What is true regarding traditional WC plans compared to self-insured WC plans?

In traditional workers’ compensation plans, the benefits are provided by an insurance company that the employer contracts with. This means that when an employee files a claim, the insurance provider takes responsibility for paying the benefits, including medical expenses, lost wages, and rehabilitation costs. The employer pays premiums to the insurance company, which then assumes the financial risk and administrative responsibilities associated with workers' compensation claims.

This structure contrasts with self-insured workers' compensation plans, where the employer itself retains the financial risk and pays for claims directly rather than transferring that risk to an insurance company. While self-insured employers may also seek excess insurance for particularly large claims, they directly manage the claims and bear the long-term liabilities associated with those claims.

Given this understanding, the statement that benefits are paid by the insurer, not the employer, accurately reflects the nature of traditional workers' compensation plans. It highlights the crucial distinction in responsibility between traditional insurance models and self-insured arrangements.