Self-Insurance

What employers can apply to be approved by the Commission as self-insurers?

A private employer may apply to the Commission for authorization to insure its own workers’ compensation liabilities. A private employer is an individual employer and does not include group self-insured employers, the State of Illinois, any political subdivision of the state, unit of local government or school district, or any other public authorities or quasi-governmental bodies or their subunits.

To qualify for self-insurance, an employer must meet certain requirements, including the demonstration of sufficient financial strength to meet workers’ compensation obligations in a timely manner, and providing security as required by the Commission (see Commission Rules, Section 9100.40.) As a self-insurer, the employer is responsible for the payment and administration of its workers’ compensation claims.

What must an employer do to maintain the self-insurance privilege?

A self-insured employer, upon notice from the Commission, must file an application each year in the Self-Insurance Plus (SIP) system to continue the self-insurance privilege, must continue to meet the financial and security requirements as required by law, and provide interim financial statements as required by the Self-Insurers Advisory Board (SIAB). A self-insured employer is required to promptly pay benefits due to injured employees or their dependents; meet all assessment obligations in accordance with the Workers’ Compensation and Occupational Diseases Acts; report compensable injuries, diseases, and deaths to the Commission as required by law; and promptly notify the Commission of any change in financial condition that will impact the company’s ability to self-insure.

In addition, a self-insured employer is required to immediately notify the Commission before the contemplation of liquidation, sale, or transfer of ownership is made and make arrangements satisfactory to the Commission for the payment of all existing liabilities.

How can an employer apply for self-insurance?

Employers can file an application for self-insurance (initial application, subsidiary application, or renewal application) electronically by utilizing the IWCC’s Self-Insurance Plus (SIP) system. Please refer to the external training guide for step-by-step instructions for self-insurance processes within the SIP system

How long does the application the process take?

An applicant is required to submit the application to the Commission at least 60 days prior to the requested effective date of self-insurance. The Commission makes every effort to process the application so that the requested date is met. This time frame begins upon receipt of a completed application. Any delay in submitting necessary information may increase the application processing time.

Who reviews the applications?

The SIAB reviews initial and renewal applications and makes recommendations to the chairman of the Commission. The chairman of the Commission also serves as chairman of the SIAB and the SIAB consists of six other members appointed by the chairman who are experts in matters of self-insurance for workers’ compensation liability. One of the six members shall represent the general public. Members serve four-year terms or until their successor is appointed.

How will the application be reviewed?

The SIAB and Commission’s staff conduct a review based upon the information submitted by the employer and any other information the Commission requests. Key factors considered are the applicant’s financial condition, the nature and hazard of the employment, the number of employees, the amount of payroll, the employer’s claim experience (frequency, severity, and cost), claims administration program, and any other factors that may impact the ability to self-insure. The review also includes consideration of the earned points on three financial ratios. There is no required minimum number of employees or amount of payroll to qualify for self-insurance.

What is conditional approval?

If an applicant qualifies for self-insurance, the chairman will first issue a notice of conditional approval to the applicant. The notice directs the applicant to meet certain conditions before a certificate of self-insurance is issued. These conditions generally require the applicant to complete all necessary paperwork and furnish the Commission with required security. When all conditions are met, a certificate of self-insurance is issued. This certificate constitutes a final approval to self-insure.

What are the earned points on the financial ratios?

Commission rules set forth a system of points (0 to 6) that may be earned on each of three financial ratios, which are considered by the Board in determining an employer’s financial strength. See Commission Rules, Section 9100.40.

The three ratios are:
1) Current assets to current liabilities;
2) Capital and retained earnings (net of treasury stock) to sales (less discounts); and
3) Capital and retained earnings to long-term debt.

The points earned on each of the ratios are added together for a total score (0 to 18). A total score of 9 or above creates a rebuttable presumption that the employer’s application should be approved conditioned upon furnishing of appropriate security.

Must an employer maintain insurance coverage while the application is pending?

Yes. A new applicant is required to maintain workers’ compensation insurance coverage. Coverage must be maintained until the applicant has met all the conditions to self-insure and the Commission issues a certificate of approval to the applicant with the effective date of self-insurance. The last day of insurance coverage should coordinate with the effective date of self-insurance so there is no gap in coverage.

Is there an application fee?

Yes. Each private employer must pay a non-refundable application fee of $500. Where the applicant is a corporation, a $500 fee is also required of each subsidiary to be included in the self-insurance program. For non-profit corporations, an application fee is required of every controlling person and every employer that applies.

The fee is required for both initial and renewal applications. The application fee must be paid by check or electronic payment (ePAY).

Are there any other fees a self-insurer must pay?

Yes. Obligations under the Workers’ Compensation Act include the timely payment of benefits due injured employees as well as required assessments to the Self-Insurers Security Fund, Rate Adjustment Fund, Second Injury Fund, and Commission Operations Fund. (See Workers’ Compensation Act, 820 ILCS 305/4a-7, 305/4d, 305/7f, 310/7f.)

What security is required?

Commission rules set forth security requirements and how security is determined. (See Commission Rules, Section 9100.40 (c)(3).) Each year upon application for renewal of the self-insurance privilege, the security requirement is evaluated and may be adjusted, if necessary, based on information in the renewal application. The Board has set the minimum security requirement at $200,000. An employer that has been self-insured for a minimum of three consecutive years and earns a total score of 18 on the financial ratios for three consecutive audited years is not required to furnish security.

What form of security is acceptable?

The Commission accepts surety bonds, letters of credit, and deposits under escrow agreements. Deposits under escrow agreements shall be cash, negotiable United States government bonds or negotiable general obligation bonds of the State of Illinois.

Is excess insurance required?

It is optional unless the chairman requires that a self-insurer further secure payment of liabilities under the Act by obtaining a policy of excess liability or catastrophe insurance. If the self-insurer obtains such excess insurance, it must submit a Certificate of Excess Insurance to the Commission via the Self-Insurance Plus (SIP) system.

Can an employer insure a portion of its operations with an insurance carrier and self-insure another, separate portion?

Yes, provided that the entire compensation liability of the employer to employees working at or from one location shall be insured by one such insurance carrier or shall be self-insured.

Is a parent guarantee agreement required?

Yes, a subsidiary or controlled employer must submit a guarantee agreement, executed by the parent or controlling person(s), which guarantees the obligation of the subsidiary or controlled employer (See Commission Rules, Section 9100.40 (c)(4)).

How are claims administered?

On its initial and renewal applications for self-insurance, an employer must indicate how its workers' compensation claims will be administered.

An employer may self-administer its claims or contract with a service company. If an employer contracts with a service company, a copy of the contract must be submitted to the Commission. In servicing claims, the employer or service company must provide adequate facilities for the investigation, administration, and payment of claims. In determining adequacy, the Commission looks to whether there are personnel experienced in the adjudication of workers' compensation claims; whether a reporting system exists; whether the reporting system is automated and the frequency of reports; and the response system to claims filing.

What companies have received permission from the Commission to self-insure?

Click here to obtain the list of individual, private, parent companies that the Commission has authorized to self-insure, pursuant to Section 4(a) of the Illinois Workers' Compensation Act. Please note that subsidiaries do not appear on this list. Contact the Commission's Self-Insurance office to verify the status of a subsidiary.

Can the self-insurance privilege be terminated?

Self-insurance can be denied or terminated because an employer fails to demonstrate the financial strength to meet its self-insurance obligations.

Other reasons that are cause for termination:

- failure to file the renewal application and renewal fee as required;
- failure to comply with a notice of conditional approval letter;
- failure to furnish required security;
- failure to replace canceled security;
- failure to provide a parent guaranty; and
- failure to comply with a request of additional information.

What if an employer wishes to leave the self-insurance program?

A self-insured employer may voluntarily terminate the self-insurance privilege with notice to the Commission. The Commission will issue a certificate terminating the privilege on a date certain upon receipt of evidence of workers' compensation insurance coverage. The employer is required to provide for the continuation of payment of current and future claims that occurred during the self-insurance period and maintain security for the length of time sufficient to guarantee the payment of those workers' compensation obligations. Also, the employer will be required to continue to pay assessments into the Self-Insurers Security Fund, the Second Injury Fund, and the Rate Adjustment Fund on workers’ compensation benefits paid for injuries that occurred while self-insured.

What is an insolvent self-insurer?

A private self-insurer financially unable to pay its workers’ compensation obligations which has filed a bankruptcy petition or is the subject party in any proceeding in which a receiver, custodian, liquidator, rehabilitator, trustee or similar officer has been appointed by a court to act in lieu of or on behalf of the self-insurer.

What happens when a private self-insurer becomes insolvent?

Any private self-insurer who may become an insolvent self-insurer shall file written notice with the Commission and the SIAB within 30 days of the occurrence of such event. Upon notice of a bankruptcy filing or similar occurrence, the SIAB will determine the self-insurer’s ability to pay its workers’ compensation obligations.

What happens if the insolvent self-insurer continues to pay its workers’ compensation obligations?

The SIAB will obtain a copy of the bankruptcy order allowing the self-insurer to pay prepetition claims and the SIAB will ensure benefit payments continue.

What happens if the self-insurer is unwilling or unable to pay its workers’ compensation obligations?

The SIAB is empowered to and will assume the outstanding workers’ compensation obligations of the insolvent self-insurer. The SIAB will take all steps necessary to collect, recover, and enforce the security posted by the self-insurer. Future administration of the claims will be determined by the nature of the security. If the employer is a current self-insurer, its self-insurance privilege will be terminated.

What happens if the security is a letter of credit or escrow deposit?

A demand is made of the bank or trust company and the money collected is deposited into the Self-Insurers Security Fund for payment of benefits. The claims will be administered by the SIAB unless the company’s claims administrator will handle the claims at no additional cost.

What happens if the security is a surety bond?

The bond holder is allowed 30 days to determine if it is able and willing to administer the claims pending against the insolvent self-insurer. It can either turn over the bond proceeds to the SIAB to pay benefits or it may elect to pay the insolvent’s workers’ compensation obligations.

What is the Board’s role in administrating the claims of an insolvent self-insurer?

The SIAB is a party of interest in all proceedings involving workers’ compensation claims against the insolvent self-insurer whose obligations have been paid or assumed by the SIAB and will have all rights of subrogation of the insolvent employer. The SIAB will assume and may exercise all rights and defenses of the insolvent self-insurer.

What if the self-insurer’s security is not adequate to pay all the workers’ compensation obligations?

The Self-Insurers Security Fund will continue to pay in full the workers’ compensation obligations from the self-insurer’s self-insurance period regardless of the security collected.

What if the Security Fund is insufficient?

The Self-Insurers Security Fund includes assessment payments received from private self-insurers. The SIAB determines on a quarterly basis whether an assessment is required. Self-insured employers may pay assessments up to a maximum of 1.2% annually based on compensation payments, excluding medical expenses.

What self-insured companies are insolvent?

SELF-INSUREDEMPLOYERS
THAT BECAME INSOLVENT SINCE 2000

Note: Companies are removed from this list if they emerge from bankruptcy or close all cases.

How do I obtain more information?

Email
Office of Self-Insurance Administration at wcc.selfinsurance@illinois.gov

Telephone Numbers

• Springfield 217-782-6330; 217-785-7085; 217-785-7086
• Chicago 312-814-6065

Addresses