West Virginia Offices of the Insurance Commissioner 2009 Annual ...

Self-Insurance (Workers’ Compensation)
The Workers’ Compensation Self-Insurance Unit is responsible for regulating the 96 employers that
currently self insure their workers’ compensation coverage in West Virginia and the approximately
100 employers who no longer self insure but continue to administer claims incurred during their period
of self insurance. No companies were approved for self insured status in calendar year 2009.
Self-insured employers in West Virginia self-administer their claims. Ordinarily, the employer hires a
third party administrator (TPA) to mange and process claims although a small number of employers
truly self-administer through an internal claim management department or a subsidiary company. Selfadministration
provides the self-insured employer with a greater degree of control over the claim
management process than participation in guaranty cost or deductible programs.
Regulation of the self insured employers focuses primarily on two areas: maintenance of the risk pools
and annual financial condition reviews.
W. Va. Code St. R. § 85-19-1 et seq. establishes two risk pools in which the self-insured employers
participate: the Security pool that covers claims with dates of injury, last exposure or death prior to
July 1, 2004 (the date self-administration began) and the Guaranty pool that covers claims with dates
of injury, last exposure or death on or after July 1, 2004. Active and inactive self-insured employers
participate in the pools dependant upon each employer’s exposure base since self-insured employers
are joint and severely liable for defaults of other self-insured employers. The purpose of the risk pools
is to provide the means to pay claims for defaulted self-insured employers without placing the burden
on the taxpayers of West Virginia.
Annual financial condition reviews require the employer to submit three years of audited financial
statements which are then analyzed to determine if the employer’s financial state has changed over the
past year. W. Va. Code St. R. § 85-18-1 et seq. identifies the benchmarks against which the financial
statements are measured and defines deteriorating financial condition. Employers who do not pass the
annual review and are deemed to be in a deteriorating financial condition are required to provide
additional security to cover the claims that would be paid out of the Guaranty pool in the case of a
default.
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