Bulletin No. 95-06
Assessments made pursuant to section 551 of the worker's disability compensation act
Issued and entered August 21, 1995 by D. Joseph Olson, Commissioner of Insurance
Section 551 of the Worker's Disability Compensation Act (Act), MCLA 418.551, provides for assessments to be levied upon carriers for purposes of the second injury fund and the silicosis, dust disease, and logging industry compensation fund. This section also specifies the basis for these assessments:
The assessment shall bear the same relationship that the total compensation benefits, exclusive of payments made pursuant to sections 315, 319, and 345, paid by each carrier in the state bears to the total compensation benefits paid by all carriers in the state.
Confusion has apparently arisen with regard to the basis for assessment in the case of large deductible worker's compensation insurance policies. The purpose of this bulletin is to provide some clarification in that regard.
Large deductible worker's compensation insurance policies provide that the insurer shall make all benefit payments and the employer will reimburse the insurer for any amounts paid up to the deductible limit. Employers purchasing such policies are considered insured for purposes of the Act. Therefore, the payments made by the insurer, including those made under the deductible limit, are to be considered in the calculation of the assessment pursuant to Section 551.
It has come to the Insurance Bureau's attention that some insurers believe that employers are to be considered self-insured for the amount of the deductible and insured for the amount over the deductible, and therefore can be assessed as a self-insurer for amounts paid under the deductible. This is not possible under the Act. The Act defines "self- insurer" as a group of employers who pool their liabilities as a group fund in the manner provided by the Act, or as an individual employer authorized to carry its own risk. An individual employer must receive authorization from the director of the Bureau of Workers' Disability Compensation in order to carry its own risk. Employers purchasing large deductible worker's compensation insurance policies do not have such authorization and therefore cannot be assessed as a self- insurer under Section 551.
Therefore, the Bureau of Workers' Disability Compensation cannot assess individual employers with large deductible policies as self- insureds. Insurers' assessments are to be based on all benefits paid, including those made under the deductible limit.
Any questions regarding this bulletin should be directed to:
Market Standards Division
MI Insurance Bureau
611 West Ottawa, 2nd Floor
Lansing, MI 48933
MI Department of Labor
7201 West Saginaw St., Suite 110
Lansing, MI 48917