• What is a California GSIP?
  
• What Benefits do GSIP’s Offer?
  
• How does a GSIP Work?
  
• How is a California GSIP Regulated?
  
• How are Groups Administered?
  
• How are Claims Managed in California?
  
• What is the Purpose of Underwriting Services?
  
• What are Feasibility Studies and Why are they Needed?
  
• How are Accounting and Financial Management Matters Dealt With?
  
• What is Medical Case Management and what is its Role?
  
• What is Risk Management and what is its Role?
  
• What Marketing and Membership Services are Needed?
  
• What Legal Services are Necessary?
  
• How are Management Information Systems Utilized?
  
• What are the Risks vs. Rewards of Joining a GSIP?
  
• Conclusion

  
  
  

Q: What is a California GSIP?
A: A GSIP is an association of homogeneous employers formed for the sole purpose of providing statutory workers’ compensation and employers’ liability coverage. Organizations that form GSIP’s are usually, medium-sized companies that do not have the size or financial capacity to become a self-insurer on their own, yet want to assume control over their workers’ compensation costs. They also desire the same benefits and savings realized by large self-insured companies.

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Q: What Benefits do GSIP’s Offer?
A: The primary benefits that can be expected from membership in a GSIP are:

• Decreased frequency and severity of claims through more effective underwriting, risk selection, loss prevention, loss control, and managed care programs
• Savings through reduced administrative costs
• Interest income on the contribution dollars collected by the group
• The potential for dividends from surplus

In essence a GSIP helps employers control multiple aspects of their workers’ compensation cost. The degree, to which their benefits can be achieved, depends on a variety of factors.

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Q: How does a GSIP Work?
A: A GSIP enables employers to assume a major portion of their risk and provides group purchasing power for excess insurance to cover losses incurred individually or collectively in excess of a specified dollar amount.

Members of a GSIP pay a contribution (premium) to the group based on their classification codes, payroll, experience modifications, and rates that are developed for the group through an actuarial study. Contributions paid by members are used to pay covered losses, claims administration and costs associated with the management of the group, such as loss control, legal, accounting, actuarial, and excess insurance. Surplus from both the claims fund and the administrative expense fund can be returned to group members on a pro-rata share basis in a variety of ways.

Many costs associated with traditional workers’ compensation insurance, such as CIGA and premium taxes, do not apply to a GSIP. These costs can amount to a significant percentage of traditional workers’ compensation insurance premiums. The elimination of these expenses, are part of the cost reduction process of a Group Self Insurance Program.

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Q: How is a California GSIP Regulated?
A: GSIP’s must receive approval to operate in California from the Department of Industrial Relations Self – Insurance Division. GSIP’s are required to follow the laws and regulations of the State of California. One of he DIR’s primary responsibilities is to ensure the group’s ability to pay claims. This is done through appropriate planning and the actuarial based funding (pricing) used by each GSIP.

Coverage Requirement: California’s DIR requires that a GSIP carry excess insurance at a maximum attachment point of $ 500,000. This insurance pays for losses / claims that exceed this dollar amount. This coverage is in place so that the group’s assets will not be exhausted.

Financial Requirements: The DIR requires that each member of a GSIP and the GSIP itself meet very strong financial requirements regarding net worth, profitability, liquidity, and solvency.

Security Requirements: GSIP’s are required to post security with the State. There are a variety of ways this can be done.

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Q: How are Groups Administered?
A: GSIP’s elect a board of trustees to govern the activities of the group. These activities include setting criteria regarding eligibility, excess insurance, the distribution of dividends, the selection of service providers, etc.

GSIP’s are responsible for the payment of claims in conformance with California workers’ compensation laws. In addition, groups require a variety of services, such as underwriting, actuarial, legal, finance, loss prevention, loss control, and claims management. To a large extent, the success of any self-insurance group depends on how effectively it manages and integrates many of these activities. To operate most effectively, a Program Administrator is usually selected to provide these services to a group.

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Q: How are Claims Managed in California?
A: A primary benefit to self-insurance is the degree of control a group can exercise over all aspects of claims handling process in order to help contain costs. A California GSIP must hire a Third Party Administrator (TPA) to implement claims management services, including:

• Claims processing and settlement
• Investigation
• Managed care and cost containment pro- grams
• Preferred provider service
• Litigation management
• Subrogation

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Q: What is the Purpose of Underwriting Services?
A: Underwriting is required to develop guidelines for membership, evaluate exposure to loss for individual members and to the group as a whole, calculate the contribution each member must pay to the group, and review compliance with California’s regulations, laws and/or guidelines.

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Q: What are Feasibility Studies and Why are they Needed?
A: Feasibility studies play an integral part in the process of forming a GSIP. This study also plays a role once a group has been formed. When organizing a GSIP, feasibility studies are used and required to review and analyze specific regulations and to provide specific financial and actuarial information to the DIR. Once a group is formed, these studies help prospective members evaluate the group. Accurate loss forecasting is an extremely important component of a feasibility study and usually requires a minimum of five years of premium, payroll, experience modification, and claims history. Financial statements are also evaluated for each prospective member.

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Q: How are Accounting and Financial Management Matters Dealt With?
A: GSIP’s are responsible for the proper establishment, maintenance, and administration of accounting procedures and financial controls including:

• Collection of accounts and monies owed to the group in connection with providing coverage and the group’s administration
• Maintenance of all claims fund and administrative fund accounts necessary to satisfy the legal and financial obligations of the group
• Systems for safekeeping of records, books of accounts, and financial affairs
• Reporting of financial statements and reports as required by state regulations and the group’s by-laws
• Selection of independent certified public accountants and actuarial services, as appropriate, and proper investment management

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Q: What is Medical Case Management and what is its Role?
A: Medical case management is an effective way to reduce cost through early intervention and an effective early-return-to-work plan. Medical case management includes:

• Immediate contact by a health care professional to assess the employee’s medical condition and to ensure that the employee receives the appropriate care from the time of injury, through treatment and recuperation.
• Developing modified works plans with the employer, the injured employee, and the health care provider to help the employee make the transition back to work and to expedite early-return-to-work.
• Implement work conditioning and vocational rehabilitation programs, where appropriate, in order to help individuals return to work and ensure that the early-return-to-work plan is successful.

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Q: What is Risk Management and what is its Role?
A: Risk management and loss control planning are designed to prevent losses from occurring in addition to reducing their frequency and severity. A risk management specialist can:

• Evaluate the effectiveness of existing safety programs
• Analyze and reduce site hazards to prevent or eliminate causes of injury
• Develop written safety policies and guidelines to help prevent injuries
• Provide periodic inspections and written re- ports recommending specific action
• Assist in the development and implementation of new safety programs as well as provide risk management analysis reports

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Q: What Marketing and Membership Services are Needed?
A: The marketing and membership of GSIP’s require ongoing efforts to promote the group’s program, attract new members, and provide frontline evaluation of potential members to ensure the group’s long term survival and continued financial viability. Risk management consultants and insurance brokers are two of the resources that can assist a group in gathering information on prospective group members.

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Q: What Legal Services are Necessary?
A: Because workers’ compensation is so closely regulated, effective service is crucial , not only for handling claims and controlling losses, but also to insure that groups comply wit the various compensation laws. Numerous applications must be filed with the DIR to receive authorization for the formation and maintenance of a GSIP.

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Q: How are Management Information Systems Utilized?
In order to achieve optimum success, GSIP’s require management information systems capable of providing a variety of information management services including payments to providers and injured employees, calendaring of reoccurring payments, filing of forms, etc. The system must have the capability of recording important information and log notes, as well as produce statistical reports that help monitor and control losses. Also essential are reports that detect trends in losses, develop loss cost and predict future losses. They also used to assist in rate calculation procedure.

In addition, members and providers should have remote access to the management information system for the reporting of claims, review losses, and communications to claims examiners.

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Q: What are the Risks vs. Rewards of Joining a GSIP?
A: GSIP’s offer many advantages over traditional insurance company plans including: greater control, lower rates, removal from DOI and its’ oversight, industry specific loss control, peer review, potential dividends and stability. When evaluating participation in a GSIP one must weigh the numerous rewards against risks, including:

Joint and Several Liability: Members of the group are both jointly and severally liable for workers’ compensation and employer’s liability losses incurred by the membership while they are members of the group. The subsequent bankruptcy of a member does not release the group members, during that period of time, from this liability. Terminated members retain their financial responsibility for the period of time they were in the group.

Multi-State Operations: A California GSIP is regulated by the state of California and only covers exposures within California. As a result, an employer with operations within California. As a result, an employer with operations outside California must find an insurer, another GSIP, or alternative means to cover any out-of-state portions of the workers’ compensation exposure.

Administrative Functions and Additional Costs: Many of the services usually provided by an insurer (i.e. claims administration and record keeping, loss control, legal services, and actuarial services) are now the responsibility of the group. The group must select the services it requires and, if necessary, hire service providers to manage these services.

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The subject matter contained herein is provided on an informational basis only. The advice of a professional should be sought to make an appropriately informed decision. Neither the creator, the distributor nor any other party to this document assumes liability for loss or damage as a result of reliance on this material.

Conclusion
GSIP’s offer a multitude of advantages over traditional workers’ compensation coverage. They can help employers control escalating workers’ compensation costs while also implementing higher standards for workplace safety. As noted previously, there is a small degree of risk that accompanies the benefits of joining a group. However, a GSIP that is well managed by way of integrating, program administration, risk management, safety programs, and claims oversight is an excellent option to consider. Thousands of employers in over 35 states participate in GSIP’s.

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