A form of workers compensation insurance introduced in 1990 and approved for use in some states. The employer pays a reduced premium but must reimburse the insurer for claims that fall within the deductible amount. There are three types of plans; indemnity deductible, medical deductible, and claims deductible.
Small deductible plans were developed for those employers who are not eligible for more complex premium savings programs or who may not be of the size to qualify for those other plans. These plans were also developed with the idea in mind to provide incentives for employers to implement loss control programs that ultimately assist in reducing the employers cost for workers compensation insurance. Small deductible plans vary from state to state with many approved deductibles ranging from $500 to $5,000.
Small deductible plans work by the insurance carrier providing reduced rates or a rate calculation factor or multiplier for each size deductible available. This factor is then applied to the employers premium calculation thus reducing his premium. The larger the deductible the more credit is applied. When one of these plans is chosen the insurance company will pay the claim as usual and then will ask the employer for reimbursement of the deductible. Thus the insurance company fronts the deductible amount to the employer and then expects the employer to pay it back. Deductibles can apply to these areas:
Indemnity Deductible - The deductible only applies to workers compensation indemnity benefits
Medical Deductible - The deductible only applies to workers compensation medical benefits
Claims Deductible - The deductible will apply to both the workers compensation indemnity and medical benefits
Keep in mind the small deductible option is available in most states but is controlled by each individual state. You'll find that in some states the offer of a small deductible plan is mandatory and in others it is optional. States will fall into one of these four categories:
Is Optional - states where the small deductible plan is totally optional
Is Mandatory - only when the employer makes a request for such a plan
Is Mandatory - only if the insurance company determines that the employer is financially able to pay the deductible
Is Mandatory - where the insurance company must offer the small deductible plan to an employer