Which type of workers' compensation plan typically has higher risks for employers?

Self-insured plans typically entail higher risks for employers because they involve the employer assuming full responsibility for funding and managing their own workers' compensation claims. In this arrangement, the employer must pay for medical expenses and lost wages directly out of their own resources, without the safety net that insurance provides.

This can lead to significant financial exposure if there are unexpected claims, especially for industries with a higher incidence of workplace injuries. Employers who choose self-insured plans must also invest in claims management, compliance, and legal issues that arise from workplace injuries, which can further increase their financial risks.

In contrast, traditional plans and state-managed plans involve transferring most of the risk to an insurance company or state fund, providing a level of financial predictability for employers. Standard industry plans also tend to distribute risk more evenly across a pool of employers, as they are typically regulated and further diversified, thus reducing the potential for any single employer to face high financial claims.