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.
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.
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. §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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