Boca Benefits Consulting Group Inc.

Whether your company is a small firm or a very large one, there is probably at least one similarity. Workman’s compensation insurance has historically been purchased based on estimates of payroll size and risk categories that are trued-up at year-end via some form of insurance carrier audit. During the course of the year some carriers require that the estimating employer provide a deposit which functions as a reserve against loss of cashflow and ultimate payment if the estimated premium payment is determined to be short. Neither employers nor carriers have been happy with this arrangement.  As a small employer, these year-end true-ups can be very traumatic if additional funds are due over and above the deposit. From the carriers perspective, in addition to cashflow and bad debt implications, they just never like chasing funds after the risk event has occured.

The concept of “pay-as-you-go” has emerged which means that the workman’s compensation liability is tracked per employee per pay period and premium is paid on the actual as opposed to an estimated liability. It eliminates the need for up-front deposits for smaller employers and year-end audits. For carriers, it improves cash flow and more accurately matches the premium flow with the underlying risk. In a shrinking economy this is somewhat less important than in an expanding economy where estimated payrolls may be based on dampened historical data that does not currently reflect renewed economic vitality.

Smaller employers have had “pay-as-you-go” offered to them by big name payroll companies which have forged deals with insurance companies to provide the required reporting. Many of those smaller employers feel that they are locked-in and have no other alternative due to the potential financial implications. They feel that moving to another payroll solution means a return to the deposit and audit methodology. They might be unhappy but they bite their tounge and endure the present relationship. However, that is not the required reality.

For the smaller employer, BBCG can work with virtually any property and casuality licensed agent who handles your workman’s compensation insurance. If there is no agent an employer wants to protect, BBCG will facilitate a new relationship. The one absolute: it is necessary to utilize a payroll service company which utilizes one of the major payroll software systems. This does not mean one of the “big name” payroll companies. A small CPA with whom you have developed a comfort level as your payroll service company over time can provide the required reporting if he/she uses one of the major software vendors. The requirement lies in the software vendor and the insurance carrier interface company having established the appropriate data sharing protocol. Most of the major payroll systems are represented but there are in fact a few for which this solution is not viable. We would encourage you to call us at 727-510-7138 to discuss how you are presently structured.

Larger employers may not be using a payroll company at all. If payroll is an in-house function, the software and data reporting issues might become more problematic. However, that does not preclude larger employers from having similar access to “pay-as-you-go”. If the degree of sophistication is present, we can likely structure a data reporting protocol directly between the employer and the carrier interface company. The key is structuring a data reporting methodology which regularly transmits all the data elements required by the insurance carriers. These specfications are in place for each of the major payroll software systems. A major large employer could be treated as a new software system if it is using a proprietary in-house system. If using one of the major commercially available systems, the interface may already be there.

A question often arises as to which workman’s compensation insurance carriers the “pay-as-you-go” concept might apply. Due to the way the carrier interface company has been built, virtually all the major carriers subscribe. If your company presently uses a “captive” agent who can only show you his/her company’s product there might be a disconnect. However, if your company uses an independent agent or broker it is more than likely that he/she can be protected either by using one of the carriers with which an agent appointment already exists or by newly appointing the agent/broker with a carrier that has the best terms for the employer. Again, if no agent protection is required, BBCG will assist the employer with having an agent/broker from the company with the best terms named as a new “broker of record.”

Please call BBCG at 727-510-7138 if you have any questions.


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