Chapter 13. Individual Employer Self-Insurer

“Acceptable financial indicators” means indicators consistent with comparable industry financial health and performance criteria as reported in rating services such as RMA Annual Financial Statement Studies or equivalent recognized indices.

“Act” means the Maryland Workers' Compensation Act, Labor and Employment Article, Title 9, Annotated Code of Maryland.

“Actuarial report” means a report written by an actuary who is a member of the Casualty Actuarial Society or the American Academy of Actuaries.

“Affiliate” means a member of a group of companies with common ownership but not the company having a direct ownership interest.

“Commission” means the Maryland State Workers' Compensation Commission.

“Investment grade securities” means federal or state bonds accepted by the circuit courts for investment of trust money.

“Irrevocable trust, custodian, safekeeping, or book entry account” means a depository account of monies and investment grade securities held by a Federal Deposit Insurance Corporation bank that agrees to hold amounts ordered by the Commission for a self-insurer that can only be withdrawn by the Commission, or if a trust exists pursuant to the terms of the trust document.

Self-Insurer.

“State” means the State of Maryland.

“Third-party administrator” means a company that handles and adjusts workers’ compensation claims under contract to a self-insurer.

An initial application for individual self-insurance shall be submitted to the Commission on forms prescribed by the Commission and shall include all required information and documentation required by the Commission. A corporation shall submit a resolution of its board of directors authorizing and directing the corporation to apply to become self-insured.

A nonrefundable fee in the amount established by the Commission shall accompany the application.

The required information on the application shall be fully completed and particularly set forth under oath by the employer or an individual acting on the employer's behalf. The affidavit shall be made upon personal knowledge of the matters set forth in the application. The Commission may require the applicant to supplement or explain any of the matters set forth or to provide additional information that the Commission considers necessary.

If a third-party administrator is used or intended to be used, the applicant shall provide a copy of the contract between the parties demonstrating that the third-party administrator agrees to do the following:

Upon receipt of a complete application and all required information and documentation, the Commission shall act upon the application for self-insurance within 60 days.

When an employer applying to self-insure is a subsidiary company, the parent company shall provide, on forms prescribed by the Commission, a written agreement adopted by its board of directors which states that the parent company guarantees the payment of all claims incurred by the self-insurer and its affiliates and subsidiaries that are approved under the self-insurance program. The parent company shall further assume liability for the payment of an affiliate's or subsidiary's claims incurred during its period of self-insurance upon termination of the affiliate or parent-subsidiary relationship until formally released by the Commission.

When a subsidiary company applies to self-insure under a parent company's existing self-insurance program, the subsidiary company shall file an application on forms prescribed by the Commission.

In determining whether an applicant is eligible for self-insurance and in establishing the amount of surety required, the Commission shall consider all relevant factors including the following:

Not-for-profit organizations need not be profitable if all other provisions are satisfied and there are significant investments or endowments and other resources to assure payment of workers' compensation claims.

3 straight years of losses or negative cash flow from operations;

Negative tangible net worth;

8 straight quarters of losses;

Noncompliance with lender covenants;

Financial instability of surety, excess carrier, or letter of credit issuer;

Public disclosure of accounting irregularities;

Potential insolvency or bankruptcy; or

Any other issue that shows financial instability.

Provide written notice to the Commission by personal delivery or by certified mail, return receipt requested, including a:

Provide the date and time of the intended withdrawal and the carrier name, policy number, and effective date of coverage of the insurer assuming the risk.

Surety Bond.

Letter of Credit.

Irrevocable Trust, Custodian, Safekeeping Agreement, or Book Entry Account.

Before approval of self-insurance status and periodically after that, the Commission, in establishing and adjusting security deposit amounts, shall consider, among other conditions or facts relevant to security and prompt payment of compensation, the following:

A self-insurer shall, after the third full year of an approved plan, or earlier if required by the Commission, and tri-annually after that, or at a time frequency determined by the Commission, provide an independent actuarial study prepared in accordance with actuarial standards of practice as a basis for security deposit determination. The Commission may use reported reserve amounts in addition to a factor for related administrative costs and the potential modifiers in this subsection to establish the security amount.

The Commission may waive this requirement for security for individually self-insured governmental entities.

A self-insurer shall file an annual certified, audited financial report and 10K reports, if applicable, with the Commission within 120 days of the end of the reporting period. An extension may be granted upon written request of the Commission.

The self-insurer shall submit interim reports as requested by the Commission.

Financial reports shall be filed with the Commission electronically and as directed by the Commission.

A self-insurer shall maintain true and accurate records of workers' compensation paid and incurred costs and case reserves on each claim in indemnity, medical, and allocated costs paid and reserves for each claim. This information shall be provided annually to the Commission or more frequently if requested by the Commission.

Reports submitted by a service company or third-party administrator on behalf of the self-insurer shall be treated as if they were submitted by the self-insurer directly.

Claims reports shall be filed with the Commission electronically and as directed by the Commission.

After notice and opportunity for a hearing, the Commission may assess an individual employer self-insurer that the commission finds to be in violation of this regulation a fine not exceeding $1,000 for each violation.

Failure to pay a fine assessed under this section may result in revocation of self-insurance status.

A self-insurer shall notify the Commission within 30 days of a change in majority ownership. Existing parental guarantees may not be released until an acceptable replacement guarantee is received by the acquiring parent company.

A self-insurer or parent guarantor that amends its organizational documents to change its identity, status, or business structure, including merger, acquisition, and disposition, shall promptly notify the Commission in writing. All legal agreements and instruments that obligate the self-insurer, guarantors, excess carrier, or security provider shall be updated by the provider within 30 days. The Commission may request copies of documents or information considered necessary to determine whether an action has affected the ability of the employer to self-insure.