Workers’ compensation is mandatory in most states and helps protect employers and employees from costly medical expenses and lawsuits. It also keeps companies from facing state fines and shutdowns for noncompliance with state requirements.
A workers’ comp policy pays for medical care, lost wages, vocational training, and death benefits if an employee dies from a work-related injury or illness. Premiums are based on state regulations and risk classification codes.
Cost
A workers’ compensation policy covers medical expenses and lost wages if an employee is injured. It also pays death benefits to the family of an employee who dies on the job.
Most states require businesses with employees to have workers’ comp coverage. Some, such as Texas, only mandate coverage once the business has a certain number of employees.
Many small businesses find that the cost of one workers’ comp claim can bankrupt them. Insurance premiums are based on each employer’s industry classification code and payroll.
In some jurisdictions, employers must purchase workers’ comp insurance from a state monopoly insurer called a state fund. In others, private insurance companies compete for business.
Employers can also obtain coverage by participating in an assigned risk plan or pool. These pools are usually available to high-risk employers or employers in industries with a history of claims that don’t qualify for private market coverage.
Premiums for an assigned risk pool are often higher than in the private market. Be sure to check with your insurance agent or a state workers’ comp agency to see if you have better options.
In addition to a regular premium, most states also allow employers to increase their deductibles or set up a payment system for medical care. The process of preauthorization can help control costs by requiring doctors to submit a treatment plan and estimate the cost before providing care.
Benefits
Providing workers’ compensation coverage insurance is a strategic investment that protects your employees and the business you own. In addition, it provides a way to avoid costly employee lawsuits and medical bills that can arise from workplace injuries and occupational diseases.
In addition, most insurers offer accident prevention services to help you make your workplace safer for your employees. These safety programs are often effective and can reduce your risk of claims by improving workplace procedures, identifying dangerous conditions, and training employees to avoid accidents.
Workers’ comp also offers income replacement benefits to employees who are disabled by an injury or illness. This benefit pays the employee a percentage of their wages for a specified period, depending on the state’s law.
Many employers and workers’ comp insurers offer case management to coordinate medical services for an injured employee to improve care and reduce costs. These programs can benefit workers who are still in recovery or have had a long disability following a work-related injury.
Other benefits include death benefits for the family of a worker who dies in a work-related incident and vocational rehabilitation to assist an injured employee in getting back to work after an injury or illness. In some states, insurers must provide these benefits to help prevent workplace injuries.
Liability
Employees injured at work can receive benefits if their employer has workers’ compensation insurance. Unlike many other forms of insurance, workers’ comp doesn’t have a ceiling on what the employer can be required to pay by law.
Employers’ liability is the insurance portion of a workers’ comp policy that provides coverage for an employer when an injured employee sues the employer. This covers situations where the employer’s negligence is a factor in the injury, such as when an employee’s accident is caused by a company vehicle or an employer-modified machine.
Premiums are based on an employer’s industry classification code and payroll. They are also influenced by location. When determining rates, insurers look at the risk of both natural and artificial disasters.
A few states have workers’ compensation monopoly insurers, called state funds, that offer policies at a reduced rate to companies that cannot get workers’ compensation insurance from private insurers. These state funds are often a last resort for businesses with no other option for workers’ comp insurance.
An assigned risk plan provides workers’ compensation insurance to high-risk businesses and businesses with a history of claims. Insurers in a given risk pool charge a higher premium than if the industry were to go directly to an insurance carrier. Companies need to find out if they are in an assigned risk plan and make an effort to switch carriers.
Settlements
When a workplace injury results in an employee being out of work for an extended period, the employer and insurance company usually make a settlement offer. The offer typically includes payment for unpaid benefits, medical bills, and future treatment costs.
The settlement amount depends on the severity of your injuries and how long you’ve been out of work. More severe injuries will usually result in higher settlement amounts.
Settling can save employers money by avoiding costly litigation and giving injured workers more control over their treatment and access to healthcare providers. For example, if you have been having your treatment denied through Utilization Review, a settlement can allow you to see your doctor or use your pharmacy.
Two types of settlements can be made under workers’ compensation law: lump sum and structured payments. Regardless of your choice, it’s best to get the advice of an experienced attorney in your state before making any settlement decisions.
Most states require a workers’ comp judge or an official from the state workers’ compensation agency to approve a settlement before it’s officially recognized. During the process, the judge or official reviews all documentation and settlement details to determine if it’s in the claimant’s best interest.