FAQs About MADSIF
What is a Group Self-Insured Workers’ Compensation Fund?
A group self-insured fund is a not-for-profit organization of employers formed for the specific purpose of providing statutory workers’ compensation and employers’ liability coverage. Employers that form a self- insured fund are typically small to medium-size locations (not companies) that want to assume control over their workers’ compensation costs and enjoy the benefits of self-insurance.
Why Was MADSIF Formed and Who Created It?
Michigan Auto Dealers Association (MADA), with a group of Michigan dealers, started MADSIF in the early 1990s to provide their members with resources to turn their workers compensation program into an investment while improving their safety cultures and lowering their claim costs. They wanted a dealer-exclusive program that would allow them to never shop their workers compensation program again.
How Do Group Self-Insured Funds Work?
Similar to a commercial carrier, members pay premiums based on their exposures, classification codes, payroll, and experience modifications. All members receive a typical annual payroll audit as well. Premiums are used to pay claims and administrative expenses of the fund such as loss control, legal, accounting, actuarial, and management costs. Funds are highly regulated by the Michigan Workers Compensation Agency.
What is Excess Insurance?
The State of Michigan requires that self-insured funds purchase Excess Insurance to limit the Fund’s costs on catastrophic workplace injuries. The coverage is placed only with A-Rated carriers.
What is the Main Difference Between a Self-insured Fund and a Standard Carrier?
A group self-insured fund is a not-for-profit entity whereas a standard carrier is a for-profit entity. Self-insured funds return any surplus to its members, a carrier returns it to the shareholders.
What are the Advantages of Joining a Group Self-Insured Fund?
- Dealer Board of Trustees; Typically the insurance carrier makes the decisions. In a Fund, the Board of Trustees directs the service teams to ensure that administrative costs are kept to a minimum, that claims are kept to a minimum, and that loss control programs are relevant to dealerships.
- Lower premiums because no profit margin is added.
- Group purchasing power for excess insurance.
- Surplus – a surplus is returned to members. In an insured product, even if a policyholder has no claims, their premium is used to pay the claims of other policyholders. MADSIF has distributed over $5,000,000 in returns to its 250-plus members for many consecutive years.
- Superior Loss Control – MADSIF’s loss control team provides a comprehensive, customized program for each member. Specifically, the focus is on ensuring all members are trained on Right-to-Know, SDS, Hazardous Chemicals, and Shipper Training and how to prevent MIOSHA fines.
- Aggressive Claims Management/Member Input and Direction – The claims process allows the member input and direction as to the details of the claim with consistent follow-up and collaboration. Approval is sought by members for items such as settlement of a claim, use of surveillance, and return to work/modified duty programs. The members work with the claims team to establish denial or acceptance of compensability.
The group’s claims management program is the foundation of cost containment efforts. The program is founded on the philosophies of its 24-hour Three-Point-Contact with:
1) The employer
2) The injured worker
3) The physician
The first 24-hour period of a claim is the most critical as it can drive the cost of the claim. We spend the first 24 hours making an assessment and developing a plan to return the injured
employee back to work. We analyze the treatment plan with the physician and ensure the following:
- Employee is keeping all appointments
- Medications are appropriate
- Employee has return to work options
- Employee is motivated to return to work
- Stability/Consistency – It is rare for a member to leave a self-insurance group due to consistency of services, rates, and surplus regardless of market conditions or natural conditions (hurricanes, pandemics, fires, events of 911).
- Common Risk: From both a service and a risk standpoint, being part of a homogeneous self-insurance group, provides great benefits. Claims and Loss Control services are provided based on familiarity with the industry and its typical injuries. Members feel comfortable knowing they are not mixed in with other industries like they are in a fully insured product.
Are There Disadvantages of Joining a Group Self-Insured Fund?
A self-insured fund’s members are jointly and severally liable for workers’ compensation losses incurred by the members. Members share the surplus but they also share any deficit from a given year. A self-insured fund can assess its members for additional premiums to cover unforeseen claims. This risk was high in the early 90’s when these groups were first forming. Nowadays, they are protected by a high level of excess insurance making the risk minimal to non-existent.
Does MADSIF Manage This Risk and is There a History of Deficit?
No, MADSIF has never had a deficit fund year. Yes, MADSIF manages the risk utilizing the following tactics:
- Excess Insurance: This is the most critical step in capping members’ risks. The Fund purchases excess insurance to cap the costs of any one occurrence as well as to cap the total costs of all claims in a given year.
- Specific (per occurrence) Excess Insurance: Losses paid by the Group for any single occurrence are limited to $750,000.Above that amount, the Excess Insurance Carrier is liable regardless of the ultimate cost.
- For example, in the event of an employee accident, which might require significant surgical expenses, workers compensation claim costs could be substantial. Trust claim costs are capped at $750,000 – the Excess Insurance Carrier pays the remainder.
- The Fund only purchases this coverage from A.M. Best Ratings of “A” and higher
- Independent Fund Reviews:
- An independent actuarial firm reviews the funding adequacy, claim case reserves, and the financial condition of the Fund annually.
- An independent CPA firm submits an annual audit of the Group’s finances for approval and review by the Michigan Workers Compensation Agency
- The Workers Compensation Bureau closely regulates self-insurance funds.
- Selectivity of New Members: Michigan Dealer Industry: A member must be engaged in the Michigan Dealership Industry and have exposures, which are compatible with those of the other Group membership.
- MADA Membership: All members are required to be a member in good standing with the Michigan Auto Dealers Association.
- Financial Screening: The Fund seeks financially strong employers who are required to meet certain criteria.
- Superior Claims Experience: MADSIF seeks members with experience modifications below 1.00. Exceptions may be made after reviewing the loss history.
- Commitment to Safety: All members are committed to safety and are required to respond to MADSIF’s loss control consultants. Each member assigns a Safety Champion to consistently meet criteria established by the MADSIF loss control committee.
- Board of Directors Approval: The MADSIF Board of Trustees approves all Group applicants.
Who Manages MADSIF?
The Fund is a separate legal entity and is under the direction of its Board of Trustees, which is comprised of members of the Fund. Reporting to the Board of Trustees are: NEXTComp Fund Administrators: Program Management, Underwriting, Financial Management Services, and Marketing Services Comprehensive Risk Services (CRS): Excess Insurance Placement, Medical Case Management, Claims Management, Underwriting, and Loss Control Safety National: Excess Insurance Carrier for catastrophic exposure. Fully insured, “A+” Rated Michigan Workers Compensation Agency: Regulates all Michigan Self-Insured Funds, requiring that loss calculations be met on a quarterly and annual basis.
The Board meets quarterly and reviews all reports submitted by these entities and provides direction to benefit its members.
Do you have more questions that you don’t see the answer to? Be sure to contact us, we are happy to help!