Workers’ Compensation Deductible, Reimbursement, Retention and Similar Plans

BULLETIN 92-7

(Revised 10/96)

Workers' Compensation

Deductible, Reimbursement, Retention and Similar Plans

Deductible plans for workers' compensation insurance have not been permitted in

Utah because of conflicts with Utah law. Recent revisions to various sections of

the law now permit such plans in certain circumstances. This Bulletin sets forth

Utah Insurance Department policy regarding workers' compensation deductible

plans. This Bulletin does not apply to insurance companies submitting filings for

excess workers' compensation insurance for employers that have registered with

the Industrial Commission of Utah as self-insurers.

By "deductible plan" we mean an insurance policy plan that provides for the

insured to participate in the payment of the insurance claims and losses covered

by the policy. "Loss reimbursement", "self-insured retention" and other similar

terms may be used but all refer to an insured's sharing in the costs of claims. All

such plans are subject to this Bulletin.

Deductible plans are considered "supplementary rate information" as defined in

the Insurance Code. As such, they are subject to filing pursuant to the general

filing procedures and, particularly, to Utah Code Ann. §31A-19-408. Deductible

plans must be filed with the Insurance Department at least 30 days before their

effective date.

There are three specific elements that are of concern in considering deductible

plans: type of plan, statistical reporting, and premium taxes. All deductible,

reimbursement, retention or similar plans must comply in these three areas. All

filings of such plans must address each of these elements and show that the

plan being filed is in compliance with each item. Specifics regarding each

element are discussed below. Any deductible plan filing that does not

demonstrate compliance is subject to disapproval upon examination by the

Department and may be deemed a violation of the Utah Insurance Code and

appropriate penatlies may be imposed

lings of such plans must address each of these elements and show that the

plan being filed is in compliance with each item. Specifics regarding each

element are discussed below. Any deductible plan filing that does not

demonstrate compliance is subject to disapproval upon examination by the

Department and may be deemed a violation of the Utah Insurance Code and

appropriate penatlies may be imposed.

Type of Plan

Under no circumstances will any plan be allowed that permits an insured to pay

any amount directly. The only type of deductible plan that will be permitted is a

"reimbursement" type of plan. The insurance company must assume

responsibility to pay all losses in accordance with the workers' compensation law

and the insurance policy, then seek reimbursement from the insured employer for

the deductible amount, as provided by policy provisions. The insurance company

is not to be relieved of any claim payments due or accrued if the insured

employer becomes insolvent or bankrupt and cannot pay the deductible

reimbursement amount owed the insurer. The insurance company must also

assume responsibility for claim reports as required by the Industrial Commission

of Utah.

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Statistical Reporting

Any deductible plan filed must be consistent with the uniform statistical plan,

uniform experience rating plan, and the uniform classification system. The

premium credit amount under the deductible plan must be reported to the

National Council on Compensation Insurance under the proper statistical codes

according to the deductible amount chosen by the insured. Total losses shall be

subject to experience rating. Losses for which the deductible applies must be

reported as specified by the NCCI. Companies filing deductible plans must

demonstrate that they are in compliance with these requirements.

Premium Taxes

Pursuant to Utah Code Ann

il on Compensation Insurance under the proper statistical codes

according to the deductible amount chosen by the insured. Total losses shall be

subject to experience rating. Losses for which the deductible applies must be

reported as specified by the NCCI. Companies filing deductible plans must

demonstrate that they are in compliance with these requirements.

Premium Taxes

Pursuant to Utah Code Ann. §59-9-101(2)(b), premium tax must be paid on the

premium amount that otherwise would have been collected for the deductible

amount, in addition to the tax normally collected for any non-deductible portion of

the policy. In Utah, the workers' compensation premium tax finances the

Employers' Reinsurance Fund and the Uninsured Employers' Fund. Filings of

deductible plans must demonstrate that the procedure for crediting the rate for

the deductible amount includes provisions for calculating and collecting the tax

for the deductible amount. Insurance companies should refer to §59-9-101(2) and

contact the Utah Tax Commission for the appropriate tax rate and reporting

procedures.

DATED this 23rd day of October 1996.

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