TERRE HAUTE — An improved safety record and fewer claims is prompting the Vigo County School Corp. to consider self-insurance for workers compensation.
Brendan Kearns, risk manager, outlined the proposal at the Nov. 13 school board meeting and will present a recommendation Monday to the School Board.
For 2005-06, the school district spent $600,000 on premiums to Liberty Mutual Co. for a fully insured worker’s compensation program. So far, the school district has had only $140,000 in claims this year.
With fewer than six lost-time claims in the past two calendar years, traditional fully insured coverage “has become a negative financial option” because premiums are far in excess of losses, Kearns said.
With self-insurance, the school district pays only for claims that are incurred as they are incurred. “We can realize the savings,” he said.
As risk manager, Kearns said his goal has been “to get accident rates down and create a safety culture for the school district.”
Those efforts have met with success. “At all schools, we’ve seen a significant decrease in employee accidents and injuries,” he said.
Last year, the school district received a significant discount on its regular worker’s compensation policy because of those efforts, he said.
Under a self-insurance program, the school district would hire a company (third-party administrator) to administer bills, handle claims and deal with any kind of lawsuits or legal actions.
Those services would cost about $50,000 per year. In addition, Kearns would recommend adequate excess coverage to protect the school district in the event of catastrophic losses, which would cost about $44,000.
The catastrophic policy would kick in anytime a claim exceeded $250,000.
Kearns said it’s a big jump for the school corporation, which is going from a conservative program to one that has greater risk, but he thinks it will provide significant savings to the school district.
With the savings, Kearns proposes setting aside $500,000 in an account dedicated to claims; surplus would roll over for 2008-09 claims.
Setting aside the funds in a dedicated account will help provide a cushion “in case of a bad [claims] year,” he said.
The school district’s claims history has been improving. In 2002-03, the school district had $359,000 in claims, and premiums were $515,000. In 2003-04, the district had $348,000 in claims, with $500,000 in premiums.
In 2004-05, claims totaled $187,000, and premiums $635,000.
Kearns said the school district has been implementing extensive safety training programs.
Self-insurance would allow the school district to have greater control of its worker’s compensation medical costs and possibly enhance treatment for injured employees.
The school district could negotiate directly with medical providers to reduce costs, he said.
On Monday, the district will recommend a self-insurance approach in which the company JWF Specialty would act as the third-party administrator. The contract would be for two years. The minimum expense would be $94,561 per year to cover JWF fees and the catastrophic excess coverage.
The school district is listing other options, though they aren’t recommended. The board could renew the existing policy with Liberty Mutual; the proposed premium is $479,245, a reduction of $122,126 from the current policy.
A third option would be a Liberty Mutual LRARO risk plan, which is similar to a self-insurance approach. Minimum premium is $281,000 with a maximum of $695,000.
Kearns noted that Liberty has reduced its premium for the existing policy, so whether the board chooses self-insurance or Liberty Mutual, “either way, we’ll win.”
The board also will act on property-casualty insurance policy. The school district recommends renewing an existing policy with Indiana Insurance for $670,169. That’s a reduction in premium from $817,127 in 2004-05 and $710,470 in 2005-06.
Sue Loughlin can be reached at (812) 231-4235 or sue.loughlin@tribstar.com.
What’s the difference?
• Traditional coverage: School district pays the same premiums even if annual claims are far fewer than plan covers.
• Self-insurance: School district pays only for claims that are incurred as they are incurred.
Local & Bistate
School Corp. considers self-insurance
Improved safety record makes traditional coverage uneconomical
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