For a private self-insurer that has not previously self-insured, which arrangement is required for the first three years?

• A. Adjust its own claims
• B. Contract with a third party administrator for the first three years of self-insurance
• C. Contract with a TPA for the first five years of self insurance
• D. Conduct the administration of each self insurance program through the services of a competent person or persons located in CA.

Answer: (B)

When a private self-insurer in California is new to self-insurance, the governing rule requires that claims be handled by a third-party administrator for the first three years. This arrangement provides professional, compliant claim administration during the initial period, when the employer is building internal expertise and processes. A TPA manages the complex tasks of claims processing, medical management, reporting, and reserves, helping ensure timely compliance with workers’ compensation laws and proper benefits administration.

Options that imply in-house claim adjustment right away or a longer initial period do not fit this requirement, and simply stating that administration must be done by CA-based staff doesn’t address the specific mandate for a TPA during the first three years.