Workers Compensation Insurance: Programs, Types, Costs & More
June 11, 2020
- Last edition
June 11, 2020
Insights on How to Sell Workers' Compensation Insurance
State laws regulate Workers' comp. All states, except Texas, have laws that require workers' compensation. Each state has requirements and penalties unique to it. In Texas, Workers' compensation insurance is optional for employers. QuickBooks has an excellent directory on its website that examines state-specific employer obligations, employee benefits, and government resources to help you with understanding state-specific workers' compensation details. The U.S. Department of Labor publishes listings of State Workers' Compensation Officials on this link.
The NFIB also publishes a Comparison of state-by-state Workers' Comp laws. It says, "Even in reasonably safe industries, small business owners would be mistaken to think workers' compensation insurance is not a requirement."
Workers' compensation laws and requirements vary by state, by industry, and even by the size and structure of your business and payroll. Companies that fail to carry Compulsory Workers' Compensation insurance can face severe fines, a massive lawsuit, or even criminal charges."
Workers' Compensation Programs: What do They Cover?
Workers' Compensation, also known as Workers' Comp insurance, is meant to replace wages and provide medical benefits to employees who suffer and injury regardless of fault on the job. The trade-off for the mandated coverages means employees who accept it relinquish their rights to sue their employer for negligence.
Before the Covid-19 pandemic, Business Insurance reported that uncertainties on rising medical and indemnity costs, along with the continuing opioid crisis, were top concerns of workers compensation experts going into 2020. It mentioned how rising wages, increasing medical facility fees, and new and expensive changes in medical care and pharmaceuticals were causing concerns about how such costs will comp in the coming years. Another area of concern is facility costs as Fee schedules may not always account for facilities, which can drive prices up significantly.
Employees who get sick or suffer an injury on the job can make a workers' comp claim to pay for medical expenses. Typically, workers' comp programs include payments for emergency room care, doctors' visits, hospital stays, imaging studies (x rays), blood tests, the cost of rehabilitation treatment, and in some cases, the transportation costs to and from appointments.
The regulations and guidelines for the approval of workers' compensation medical expenses claims vary by state. In most instances, policies will cover proper and necessary doctor-recommended medical treatment to treat your industrially related condition.
Employees who sustain an injury at work and are unable to perform their job duties because of the injury could be eligible for disability compensation for lost wages. Lost Wages coverage also known as workers' compensation disability benefits. A qualified medical examiner must authorize "time-loss" payments. Depending on the status of the case, payments may be either on temporary disability or a permanent disability basis. Workers' compensation laws vary by state. Most states have formulas or a workers' comp calculator to help determine the amount the coverage will pay.
State laws determine the amount of lost-time benefits. They are not subject to negotiation by either the worker or the employer. A typical percentage is two-thirds of the average weekly wage, as calculated over the 52 weeks before the accident.
In the case of death due to work-related injury or disease, as part of a workers' comp settlement, the worker's beneficiaries may receive death benefits through the employer's workers' compensation plan. Since workers' compensation laws differ in each state, the rules and payments depend on decisions by the state where the claimant files for benefits. The laws and regulations of the state where the claimant files decide who gets death benefits, and how much for how long.
Death benefits are usually paid in installments with the amount based on a percentage of the employee's earning at the time of the injury. While rates vary, a typical payment is two-thirds of the deceased employee's average wage per week. There are both maximum and minimum amounts calculated on the payments. One-time lump sums are sometimes an option. Two-thirds of the deceased employee's wages for a certain period, such as two years is an example of what many states pay. Lump sums are also subject to a minimum or maximum amount.
Depending on the state, death benefits are the same no matter how many dependents there are, or the benefit amount may increase due to the number of dependents the deceased has.
Due to a workplace injury, an employee may have an approved provider refer them to physical therapy or rehabilitation and include the treatment in the workers' comp settlement. Typical workers' comp questions center around the definition of rehabilitation. That's because it has two entirely different meanings concerning workers' comp. There is rehabilitation based on physical therapy, which aims to overcome an employee injury so they can regain the functionality necessary for their job. There is also vocational rehabilitation, which trains injured workers who are not able to continue in their former position. The amount and type of vocational rehabilitation provided to injured employees vary from state to state.
Worker's comp is a form of disability insurance in that it has a provision to replace a portion of the income of employees who suffer an injury while doing their job. Injured employees may be able to collect disability insurance in some states when the injury they incur happens away from work but cannot work their customary job. The federal government also pays Social Security Disability Benefits (SSDI) in some cases.
Your workers' compensation insurance covers disability caused by two main types of permanent injuries: permanent partial and permanent total. An employee with a permanent partial disability can still work, but the partial disability of the injury will last for the rest of his life. A permanent total disability is such that the employee is out of work for good.
The Various Types of Workers' Compensation Insurance
Traditional Workers' Comp
When a company purchases a workers' comp policy from an approved insurance company that offers payment options, it is a traditional workers' comp policy. The payment options typically range between a single annual payment of up to 12 monthly payments.
Pay-as-you-go Workers' Comp
Pay-as-you-go workers' compensation is not a different kind of coverage. It is an alternative premium payment solution. As the name implies, premiums are paid in smaller amounts over 12 months. The WorkCompConsultantwebsite compares how traditional and pay-as-you-go policies differ along with opinions on the downside of pay-as-you-go workers' compensation.
Third Party Self-Reporting Option
Third Party Self-Reporting is a payment solution for workers' comp coverage. It is advantageous because it does not require large upfront premium deposits. It gives the insured a better way to manage their cash flow because they base premiums on actual payroll each pay period.
Determining Your Workers' Comp Costs
An employer's payroll forms the basis for workers' comp insurance costs. For every 100 dollars of payroll, a specific rate determined by the classification codes of your employees applies.
Employee Classification Codes
The National Council on Compensation Insurance (NCCI) gathers data, analyzes industry trends, and provides objective insurance rate and loss cost recommendations. It also creates four-digit codes used to classify businesses for workers' compensation insurance. For example, a roofer NCCI code "5551".
Experience Modification Rate
FitSmallBusiness provides this succinct description of the Experience Modification Rate:
An experience modification rate (EMR) is a multiplier insurance companies use to help set workers' compensation premiums. Your business's rate is determined by looking at your workers' comp claims history and potential for future injuries. Businesses with lower EMRs pay less for their workers' compensation insurance. EMRs commonly range between 0.75 and 1.25.
Claims History reports are available at the state level. As a result, the information may vary. The reports have abbreviated information found in these government documents:
· Report of Injury
Court Contested Claims.
In some states, additional information reported from private sources is available. Each state controls the amount of data reported. Types of information can include the date of injury, time lost, employer during the time of the incident, type of injury, body part, and job-related disability. Some states will provide no information other than the number of claims filed.
Workers Compensation information is health and disability-related under the Americans with Disabilities Act (ADA). As such, employers may NOT ask health and disability questions about an applicant for employment that claims history unless, and until, the employer has made a tentative job offer to the employee applicant or has made an actual job offer, which is NOT tentative. Employers may NOT deny a job based on an applicant's workers' comp claims.
COVID-19 and Workers’ Comp
The NCCI publishes this COVID-19 and What You Need to Know - FAQs page on its website regarding COVID-19 and the impact it may have on the workers compensation industry. It is updating the FAQ section frequently. A wise recommendation is to visit this page with your questions and those you anticipate from your insureds and prospective client.
Best Workers' Compensation Insurance Programs
The amount of work and detail involved in properly securing the information necessary to propose workers' compensation is daunting. For that reason, agents seeking to write Workers' Compensation insurance will have significantly increased odds of success when they team up with a program run by an experienced partner. eMaxx Assurance Group of Companies, which you can find the Program Business marketplace, is an excellent first choice.