Appendix C

Comparison of a PEO guaranteed cost program with generalized typical examples of other forms. This comparison does not replace your responsibility to compare the forms of various loss sensitve and alternative risk financing methods. Do your own work. This is intended to be a generalized guide, and is not going to be accurate in every case, as some forms may vary from this generalized presentation.

HCO - 6 months control of treating doctor	YES	If it is available, there will usually be an extra charge incurred.	If it is available, there will usually be an extra charge incurred per employee, per month.	If it is available, there will usually be an extra charge incurred per employee, per month.	If it is available, there will usually be an extra charge incurred per employee, per month.	If it is available, there will usually be an extra charge incurred per employee, per month.
Drug and alcohol testing expenses included in premium	YES	Usually for extra chage, if available	Usually for extra chage, if available	Usually for extra chage, if available	Usually for extra chage, if available	Usually for extra chage, if available
Background Checking expenses included in premium	YES	Usually for extra chage, if available	Usually for extra chage, if available	Usually for extra chage, if available	Usually for extra chage, if available	Usually for extra chage, if available
Pay Roll Service	YES	Not usually available	Not usually available	Not usually available	Not usually available	Not usually available
IRS & State tax and regulation administration and responsibility	YES, except ultimate responsibility for OSHA	Not usually available	Not usually available	Not usually available	Not usually available	Not usually available
Employee Staffing Availibility	YES	Not usually available	Not usually available	Not usually available	Not usually available	Not usually available
Over 97 % of claimants either closed or back to work after 6 months of injury.	YES - extremely successful at this	TBD	TBD	TBD	TBD	TBD
CEO scrutiny of each claim	YES	Never heard of this being done except at BBSI	Never heard of this being done except at BBSI	Never heard of this being done except at BBSI	Never heard of this being done except at BBSI	Never heard of this being done except at BBSI
Deposit	NO, depending on credit history	YES, usually at least 10% of estimated annual premium	YES, usually at least 10% of estimated annual premium	YES, usually at least 10% of estimated annual premium	YES, usually at least 10% of estimated annual premium	YES, usually at least 10% of estimated annual premium
Audits	NO	Usually	Usually	Usually	Usually	Usually
LOC Required	NO	NO	YES	Usually	Occasionally	YES, usually
Cash tied up in loss fund, to pay claims	NO	NO	YES	Usually	Occasionally	YES
Human Resources, (in addition to claims management and loss control), Services included within premium	YES	Not usually available	Not usually available	NO	NO	Not usually available
401K / and health Insurance available in program	YES	NO	NO	NO	NO	NO
Pay for your all of, or a portion of your own claims, in addition to premium	NO You will not be required pay for any of your own claims as you will in other forms	NO You will not be required pay for any of your own claims as you will in other forms	YES, subject to a maximum amount, significantly above your estimated premium	YES, subject to a maximum amount, significantly above your estimated premium	YES, subject to a maximum amount, significantly above your estimated premium	YES, subject to a maximum amount, significantly above your estimated premium
ash flow advantage of paying a low beginning estimated annual premium, delaying the ultimate cost of losses, Collateral use, LOS's, cash loss funds, etc.until subsequent years.	No cash flow advantge. This is a guaranteed cost program. Their estimateed annual premium will usually be higher than the starting cost of a loss sensitve plan. They offer a signifcant loss incentive, so there is possible return of premium. Ultimate costs after all claims are paid, may be lower than other plans, including loss sensitive plans.	No cash flow advantge. This is a guaranteed cost program. Their estimateed annual premium will usually be higher than the starting cost of a loss sensitve plan. They offer a signifcant loss incentive, so there is possible return of premium. Ultimate costs after all claims are paid, may be lower than other plans, including loss sensitive plans.	Costs usually about the same as a guaranteed cost plan, going in. Ultimate costs may be higher, or claims, depending on losses and investment income, if any. Ultimate costs much less predictable than with guaranteed cost program.	YES Costs usually lower going in, compared to a guaranteed cost plan. Ultimate costs may be higher, depending on claims. Ultimate costs harder to predict than with guaranteed cost program.	usually NO, pay everything up front, usually in same range as guaranteed cost programs, with possibility of return or additional premium after all claims are closed.	Costs usually about the same as a guaranteed cost plan, going in. Ultimate costs may be higher, or claims, depending on losses and investment income, if any. Ultimate costs much less predictable than with guaranteed cost program.
Loss performance can create a need for additional premiums, even several years later. Ultimate cost not determined for several years.	NO - Ultimate cost will be what is paid the first year, (subject to payroll and mod variation, of course), in the form of a guaranteed cost plan, with the exception of the possible return of some premium, depending on claims' performance.	NO - Ultimate cost will be what is paid the first year, (subject to payroll and mod variation, of course), in the form of a guaranteed cost plan, with the exception of the possible return of some premium, depending on claims' performance.	YES - Considerable additional premium, over the first year pay in, may be required, depending on claims performance	YES - Considerable additional premium, over the first year pay in, may be required, depending on claims performance	YES - Considerable additional premium, over the first year pay in, may be required, depending on claims performance	YES - Considerable additional premium, over the first year pay in, may be required, depending on claims performance
Capitalization (start up) charges	NO	NO	YES	NO	NO	YES
Possible joint liability exposure, and financial responsibility for other's losses.	NO You are alone in your premium and loss experience.	NO You are alone in your premium and loss experience.	Usually YES, have shared financial responsibility, usually jointly and severable liable.	Usually NO You are usually alone in your premium and loss experience.	Usually NO You are usually alone in your premium and loss experience.	Usually YES, have shared financial responsibility, usually jointly and severable liable.
Have to take on the shared responsibility of administering the program, including money management, investments, claims administrators, brokers, Loss control, and reinsurenace	NO	NO	YES	NO	NO	YES
Possible legal responsibility for how claims are handled	NO	NO	YES	NO	NO	YES
Registration, legal and audit fees	NO	NO	YES	YES	YES	YES
Loss fund $ tied up for years	NO	NO	YES, ususally	YES, ususally	YES, ususally	YES, ususally
Possible reduction of annual premium, compared to a guaranted cost plan, if claims justify a return	YES, in the form of a loss incentive	NO	YES	YES	YES	YES
LOC usually required, held for several years, reducing credit line, will multiply at renewals	NOT usually	NO	YES	YES, usually	SOMETIMES	YES
Claims performance can cause an additional premium chargefor the year in which the claims occurred	NO	NO	YES	YES	YES	YES
Long term commitment / process because of claims development	NO, one year only	NO, one year only	YES	YES	YES	YES
The claims performance of others in your inxuring entity can affect your ultimate costs.	NO	NO	YES	NO	NO	YES
Loss Fund required for claims, in addtion to premium	NO	NO	YES	YES usually	Not usually	YES
Penalty for early, mid term cancellation	NO, all that is required is 30 days written notice - no penalty	Yes, $ penalty involved	YES, often difficult and expensive to cancell mid term.	YES, often difficult and expensive to cancell mid term.	YES, often difficult and expensive to cancell mid term.	YES, often difficult and expensive to cancell mid term.
Group $ assessment possible for various reasons	NO	NO	YES	NO	NO	YES
Collateral required	NO	NO	YES	Sometimes	Sometimes	YES
Quality of Reinsurer	AIG - A+ XV	Varies - TBD	Varies - TBD	Varies - TBD	Varies - TBD	Varies - TBD