public commission may protect from public

inspection the financial information that is inspection the financial information that is received from a private entity that applies to received from a private entity that applies to self-insure or that renews its self-insurance self-insure or that renews its self-insurance

plan pursuant to section 23-961, subsection A plan pursuant to section 23-961, subsection A if the information is kept confidential by the if the information is kept confidential by the

private entity in its ordinary and regular private entity in its ordinary and regular course of business. course of business.

FINANCIAL CONFIDENTIALITYFINANCIAL CONFIDENTIALITY

under the authority of A.R.S. §23-107 (D), and under the authority of A.R.S. §23-107 (D), and providing that the self insurer can establish its providing that the self insurer can establish its information is kept confidential in its normal and information is kept confidential in its normal and regular course of business. regular course of business.

financial documents and information submitted financial documents and information submitted by the self-insurer to the Commission for new by the self-insurer to the Commission for new applications or requests to renew self-insurance applications or requests to renew self-insurance authority will be held as confidential and not authority will be held as confidential and not released to the public, released to the public,

REVIEW OF REVIEW OF APPLICATION OR RENEWALAPPLICATION OR RENEWAL

The Accounting Division must determine if The Accounting Division must determine if the Self-Insurer meets the requirements of the Self-Insurer meets the requirements of A.R.S. § 23-961 and the following rules:A.R.S. § 23-961 and the following rules:

The Division may determine if the Self-The Division may determine if the Self-Insurer needs to provide additional Insurer needs to provide additional security. security.

If the Division determines that the Self-If the Division determines that the Self-Insurer must provide additional securities, Insurer must provide additional securities, then the Self-Insurer must post those then the Self-Insurer must post those securities Prior to the Commission securities Prior to the Commission authorized Start date or Renewal date. authorized Start date or Renewal date. R20-5-1127 (A) R20-5-1127 (A)

REVIEW OF REVIEW OF APPLICATION OR RENEWALAPPLICATION OR RENEWAL

If the Self-Insurer requests a decrease in If the Self-Insurer requests a decrease in security deposit of 10% or greater, the security deposit of 10% or greater, the Division can perform an additional review Division can perform an additional review to determine the adequacy of the security to determine the adequacy of the security deposit.deposit.

The Division must determine whether the The Division must determine whether the Self-Insurer has the ability to process and Self-Insurer has the ability to process and pay Workers Compensation benefits.pay Workers Compensation benefits.

INITIAL APPLICATION INITIAL APPLICATION REQUIREMENTSREQUIREMENTS

Must file a typed Application signed by an Must file a typed Application signed by an authorized representative.authorized representative.Statement from the board of directors or Statement from the board of directors or governing body authorizing the filing of the governing body authorizing the filing of the application and designating the person given application and designating the person given authority to file the application on behalf of the authority to file the application on behalf of the applicant.applicant.Employee count and payroll amount in Employee count and payroll amount in acceptable employee classification codes.acceptable employee classification codes.Copy of agreement between the applicant and Copy of agreement between the applicant and the hospital and/or medical facility, if medical the hospital and/or medical facility, if medical care is to be directed by the company.care is to be directed by the company.

INITIAL APPLICATION INITIAL APPLICATION REQUIREMENTSREQUIREMENTS

Copies of the applicants current and prior Copies of the applicants current and prior two years audited financial statements or two years audited financial statements or internally reviewed and signed financial internally reviewed and signed financial statements.statements.

If the applicant is a subsidiary, the If the applicant is a subsidiary, the applicants parent company must sign the applicants parent company must sign the Industrial Commissions Parent Company Industrial Commissions Parent Company Guaranty Form.Guaranty Form.

WORKERS COMPENSATION LIABILITY FORM

PARENT COMPANY GUARANTY FORM CONTINUOUS BOND FORM DIRECTED MEDICAL CARE FORM

SELF INSURANCE FORMS

RENEWAL REQUIREMENTS The Authorized Self-Insurer will receive an annual renewal letter

and must return on company letterhead current company information pertaining to the companies self-insured status.

Provide a copy of the self-insurers most recent audited financial statement or internally reviewed and signed financial statement

Must file a workers compensation form 30 days prior to the Renewal date.

Per claim data must be filed with the Workers Compensation Liability form to support the form information.

The Security deposit amount as calculated on the Workers Compensation Liability form must be in place by the self-insurers anniversary date.

RENEWAL QUESTIONSRENEWAL QUESTIONS

• IF CLAIM DENIAL RATES ARE OVER THE COMMISSIONS 12.0% STANDARD, AN EXPLANANTION MUST BE GIVEN IN WRITING FOR WHY EACH CLAIM WAS DENIED.

• IF EXPERIENCE RATINGS ARE OVER THE COMMISSIONS 1.10% STANDARD, THE COMPANY NEEDS TO PROVIDE AN EXPLANATION WHY THE RATINGS ARE HIGHER THAN THE COMMISSION STANDARD.

• EMPLOYEE COUNT (IF IT IS LESS THAN THE PRIOR YEAR, PROVIDE AN EXPLANATION)

EXCESS INSURANCE CREDITS Excess Insurance is not required, but if a credit

is taken against securities filed, the Self-Insurer must provide information on the amount of the credit and type of coverage.

Must provide a copy of the binder Include the credit information in the per claim

data that is submitted with the Workers Compensation Liability form.

Excess Carrier can not have an affiliate relationship with the Self-Insurer.

CHANGES IN THE COMPANYCHANGES IN THE COMPANY

THE COMMISSION MUST BE THE COMMISSION MUST BE NOTIFIED IN WRITING WITHIN 24 NOTIFIED IN WRITING WITHIN 24 HOURS IF:HOURS IF:

1.1. The Self-Insurer files The Self-Insurer files Bankruptcy.Bankruptcy.

2.2. The Self-Insurer has a Change The Self-Insurer has a Change in Ownership.in Ownership.

3.3. The Self-Insurer has a Change The Self-Insurer has a Change in Business Address.in Business Address.

ACCEPTABLE FORMS OF ACCEPTABLE FORMS OF SECURITY DEPOSITS SECURITY DEPOSITS

SURETY BONDSURETY BOND LETTER OF CREDITLETTER OF CREDIT U.S. TREASURY NOTESU.S. TREASURY NOTES Deposit must be 125% of Deposit must be 125% of unpaid losses or a minimum of unpaid losses or a minimum of $100,000 if the amount on the $100,000 if the amount on the Workers Compensation Workers Compensation Liability form is under Liability form is under $100,000.$100,000.

SURETY BONDSURETY BONDMUST BE ON THE ICA CONTINUOUS MUST BE ON THE ICA CONTINUOUS BOND FORMBOND FORMCONTINUOUS BOND FORM & RIDERS CONTINUOUS BOND FORM & RIDERS MUST HAVE THE SAME EFFECTIVE MUST HAVE THE SAME EFFECTIVE DATE OF THE RESOLUTION OF DATE OF THE RESOLUTION OF AUTHORIZATION TO SELF INSURE.AUTHORIZATION TO SELF INSURE.MUST EQUAL THE AMOUNT OF THE MUST EQUAL THE AMOUNT OF THE UNPAID LOSSES FOR THE TIME OF UNPAID LOSSES FOR THE TIME OF SELF INSURANCE AUTHORIZATION.SELF INSURANCE AUTHORIZATION.COMPANY ISSUING THE SURETY IS COMPANY ISSUING THE SURETY IS AUTHORIZED TO TRANSACT THE AUTHORIZED TO TRANSACT THE BUSINESS OF SURETY IN ARIZONABUSINESS OF SURETY IN ARIZONAAN AUTHORIZED AGENT EXECUTES AN AUTHORIZED AGENT EXECUTES THE GUARANTY BOND OR RIDERTHE GUARANTY BOND OR RIDER

SURETY BONDSURETY BOND(cont.)(cont.)

THE BOND OR RIDER MUST BE SIGNED & THE BOND OR RIDER MUST BE SIGNED & DATED BY AN AUTHORIZED DATED BY AN AUTHORIZED REPRESENTATIVE OF THE SELF-INSURER.REPRESENTATIVE OF THE SELF-INSURER.THE SURETY ISSUING THE BOND OR THE SURETY ISSUING THE BOND OR RIDER DOES NOT HAVE AN AFFILIATE RIDER DOES NOT HAVE AN AFFILIATE RELATIONSHIP WITH THE APPLICANT OR RELATIONSHIP WITH THE APPLICANT OR SELF-INSURER.SELF-INSURER.ISSUING SURETY HAS A RATING WITH ISSUING SURETY HAS A RATING WITH A.M. BEST OF AT LEAST A-A.M. BEST OF AT LEAST A-THE GUARANTY BOND OR RIDER IS THE GUARANTY BOND OR RIDER IS SUBJECT TO ANNUAL CHANGE BASED ON SUBJECT TO ANNUAL CHANGE BASED ON UNPAID LOSS LIABILITY.UNPAID LOSS LIABILITY.

LETTER OF CREDITLETTER OF CREDIT MUST BE REGISTERED TO: “THE MUST BE REGISTERED TO: “THE

INDUSTRIAL COMMISSION OF INDUSTRIAL COMMISSION OF ARIZONA, IN TRUST FOR THE ARIZONA, IN TRUST FOR THE FULFILLMENT BY SELF-INSURER OF FULFILLMENT BY SELF-INSURER OF ITS OBLIGATIONS UNDER THE ITS OBLIGATIONS UNDER THE ARIZONA WORKERS COMPENSATION ARIZONA WORKERS COMPENSATION LAWS.”LAWS.”

LOC MUST BE FOR 1 YEAR, AND AN LOC MUST BE FOR 1 YEAR, AND AN AUTOMATIC EXTENSION CLAUSEAUTOMATIC EXTENSION CLAUSE

IF LOC IS TO BE CANCELLED, THE ICA IF LOC IS TO BE CANCELLED, THE ICA MUST BE NOTIFIED 30 DAYS PRIOR TO MUST BE NOTIFIED 30 DAYS PRIOR TO THE CANCELLATION IN WRITING.THE CANCELLATION IN WRITING.

U. S. TREASURY NOTESU. S. TREASURY NOTESMUST COMPLETE & SIGN THE MUST COMPLETE & SIGN THE AGREEMENT WITH THE ARIZONA AGREEMENT WITH THE ARIZONA STATE TREASURERSTATE TREASURER

MUST PLACE THE DEPOSIT WITH THE MUST PLACE THE DEPOSIT WITH THE STATE TREASURERS SELECTED BANK. STATE TREASURERS SELECTED BANK. WHICH AT THIS TIME IS US BANKWHICH AT THIS TIME IS US BANK

THE MINIMUM ACCOUNT BALANCE THE MINIMUM ACCOUNT BALANCE MUST BE THE LESSOR OF PRINCIPAL, MUST BE THE LESSOR OF PRINCIPAL, MARKET OR PAR LEVEL & MUST MARKET OR PAR LEVEL & MUST EQUAL 125% OF UNPAID LOSSES.EQUAL 125% OF UNPAID LOSSES.

MUST BE U.S. TREASURY NOTES ONLY.MUST BE U.S. TREASURY NOTES ONLY.

EXEMPTION FROM FILING A EXEMPTION FROM FILING A SECURITY DEPOSIT SECURITY DEPOSIT

Only Public Agencies may ask for Only Public Agencies may ask for exemption from filing a security deposit.exemption from filing a security deposit.

Must have a fully funded Risk Must have a fully funded Risk Management Fund. This service fund Management Fund. This service fund

must be shown on the Public Agency’s must be shown on the Public Agency’s financial statements.financial statements.

Must have an Actuarial Study on an Must have an Actuarial Study on an annual basis to determine if the Risk annual basis to determine if the Risk Management Fund is sufficient to cover Management Fund is sufficient to cover unpaid losses. unpaid losses.

Exemptions must be renewed on an Exemptions must be renewed on an annual basis.annual basis.

TERMINATION OF SELF TERMINATION OF SELF INSURANCE AUTHORITY INSURANCE AUTHORITY

Revocation of Self-Insurance Authority can Revocation of Self-Insurance Authority can occur if a company fails to pay claims under the occur if a company fails to pay claims under the Workers Compensation Act.Workers Compensation Act.Fails to Pay Self-Insurance Taxes.Fails to Pay Self-Insurance Taxes.Failure to comply with the Self-Insurance rules Failure to comply with the Self-Insurance rules & statutes& statutesFailure to provide required securitiesFailure to provide required securitiesIf the self insurer intends to terminate its’ self-If the self insurer intends to terminate its’ self-insurance status, an authorized company insurance status, an authorized company representative must complete and sign the representative must complete and sign the ICA’s Notice of Self-Insurers Termination of ICA’s Notice of Self-Insurers Termination of Self-Insurance FormSelf-Insurance Form

SELF INSURED TAX SELF INSURED TAX PLANSPLANS The Commission must offer the The Commission must offer the

same premium plans as the SCF same premium plans as the SCF and determine what the tax and determine what the tax would be under the selected would be under the selected plan.plan.

TAX PLAN TYPESTAX PLAN TYPES

A PLAN (Fixed Premium)A PLAN (Fixed Premium)

B PLAN (Ex-Medical)B PLAN (Ex-Medical)

C PLAN (Guaranteed Cost)C PLAN (Guaranteed Cost)

R PLAN (Retrospective)R PLAN (Retrospective)

TAX PAYMENT DEADLINESTAX PAYMENT DEADLINES

ANNUAL TAX FILING DEADLINEANNUAL TAX FILING DEADLINE FEBRUARY 15FEBRUARY 15

ANNUAL PAYMENT DEADLINEANNUAL PAYMENT DEADLINE MARCH 31 MARCH 31

QUARTERLY PAYMENT QUARTERLY PAYMENT DEADLINESDEADLINES

1 QUARTER – APRIL 301 QUARTER – APRIL 30

2 QUARTER – JULY 312 QUARTER – JULY 31

3 QUARTER – OCTOBER 313 QUARTER – OCTOBER 31

4 QUARTER – JANUARY 314 QUARTER – JANUARY 31

TAX PLANSTAX PLANSPLAN APLAN A (FIXED PREMIUM PLAN)(FIXED PREMIUM PLAN)

ELIGIBILITYELIGIBILITY

1. THE SELF-INSURER ELECTS THE PLAN;1. THE SELF-INSURER ELECTS THE PLAN; 2. THE SELF-INSURERS NET TAXABLE 2. THE SELF-INSURERS NET TAXABLE

PREMIUM PREMIUM DOES NOT EXCEED $100,000; ORDOES NOT EXCEED $100,000; OR 3. THE SELF-INSURERS IS NOT ELIGIBLE 3. THE SELF-INSURERS IS NOT ELIGIBLE

FOR FOR ANY OTHER PLAN AUTHORIZED BY THE ANY OTHER PLAN AUTHORIZED BY THE COMMISSION UNDER THIS ARTICLE.COMMISSION UNDER THIS ARTICLE.

ANNUAL FORMS REQUIREDANNUAL FORMS REQUIRED

1. SELF-INSURERS PAYROLL FORM1. SELF-INSURERS PAYROLL FORM 2. SELF-INSURERS MEDICAL FORM2. SELF-INSURERS MEDICAL FORM

TAX PLANSTAX PLANS PLAN BPLAN B (EX-MEDICAL PLAN)(EX-MEDICAL PLAN)

ELIGIBILITYELIGIBILITY

1. THE SELF-INSURERS PROGRAM FOR 1. THE SELF-INSURERS PROGRAM FOR MEDICAL, SURGICAL, OR HOSPITAL MEDICAL, SURGICAL, OR HOSPITAL SERVICES MEETS THE REQUIREMENTS OF SERVICES MEETS THE REQUIREMENTS OF A.R.S. A.R.S. § 23-1070; and§ 23-1070; and

2. THE SELF INSURERS NET TAXABLE PREMIUM 2. THE SELF INSURERS NET TAXABLE PREMIUM EXCEEDS $100,000.EXCEEDS $100,000.

ANNUAL FORMS REQUIREDANNUAL FORMS REQUIRED

1.1. SELF-INSURERS PAYROLL REPORTSELF-INSURERS PAYROLL REPORT2.2. SELF-INSURERS HOSPITAL REPORTSELF-INSURERS HOSPITAL REPORT3.3. SELF-INSURERS MEDICAL REPORTSELF-INSURERS MEDICAL REPORT

PLAN CPLAN C (GUARANTEED COST PLAN(GUARANTEED COST PLAN))

ELIGIBILITYELIGIBILITY

1. THE SELF-INSURER HAS AN ANNUAL NET TAXABLE 1. THE SELF-INSURER HAS AN ANNUAL NET TAXABLE PREMIUM EXCEEDING $100,000; andPREMIUM EXCEEDING $100,000; and

2. USES AN EXPERIENCE RATING CALCULATED AS 2. USES AN EXPERIENCE RATING CALCULATED AS FOLLOWSFOLLOWS::

FIRST YEARFIRST YEAR EXPERIENCE RATING IS 1.0 EXPERIENCE RATING IS 1.0

SECOND & THIRD YEARSECOND & THIRD YEAR EXPERIENCE RATING IS BASED EXPERIENCE RATING IS BASED UPON THE INCURRED LOSS DATA ACCUMULATED BY UPON THE INCURRED LOSS DATA ACCUMULATED BY THE SELF-INSURER; andTHE SELF-INSURER; and

FOURTH YEAR EXPERIENCEFOURTH YEAR EXPERIENCE RATING IS BASED ON THE RATING IS BASED ON THE PRIOR THREE YEARS OF INCURRED LOSS DATA, PRIOR THREE YEARS OF INCURRED LOSS DATA, EXCLUDING THE MOST CURRENT EXCLUDING THE MOST CURRENT

TAX YEAR LOSS INFORMATIONTAX YEAR LOSS INFORMATION..

ANNUAL FORMS REQUIREDANNUAL FORMS REQUIRED

1.1. SELF-INSURERS PAYROLL REPORTSELF-INSURERS PAYROLL REPORT2.2. SELF-INSURERS MEDICAL REPORTSELF-INSURERS MEDICAL REPORT3.3. SELF-INSURERS INJURY REPORTSELF-INSURERS INJURY REPORT

PLAN RPLAN R (RETROSPECTIVE RATING PLAN(RETROSPECTIVE RATING PLAN))

ELIGIBILITYELIGIBILITY

1. THE SELF-INSURER HAS AN ANNUAL NET TAXABLE 1. THE SELF-INSURER HAS AN ANNUAL NET TAXABLE PREMIUM EXCEEDING $100,000; andPREMIUM EXCEEDING $100,000; and

2. USES AN EXPERIENCE RATING CALCULATED AS FOLLOWS2. USES AN EXPERIENCE RATING CALCULATED AS FOLLOWS::

FIRST YEARFIRST YEAR EXPERIENCE RATING IS 1.0 EXPERIENCE RATING IS 1.0

SECOND & THIRD YEARSECOND & THIRD YEAR EXPERIENCE RATING IS BASED UPON EXPERIENCE RATING IS BASED UPON THE INCURRED LOSS DATA ACCUMULATED BY THE SELF-THE INCURRED LOSS DATA ACCUMULATED BY THE SELF-INSURER; andINSURER; and

FOURTH YEAR EXPERIENCEFOURTH YEAR EXPERIENCE RATING IS BASED ON THE PRIOR RATING IS BASED ON THE PRIOR THREE YEARS OF INCURRED LOSS DATA, EXCLUDING THE THREE YEARS OF INCURRED LOSS DATA, EXCLUDING THE MOST CURRENT TAX YEAR LOSS INFORMATIONMOST CURRENT TAX YEAR LOSS INFORMATION..

ANNUAL FORMS REQUIREDANNUAL FORMS REQUIRED

1.1. SELF-INSURERS PAYROLL REPORTSELF-INSURERS PAYROLL REPORT2.2. SELF-INSURERS MEDICAL REPORTSELF-INSURERS MEDICAL REPORT3.3. SELF-INSURERS INJURY REPORTSELF-INSURERS INJURY REPORT