Most states, including those with monopolistic state funds, allow employers to self-insure their workers compensation losses if they demonstrate

• A. That enough employees approve
• B. The employee population size to do so
• C. The financial capacity to do so
• D. Procurement of a third-party administrator (TPA)

Answer: (C)

Self-insurance for workers’ compensation hinges on the employer demonstrating the financial capacity to pay claims as they arise. Regulators want to know the company can fund loss exposures—through solid liquidity, sufficient net worth, and accessible funding sources—without relying on a fully insured policy from a carrier. This financial capability, not the size of the workforce or the number of employees who approve, is the key gatekeeper in most states, including those with monopolistic state funds. While a third-party administrator can help manage and handle claims, having a TPA is an operational choice and does not by itself establish eligibility for self-insurance.