Ohio Amends Self-Insured Workers' Compensation Regulations

The state of Ohio recently made some changes to their workers’ compensation self-insurance regulations Rule 4123-19-03. These changes were scheduled to take effect 8/1/19 and will apply to all qualified self-insurers in Ohio. Most of the changes to the current regulations are for clarification purposes however, there are several new provisions with material changes that will be important to self-insurers moving forward. Some of the key highlights of the revised Rule are outlined below: 

(J) Self-insured employers will be required to report their paid compensation benefits to the Bureau by the last day of February each year. The previous regulations required self-insured employers to report their paid compensation to the Bureau annually but did not cite a specific date.

(K) (13) Self-insured employers are now prohibited from entering into a professional employer organization (PEO) as a client employer. This provision is most likely intended to prevent employers from circumventing self-insurance requirements by simply joining a PEO.

(O) Excess workers’ compensation policies must now name the Bureau as an additional beneficiary under the policy. When a self-insured employer becomes insolvent, the state assumes responsibility for the employer's claims. By adding the Bureau as a named beneficiary to all excess policies, the state can immediately take assignment of any potential insurance recoveries without the need for additional litigation. This provision should be added to all admitted excess workers’ compensation policies by the carriers themselves. It may however be prudent for self-insured employers to confirm this provision is included on any excess policy issued on or after 8/1/19.  

(O) (2) Self-insured employers that purchase excess workers’ compensation coverage must provide a full copy of the policy to the Bureau. Most states only require a certificate from the carrier or employer but the Bureau's new regulations require the employer to submit a full copy of the policy, inclusive of the declarations page and endorsements, as evidence of coverage. The Bureau did not previously require evidence of coverage from either the carrier or the employer. To be compliant with the new regulations, self-insured employers should send complete copies of their excess policies to the Bureau each year when their policies renew.

Although the changes to the excess workers' compensation policies are relatively minor, they could signal additional regulatory amendments in the future that could have a more significant impact on the state's self-insurers. Specifically, the Bureau does not presently require self-insured employers to purchase excess insurance. Since the Bureau must now be a named beneficiary under all excess workers’ compensation policies, one can reasonably assume the state had difficulty taking assignment of policies previously during bankruptcy proceedings. Presumably the recovery under the policies in question was meaningful enough for the Bureau to invest the time and effort needed to amend the previous regulations. It therefore stands to reason that the Bureau could consider requiring self-insurers to purchase excess coverage in the future. Doing so would add an additional layer of protection for the state in future bankruptcy proceedings and could even help self-insured employers avoid potential insolvency caused by a catastrophic claim.