On the Alternative Work Comp Plans Scale, which plan is listed as the highest level (lowest to highest)?

On the Alternative Work Comp Plans Scale, which plan is listed as the highest level (lowest to highest)?

• A. Self-Insurance.
• B. Captive.
• C. Guaranteed Cost Plan.
• D. Retrospective Rated Policy.

Answer: (A)

The main idea here is how much risk and control the employer retains in different workers’ compensation financing options. The highest level on this scale means the employer bears the most financial exposure and has the most direct responsibility for paying and managing claims. That is self-insurance, where the company funds and pays its own workers’ comp claims (often with funded reserves) and handles administration directly. Because the employer assumes the losses and the responsibility upfront, it sits at the top end of the scale. The other options involve shifting more risk to an insurer or using formal risk-transfer structures. A guaranteed cost plan transfers nearly all risk to the insurer, with the employer paying a fixed premium. A retrospective rated policy shares loss experience with the insurer but settles premiums after the fact. A captive is a separate, owned insurer used to finance and manage the employer’s risk, offering more control than a standard insurer but still not the same as pure self-insurance.

The main idea here is how much risk and control the employer retains in different workers’ compensation financing options. The highest level on this scale means the employer bears the most financial exposure and has the most direct responsibility for paying and managing claims. That is self-insurance, where the company funds and pays its own workers’ comp claims (often with funded reserves) and handles administration directly. Because the employer assumes the losses and the responsibility upfront, it sits at the top end of the scale.

The other options involve shifting more risk to an insurer or using formal risk-transfer structures. A guaranteed cost plan transfers nearly all risk to the insurer, with the employer paying a fixed premium. A retrospective rated policy shares loss experience with the insurer but settles premiums after the fact. A captive is a separate, owned insurer used to finance and manage the employer’s risk, offering more control than a standard insurer but still not the same as pure self-insurance.