Chapter 80. Regulations Governing Individual Self-Insurance under the Virginia Workers' Compensation Act
16VAC30-80-10. Definitions.
The following words and terms, when used in this chapter, shall have the following meanings, unless the content clearly indicates otherwise:
"Act" means the Virginia Workers' Compensation Act.
"Bond" means a corporate surety bond issued by a company currently licensed by the State Corporation Commission to write bonds in Virginia.
"Commission" means the Virginia Workers' Compensation Commission.
"Current" or "currently" means in effect at the time the action is taken.
"Excess coverage" means a policy providing coverage for claims costs in excess of a specified retention level, issued by a company currently approved by the State Corporation Commission to write such coverage in Virginia.
"Group self-insurer" means an employer belonging to a group self-insurance association that has been certified by the State Corporation Commission.
"Individual self-insurer" means a public or private employer certified by the Virginia Workers' Compensation Commission as an individual self-insurer for workers' compensation.
"Private self-insurer" means a self-insured individual employer that is not a governmental entity.
"Public self-insurer" means a self-insured individual employer that is a branch of state, county, or municipal government.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 1, eff. January 13, 1993.
16VAC30-80-20. Requirements for individual self-insurance.
A. Individual self-insurance for workers' compensation in Virginia is governed by Chapter 8 (§ 65.2-800 et seq.) of Title 65.2 of the Code of Virginia. Section 65.2-801 of the Code of Virginia specifies that the Virginia Workers' Compensation Commission shall establish requirements and standards for assessing and certifying that a self-insurer is solvent, capable of meeting its existing financial obligations, and able to pay all compensation that is due to its employees. Section 65.2-808 specifies that the commission shall issue a certificate of self-insurance to those employers it approves for self-insurance, and has the right to revoke that certificate upon 30 days' notice and hearing.
B. Currently approved individual self-insurers in Virginia shall not be subject to 16VAC30-80-30, 16VAC30-80-40, and 16VAC30-80-50 of this chapter, which apply to the initial submission and review of applications. Currently approved self-insurers shall, however, be subject to all aspects of the regulations that apply after initial application and review. This shall include all requirements regarding bonds (including increases in bonds) contained in 16VAC30-80-60, all reporting requirements in 16VAC30-80-70, termination and withdrawal procedures in 16VAC30-80-80, and assessment requirements in 16VAC30-80-100. However, currently approved self-insurers shall have until January 1, 1994, to comply with the advance notification requirements regarding excess coverage that are contained in 16VAC30-80-70 D.
C. Applicants that are governmental entities must apply and be certified as individual self-insurers. However, under 16VAC30-50-90 of the commission such public entities are required to provide neither proof of financial solvency nor any bond or security to guarantee payment of claims. The application and reporting requirements are therefore different, and more limited, for public self-insurers than they are for private self-insurers. Requirements for public employers are provided in 16VAC30-80-90 of this chapter. Public self-insurers are also subject to 16VAC30-80-100 (Assessments).
D. This chapter does not govern any aspect of the application, approval, or regulation of group self-insurance under § 65.2-802 of the Code of Virginia. Group self-insurance is regulated by Insurance Regulation No. 16, adopted by order of the State Corporation Commission on January 17, 1985. Group self-insurers are, however, subject to the assessment provisions of 16VAC30-80-100 of this chapter.
E. This chapter may be amended by the commission subject to a 30-day period for public comment, and a separate 60-day period from notification until implementation.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 2, eff. January 13, 1993.
16VAC30-80-30. Applications for self-insurance.
A. Applicants for individual self-insurance shall meet the following minimum requirements:
1. At least three years of operation under the current corporate identity.
2. Positive tangible net worth.
3. No fewer than 50 full-time employees within Virginia, except that for applicants with more than 250 employees in all U.S. jurisdictions this requirement will be waived.
4. No more than one net loss within the last three years.
5. A current ratio, based on audited figures, of at least 1.00, except that upon satisfactory and acceptable proof from the applicant that the median current ratio for the applicant's industry is less than 1.0, that median ratio shall be used as the minimum standard.
6. A debt/equity ratio (total liabilities to net worth), based on audited figures, of less than 2.2, except that upon satisfactory and acceptable proof from the applicant that the debt/equity ratio for the applicant's industry is greater than 2.2, that median figure shall be used as the minimum standard.
B. All applications for self-insurance must be submitted on the current version of the Employer's Application for Individual Self-Insurance (VWC Form No. 20).
C. All applications must be filled out completely and signed by an officer of the applying corporation, or by an agent authorized by the board of directors or trustees.
D. All applications must be accompanied by:
1. The latest three years of audited financial statements.
2. The latest three years of detailed claims information.
3. An overview of program operations (if this is not included with the financial figures as part of an annual report).
4. A nonrefundable application fee in the amount currently set by the commission.
Statutory Authority
§ 65.2-201 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 3, eff. January 13, 1993; amended, Virginia Register Volume 12, Issue 25, eff. October 2, 1996.
16VAC30-80-40. Review of applications.
A. Completed applications will be reviewed and a decision made within 90 days.
B. Applicants will be notified that their application has been received, whether it is complete, what materials will be needed, and when a decision can be expected.
C. Applicants may be required to provide additional information in support of their applications. Such additional information may include, but is not limited to, the following:
1. Updated information on financial operations, including review of the applicant's financial records by commission staff or their agents.
2. Additional information on Virginia operations (precise manufacturing procedures, exposure to industrial chemicals, potential occupational disease exposures, loss control efforts).
3. Detailed information on accidents or diseases, including review of the applicant's accident and safety records by commission staff or their agents.
D. Applicants will be reviewed for their financial solvency, efficiency, profitability, stability, and future prospects. The review will be based on the materials submitted by the applicant and on third-party analyses and ratings of the applicant's financial operations (including ratings of its credit). Critical financial issues, indicators, and ratios include, but are not limited to, those listed below. Analysis will be in terms of the applicant's current situation, any trends over the past three years, and comparison with other employers in the same or similar industries.
1. Net worth (tangible and intangible).
2. Operating results and working capital.
3. Nature and proportion of assets and liabilities.
4. Level and nature of debt, and overall relation of debt to equity.
5. Independent credit ratings.
6. Profitability in relation to sales, assets, and net worth.
E. Applicants will also be reviewed in terms of their existing claims experience and their possible future exposure. To the extent possible, the analysis will be based on comparisons with other employers in the same or similar industries. Issues for review include, but are not limited to, the following:
1. Total number of accidents over the past three years compared to national and state rates.
2. Number of lost-time accidents over the past three years compared to national and state rates.
3. Distribution of accidents by type and severity, including amputations, fatalities, and total incapacity.
4. Claims costs over the past three years compared to national and state rates.
5. Particular hazards to the employee in terms of both continuous and catastrophic exposures.
6. Any other indications of increase or unpredictability in accidents, lost-time accidents, and aggregate or per-capita claims costs.
F. Applicants will also be reviewed in terms of their proposed management of workers' compensation claims. Elements that will be considered include, but are not limited to, the following:
1. Demonstration of clear corporate responsibility for managing workers' compensation claims, procedures, policies, and reserves.
2. Reasonableness of proposals for maintaining excess coverage (proposed carrier, retention and limits for specific coverage, retention and limits for aggregate coverage).
3. Feasibility of proposed plan for managing claims (including specification of a third-party administrator or description of in-house claims management operations).
4. Existence of loss control programs, demonstrable effectiveness of such programs, and feasibility of any proposed improvements to such programs.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 4, eff. January 13, 1993.
16VAC30-80-50. Notice of approval or denial.
A. After reviewing the application, the commission will approve it (with or without conditions), deny it, or request additional information.
B. If the commission approves the application, the applicant will be informed of the decision, and requested to provide the following:
1. A surety bond written by a company licensed by the State Corporation Commission to write such bonds in Virginia. The bond must be in the amount specified by the commission, and provided on the currently approved version of the commission bond form (VWC Form No. 21A).
2. Proof of excess coverage provided by a company approved by the State Corporation Commission to write such coverage in Virginia. The coverage must be in the amount stipulated in the application, subject to any modifications in limits or retention level that may have been specified as a condition of the commission's approval of the application. The coverage may not be provided by any captive or subsidiary of the self-insurer, or by any captive or subsidiary of the self-insurer's parent company.
3. A copy of the agreement between the applicant and the proposed third party administrator (if not already provided as part of the application).
4. A copy of a parental guarantee if required by the commission. The guarantee must be provided on the currently approved version of the commission's parental guarantee form (VWC Form No. 22).
5. Documentation that any additional conditions of the commission's approval have been met.
C. Once all required materials have been provided by an approved applicant, the commission will provide a Certificate of Self-Insurance (VWC Form No. 22A). This certificate continues in force so long as the applicant meets all its requirements as a self-insurer under this regulation, under other commission rules and regulations, and under the provisions of the Virginia Workers' Compensation Act.
D. If the approved applicant fails to provide the required information within 60 days of the notification of approval, the application shall be considered withdrawn, but may be reactivated under the provisions of 16VAC30-80-50 E 5.
E. If the commission disapproves the application, the applicant will be informed of the action.
1. If the applicant wishes to discuss the reasons for denial in detail, a specific request may be provided either in writing or verbally.
2. If, on the basis of the discussion, the applicant wishes the commission to reconsider the application, a written request for such reconsideration must be made within 30 days from the date on which the applicant was notified of disapproval. The request must indicate the grounds for the reconsideration, and must provide evidence that any reasons for disapproval have been corrected or that the information previously provided to the commission was incomplete or incorrect.
3. The commission will reconsider the application within 60 days, and provide a written response to the applicant.
4. If the commission requires additional information, either for an initial review, or for a subsequent request for reconsideration of a disapproval, the applicant will have 30 days in which to provide the required information. If the information is not provided within that time period, the application will be considered withdrawn.
5. An application that has been withdrawn, either during review or after initial approval, may be reactivated so long as it has been no more than 180 days since the original application was submitted.
6. Applicants who have withdrawn their applications or have had their applications rejected may reapply at any time, but must meet all of the application requirements.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 5, eff. January 13, 1993.
16VAC30-80-60. Surety bonds.
A. All approved self-insurers, except those employers who already have securities on deposit, shall submit to the commission a corporate surety bond, issued by a licensed Virginia bond writer.
B. The bond may not be written by any captive or subsidiary of the self-insurer, or by any captive or subsidiary of the self-insurer's parent company.
C. The bond shall be issued on the currently approved version of the commission's bond form (VWC Form No. 21A).
D. The bond must include the phrase "and its subsidiaries" immediately after the corporate name under which self-insurance was approved.
E. If the applicant has any subsidiaries that are not to be included under the bond, a specific rider to that effect must be submitted.
F. The minimum amount of the bond shall be the larger of the following:
1. $750,000, or
2. 2.0 times the annual incurred costs (including all reserves) for workers' compensation claims, based on the average of costs incurred over the past three years.
G. The commission shall increase the bond to reflect:
1. Questionable incurred cost figures or unusual reserving practices by the applicant,
2. Any change in the size or nature of operations that may affect the validity of existing claims statistics, or
3. Any aspect of the employment which suggests increased, unpredictable, incalculable, or catastrophic workers' compensation exposure in the future.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 6, eff. January 13, 1993.
16VAC30-80-70. Reporting requirements.
A. The following regular reports must be submitted annually to the commission.
1. Within 60 days after the request, the self-insurer must provide a report of payroll to the commission, broken down by NCCI payroll classifications.
2. Within 60 days after the request, the self-insurer must provide a completed annual questionnaire on operations and claims experience.
3. Private self-insurers, but not public self-insurers, must also provide with the annual questionnaire:
a. Audited financial figures for the latest year of operations, and
b. A list of subcontractors who are, or may be, covered by the certificate of self-insurance.
B. The following information must be reported to the commission 30 days before the change occurs:
1. Any substantial change in corporate structure and status that affects overall management, financial soundness, or corporate names and designations.
2. Any substantial change in Virginia operations to include:
a. The addition of any subsidiary,
b. The addition of, or change to, any different kind of operation, or
c. An increase in the number of employees of more than 20% from the figure provided in the most recent annual questionnaire (or from the information in the self-insurer's original application if no annual questionnaire has yet been submitted).
3. Any decision to cease operating as a self-insurer.
C. Any proposed change in claims management or third party administration must be sent to the commission at least 60 days prior to the proposed change.
D. The requirements listed below apply to excess coverage. All reports, notices, and requests for approval of changes in, or notices of cancellation of, excess coverage shall be provided by certified mail, addressed to "Self-Insurance Program," Virginia Workers' Compensation Commission, 333 East Franklin Street, Richmond VA 23219.
1. All excess coverage policies must contain a clause requiring 60 days advance notice of cancellation.
2. All excess coverage policies must contain a clause to the effect that the policy is automatically renewable except upon 60 days advance notice of nonrenewal.
3. Prompt notification is required for any change in carrier, any decrease or moderate increase in retention level, or any increase or moderate decrease in indemnity limits.
4. Thirty days prior notice, subject to commission approval, is required for any change in excess coverage that involves more than a 25% decrease in indemnity limits or more than a 25% increase in retention levels.
E. Self-insurers must also respond to individual requests for information from the commission. Such requests may include, but are not limited to, the following:
1. Quarterly financial reports.
2. Clarification of information provided in regular reports.
3. Information on particular accidents and claims.
4. Copies of insurance policies and endorsements.
5. Copies of claims management and loss control reports and statistics.
F. The commission reserves the right to conduct independent audits of a self-insurer's financial records, claims management practices, and safety and loss control programs. Such audits may be conducted by commission staff or by their authorized agents.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 7, eff. January 13, 1993; amended, Virginia Register Volume 38, Issue 7, eff. November 22, 2021.
16VAC30-80-80. Termination and withdrawal.
A. The commission may revoke the privilege of self-insurance. Reasons for revocation include, but are not limited to, the following:
1. Deteriorating financial condition.
a. Seriously deteriorating financial condition, as evidenced by poor financial indicators, negative net worth, or sequential net losses, may result either in termination of the Certificate of Self-Insurance under 16VAC30-80-80 B or a requirement to increase the bond and/or excess coverage amounts.
b. Moderately deteriorating financial condition, as evidenced by poor financial indicators, low net worth, or a net loss, may result in a requirement to increase bond and/or excess coverage amounts.
2. Deteriorating accident and claims situation.
a. Substantial increase in number or cost of claims may result in termination of the Certificate of Self-Insurance or a requirement to increase the bond and/or excess coverage amounts.
b. Moderate increase in number or cost of claims may result in a requirement to increase bond and/or excess coverage amounts.
3. Failure to provide required reports.
4. Failure to respond to commission requests for information within 30 days.
5. Provision of inaccurate or misleading information to the commission regarding financial condition, claims experience, or claims management.
6. Failure to manage claims according to Virginia requirements.
7. Failure to maintain bond and excess coverage at the levels required or approved by the commission, subject to the reporting requirements in 16VAC30-80-70 D.
B. In the case of termination, the commission will provide at least 30 days advance notice of the termination, as required by § 65.2-808 of the Act. The commission will also specify the reason for the termination.
C. The commission will schedule a hearing at which the self-insurer may present evidence as to why the privilege of self-insurance should not be revoked.
D. Self-insurers may surrender their Certificate of Self-Insurance by sending a notice of intent to withdraw by certified mail to "Self-Insurance Program," Virginia Workers' Compensation Commission, 333 East Franklin Street, Richmond VA 23219. Withdrawal shall not be effective until approved by the commission on the basis of proof of alternate commercial coverage, or cessation of all Virginia operations for which workers' compensation coverage is required.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 8, eff. January 13, 1993; amended, Virginia Register Volume 38, Issue 7, eff. November 22, 2021.
16VAC30-80-90. Public self-insurers.
A. 16VAC30-50-90 of the commission stipulates that the state, its municipalities, and its divisions, may apply for and be granted the privilege of self-insurance without providing the proof of solvency required by § 65.2-801 of the Code of Virginia.
B. Public entities that wish to become self-insured for workers' compensation must apply using the currently approved version of the commission's application form (VWC Form No. 20).
C. The attachments to the application that are required of private sector applicants (financial reports, claims runs, application fee) are not required of public sector applicants.
D. No surety bond or excess insurance coverage will be required of public sector applicants.
E. Public sector applicants will be provided with a Certificate of Self-Insurance that is continuous in nature.
F. Approved public self-insurers are required to:
1. Meet their responsibilities under the Virginia Workers' Compensation Act.
2. Follow all other commission rules and regulations.
3. Provide annual payroll and operational reports as specified in 16VAC30-80-70 A of this chapter.
4. Respond to specific commission requests for information as specified in 16VAC30-80-70 E of this chapter.
5. Provide the assessments that are required under Chapters 10 (§ 65.2-1000 et seq.), 11 (§ 65.2-1100 et seq.), and 12 (§ 65.2-1200 et seq.) of Title 65.2 of the Code of Virginia and 16VAC30-80-100 of this chapter.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 9, eff. January 13, 1993.
16VAC30-80-100. Assessments.
A. All self-insurers, public and private, shall be subject to assessments for the commission's Administrative Fund (Chapter 10 of Title 65.2 of the Code of Virginia), the Second Injury Fund (Chapter 11 of Title 65.2), the Uninsured Employer's Fund (Chapter 12 of Title 65.2), and such other funds or expenses as may be required by future legislation or commission regulation.
B. Self-insurers' assessments shall be calculated by the commission each year based on manual insurance rates for the same or similar work.
C. Failure to provide the amounts assessed within 60 days of notice of the amount of the assessment shall be grounds for termination of the privilege of self-insurance.
Statutory Authority
§§ 65.2-201 and 65.2-801 of the Code of Virginia.
Historical Notes
Derived from VR405-20-01 § 10, eff. January 13, 1993.