What characterizes a Guaranteed Cost plan in workers' compensation?

A Guaranteed Cost plan in workers' compensation is characterized by its stability and predictability in premium costs. Under this plan, the premium paid by the employer does not fluctuate significantly with the actual losses incurred. This means that the employer will know in advance how much they will pay for workers' compensation coverage, which can help with budgeting and financial planning.

This structure is advantageous for businesses that prefer consistent cash flow and minimal surprises in their insurance costs, as they do not face the financial burden of paying more when there are increased claims. In contrast, other plans, like Loss Sensitive programs, link premiums directly to the actual losses, leading to variable costs which can significantly impact the budget based on performance.

Such predictability makes Guaranteed Cost plans appealing for many organizations, particularly those with a steady claims history or those who want to avoid the volatility associated with loss-sensitive arrangements. The other characteristics listed, such as dividend opportunities or the retention of losses, relate to different types of insurance arrangements and therefore do not apply to the Guaranteed Cost model.