CRMBC: Myth vs. Reality
Self-insured groups have been active and successful in over 30 states for many decades. The small number of self-insured group failures have been the result of poor design and mismanagement by the programs’ administrators. CHSI, the program administrator for the CRMBC, is SAS 70 certified and has developed proprietary program management technology that has been adopted by self-insured groups, captives and insurance companies. In order to illustrate the gap in quality information regarding SIGs, and address some common concerns directly, we offer the following comparisons:
Myth #1: If I join the CRMBC and another employer in the group has a catastrophic claim – such as a fatality or a paralysis – I will have to pay more money.
Fact: Self-insured groups are employer pools – excess losses for one member are indeed absorbed by the rest of the pool. But the CRMBC is comprehensively protected against catastrophic injuries by excess insurance coverage with A-rated insurers. The excess carrier covers all costs of all claims that come from a single occurrence, beyond the initial $500,000, whether it is one claim or 100. Catastrophic injuries do not require further funds from group members.
Myth #2: The CRMBC is financially risky.
Fact: CHSI has a team of financial professionals who closely manage the financial health of the CRMBC. The CRMBC Board of Trustees is comprised of business owners and Chief Financial Officers. CHSI delivers monthly financial reports to the Board that are on par with those of Fortune 100 companies. The CRMBC is required by California law to set aside claims reserves that are 50% greater than those of insurance companies. Rates are established each year, in liaison with a certified actuary, to ensure that the CRMBC will be able to meet this higher level of security. The CRMBC submits annual audited financial statements to the Office of Self-Insurance Plans, Department of Industrial Relations, and operates by the strictest regulations for self-insured groups in the United States.
Myth #3: If another self-insured group falters, the CRMBC and my business can be forced to pay for their liabilities.
Fact: Self-insured groups like the CRMBC are ultimately supported by the tangible net worth of the group members. This means that any group needing additional funds must collect the funds from within its own membership. California has additional back-up for self-insured employers – the California Self-Insurers’ Security Fund – which steps in if any self-insured entity cannot meet its obligations. More about the Security Fund here.
Myth #4: If I join the CRMBC, I could be responsible for claims liabilities after I leave the group.
Fact: Self-insured group members only share responsibility for their time of membership. If a member decides to leave the group, its claims liabilities stay with the group, just as they would with an insurance company. In the rare case that additional funds were needed to cover the costs from a program year when the business was a member, they would indeed share responsibility for this special assessment. The CRMBC has never required a special assessment.
Myth #5: Self-insured groups are unrated and therefore they can be a problem for members who need to be with an insurer that has an A.M. Best “A” rating.
Fact: The CRMBC has met all ‘A’ paper requirements for members since it was formed in 2005. In addition to the ‘A’ paper of their excess insurance carriers who stand behind the CRMBC, the financial and operational controls of the group and validation of its financial health by state regulators have satisfied all requirements.
Myth #6: Self-insured groups have failed in many states.
Fact: Self-insured groups have had a better track record than insurance companies in terms of continuance of business. In cases of self-insured group failures, the issue has always been an absence of administrative and underwriting integrity by the program administrator. The CRMBC maintains strict controls in all of its administrative processes, works closely with its actuaries on maintaining rating integrity and has routinely passed its state audits without recommendations for corrections.
