Which term describes a mechanism that ensures employers who cannot obtain coverage in the voluntary market can secure coverage through a residual market pool?

• A. Monopolistic States
• B. State fund
• C. Guaranteed cost
• D. Assigned risk/residual market

Answer: (D)

A residual market mechanism ensures coverage for employers who can’t obtain it in the voluntary market. In practice, insurers that issue workers’ compensation policies participate in an assigned risk pool, which provides coverage to high‑risk or uninsurable employers by assigning them to the pool. The pool sets rules and rates, and insurers share the burden through assessments. This arrangement guarantees access to coverage and helps stabilize the market by spreading risk.

This term is the best fit because it explicitly describes the system designed to give uninsurable employers a place to obtain coverage. Monopolistic states describe a market with only one insurer, which isn’t about ensuring access to coverage. Guaranteed cost refers to a pricing method, not the mechanism that ensures coverage. A state fund can be a vehicle for residual market operations, but the recognized label for the mechanism itself is assigned risk/residual market.