Whether or not to become self-insured for certain social insurance risks is an important choice for employers and can have a major financial impact.
What is self-insurance?
There are 2 ways how an employer can insure himself for the financial risk of the sickness law and/or WGA, namely;
- Public (UWV)
- Private (self-insured)
An employer has several choices when it comes to private insurance. First, the choice of what to become self-insurer for. This is possible for both the WGA and the Sickness Benefits Act, but an employer can also choose to become self-insurer for only the Sickness Benefits Act and not the WGA. But it can also be the other way around: not self-insured for the Sickness Benefits Act but self-insured for the WGA.
In addition to this choice, there is also the choice of whether the employer chooses to reinsure self-insurance with an insurer or become a pure self-insurer.
Benefits of self-insurance
Benefits of self-insurance WGA
- Grip on costs: One of the main advantages is that an employer keeps a grip on the absence costs of an (ex-)employee. A non-owner-risk bearer is in fact dependent on the reintegration efforts by the UWV. It turns out that employers who bear the excess, partly thanks to the support offered by insurers/importers, often achieve better reintegration results. The total costs are often lower as a result. Employers also do not run the risk of a sudden premium increase if an employee does end up in the WGA. This is because the premium adjustment with insurers is much less substantial than with the UWV.
- Involved insurers: Insurers/operators are proactive and more likely to be involved on absence and disability cases. Sometimes the combination with absenteeism insurance is also convenient. The insurer is then involved early on with the sick employee. There is strong competition among insurers, so the insurer is quickly "punished" if the quality of service lags behind. An insurer therefore feels more of a need to be innovative and looks to increase effectiveness. With several insurers/operators, the employer pays no premium if there is no risk. With the UWV, an employer always pays premium, both for 'Fixed' and 'Flex'.
Disadvantages of self-insurance WGA
- Long-term responsibility reintegration: The employer is personally responsible for the reintegration of employees for a period of up to ten years. This responsibility creates rights and obligations for the employer and for the (former) employee. Even if the employee is no longer employed, the employer remains responsible for his or her reintegration.
- Unexpected costs: If the responsibilities as an excess carrier are not met, the UWV may intervene. The costs incurred by the UWV are then recovered from the organization. However, the employer continues to bear the risk itself.
- Run-out risk: When an employer no longer wants to be self-insured, there may be a run-out risk. This means that the employer bears the risk for all employees who reported sick before the date the self-risk carrier ended.
Benefits of being self-insured under the sickness law
- Self responsible for reintegration: A self-insurer for the Sickness Benefits Act is himself responsible for the reintegration of his (former) employee. Where the employer supervises an employee with a permanent contract for two years during illness, he now also does this for an employee with a fixed-term contract who leaves his employment (or reports sick within 28 days after leaving employment). The employer is not dependent on the reintegration efforts of UWV, but is responsible for these efforts. The employer has the choice to use the services of an insurer or a private administrator of the Sickness Benefits Act or to arrange this internally.
- Greater chance of successful reintegration: An own-risk carrier for the Sickness Benefits Act has the option for a maximum period of 104 weeks to prevent WIA influx. The employer supervises a sick employee even after he or she has left employment. Because the employer takes the lead, possibly in cooperation with an insurer and/or sickness law administrator, an attempt is made to achieve a successful reintegration process. By preventing WIA inflow, the employer saves the imputation of WGA costs for a maximum period of 10 years.
- More cost-effective: Because the employer has the opportunity to provide intensive guidance to the (former) employee, the desired effect of this should be that the (former) employee fully or partially recovers. As self-insurer for the Sickness Benefits Act, the employer pays the Sickness Benefits himself. When the (former) employee recovers sufficiently, the obligation to pay the Sickness Benefit also ends.
Disadvantages of being self-insured under the sickness law
- Specialist knowledge required: Unlike self-insurance for the WGA, the employer as self-insurer for the Sickness Act is implementing a law. This means that sufficient knowledge must be in-house or available to implement the Sickness Act.
- Hidden costs: As self-insurer for the Sickness Benefits Act, the employer is responsible, for up to 2 years, for the reintegration of the (former) employee. The costs of reintegration are also borne by the employer. The employer can also pay the Sickness Benefits to the (ex-)employee himself. This means that its own, separate, absence administration must be carried out. This can also be outsourced to an insurer or private sickness law administrator.
- Still reintegration obligations: Has an employer, according to UWV, not done enough to reintegrate the sick employee? And does the employee apply for benefits? Then UWV can oblige the employer to continue paying your employee's wages for up to 1 year longer. An employer who is self-insurer for the Sickness Benefits Act will, when reintegrating a sick former employee, first check whether there are possibilities for reintegration in the own company.
