Questions about Workers Compensation

Who Is Covered? What Affects the Rates? State-Managed Funds? Premiums Are You Required to Buy It? Insurance Pools and Self-Insurance Penalties Classification Payroll, Overtime, Etc.

Claims History Managed Care Back-to-work Programs State Insurance Pools What are the Causes of Claims? Minimizing Your Risks Tips for Reducing Claims and Increasing Safety What to Do In Case of Injury?

Who Is Covered?

Worker's compensation covers all the employees of the business. Special provisions must be made if an employee works out-of-state. It may cover the business owner if the business is a corporation, and the owner is actively involved in the business. Independent contractors are not covered.

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What Affects the Rates?

Worker's compensation premiums are based on the amount of your payroll. The higher your payroll, the more you will pay in premiums. Premiums also vary depending on the work function or job classification of an employee. For example, the premium for a construction worker would generally be much higher than a premium for a clerical worker. Employers are expected to accurately report payroll by classification of work performed. We can help you find which classes apply to your employees.

When it comes to purchasing worker's compensation insurance, your options are limited by the state in which you live and the national rates that affect your premiums. Unless you own a business in Texas (the only state where worker's comp is not required), you are subject to state laws that govern this particular kind of insurance.

To begin with, each state sets its own rules regarding how much medical coverage you must provide your employee in the event of a work-related injury. If the injury causes missed work, it dictates the percentage of the employee's salary you must pay and how long you are required to pay it. Some states require coverage for funeral expenses and financial support to dependents in the event of death, as well as liability coverage for damages stemming from an employee claim.

The state also decides who gets to select a physician to care for the injury -- the employer, the employee, the state agency or a combination of these. Most states allow either the employer or employee their choice of physician. You may have the option of using an insurance plan that uses managed medical care to treat injured workers. If so, this can reduce your medical costs and may facilitate an earlier return to work. More than half the states now allow HMOs, PPOs and other managed-care providers to handle worker's comp claims.

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State-Managed Funds?

As a business owner, your first concern is whether your state operates a fund from which you are required to purchase worker's comp insurance, or whether it allows private insurance companies to sell the insurance. A little less than half of the states have no state-managed fund. This means you buy your policy from private companies. The other half offers you a choice between buying from a state-managed fund or a private company. Only a handful of states require you to contact them directly as your only source of worker's comp coverage.

Even in states that offer competition from private companies, worker's comp packages are fairly standardized. Because requirements are clearly defined by each state, there is little variation among the basic policies of different companies.

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Premiums

Your premiums are based on a rate classification from either a national rating bureau called the National Council on Compensation Insurance (NCCI), or by a state-rating bureau. These bureaus calculate risks based on business classifications. In other words, the riskier the business, and the higher your base rate will be.

Although the state controls the rate, it doesn't actually set your premium. Insurers use many variables to determine your risk level and how much you should pay. Therefore, premiums can vary from provider to provider. More and more states are allowing competitive pricing for worker's comp. In addition, these insurers may discount premiums by loosely defined credits. Credits are often given to companies that maintain a safe workplace or conform to other safety standards. If your state allows this kind of competition, it is definitely worth your while to shop around.

You do have several options when it comes to lowering your premiums: making sure you are classified correctly, offering better working conditions, scrutinizing payroll records and maintaining a good claims record. It's a good idea to get to know these options in order to reduce your costs.

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Are You Required to Buy It?

Most states require you to purchase worker's compensation insurance as soon as you have employees. In these states, you are considered to have employees from the moment your corporation is formed. In other states, small employers with few than four or five employees aren't required to carry any worker's comp insurance. In addition, some states don't require coverage for all employees. Contact us and we can provide you with more information.

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Insurance Pools and Self-Insurance

If you live in a state that allows competition, you may be able to self-insure or join a self-insurance pool. The benefit of self-insurance is that you don't have to pay premiums. Instead, your business must pay for all of the associated costs of a worker's comp claim when it occurs. Self-insurance is usually reserved for large employers who meet minimum payroll or employment levels. However, in more than half of the states, smaller companies may join a pool of small employers where the combined assets of the members allow them to self-insure.

Not to be confused with self-insurance pools, state insurance pools are maintained for those companies that are unable to buy worker's comp through normal means because they are considered too risky. These pools are quite costly with high premiums and oftentimes poor service. We can help determine why your business is in this category and help you to find a way to get out. It may take several years to demonstrate a reduction of claims before you can purchase insurance from somewhere other than the state insurance pool. In the meantime, you may also be able to join a self-insurance pool.

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Penalties

If you fail to purchase worker's compensation insurance, you will be penalized by the state. If an employee is injured, you will be held personally liable. In addition, the Worker's Compensation Division has the authority to close you down until proper coverage is obtained. With all the laws surrounding it, purchasing worker's compensation insurance can seem like a no-win situation. However, knowing your state's laws and working to lower premiums are ways that you can even the playing field to gain flexibility and perhaps lower your costs. State regulations leave you very little room to navigate when it comes to lowering the cost of worker's compensation insurance. How much you must cover and for how long is completely out of your hands. Even the basis for your premium is calculated by a government bureau by performing a thorough analysis of your payroll and claims history. You do, however, have some control when it comes to saving money on your workers compensation coverage.

To begin with, you should consider enlisting the help of an agent. We can help match you with an inexpensive insurance company that understands your business, can work as your advocate with the insurance company, can help guide you through the classification process, and can lead you to credits that lower your premium. That aside, it is very important for you to understand the process of setting insurance premiums and how you can ensure the best rates at various points in the process.

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Classification

Classifications are the starting point for determining how much your company will pay in premiums for each type of job. Misclassification is a common culprit in overpaying for worker's comp. If you misclassify even one worker into a riskier job, your total premium can increase significantly.

Most job classifications are established by the National Council on Compensation Insurance (NCCI). The NCCI prints its classifications of more than 700 types of jobs in a publication called the Scopes Manual. Most states use this manual as the basis for their classification schedules.

Different classifications carry their own risk of injury. Thus, a business where the majority of workers have desk jobs will likely pay less than one where the majority of workers operate heavy machinery. Most businesses receive only a few different classifications to describe their operations.

Because of the direct impact to your premium, it is worth your time to make sure both your company and your employees are classified correctly. Keeping track of changes in job descriptions throughout the year is also important. If a worker is promoted to a less risky position, your premiums will be lowered accordingly.

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Payroll, Overtime, Etc.

Payroll and classifications are tied to one another in that rate classifications are based on each $100 of an employee's salary. In other words, if a secretary is classified at 29 per $100 and that secretary makes $20,000, it will cost the employer $58 in premiums.

Accurate payroll records will ensure that the information used to calculate your premium is correct. Insurance companies normally audit your payroll before setting their rates, but it is a good idea to schedule audits of your payroll on a regular basis, especially if your company experiences a great deal of shifting among your employees from year to year.

The payroll data used to calculate premiums should also include the correct overtime exemptions. Your workers' comp premiums are usually based on your regular payroll figures, excluding overtime. Most states allow you to deduct overtime pay to straight time for the purpose of figuring your payroll. In addition, insurers will consider employee commissions, bonuses, overtime, holiday, vacation, sick pay, incentive plans, profit-sharing plans, payments for tool reimbursements, the value of rental housing and lodging provided by an employer, the value of meals provided by employer, and the value of store certificates or merchandise given to employees.

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Claims History

Your experience rating will affect your premiums. An experience rating compares your claims history to that of other firms in your industry. If your company's claim history is lower than the industry average, you may be eligible for a better rating, and, therefore, a lower premium.

Most often, if you pay more than $5,000 per year in workers' comp premiums, your company will be eligible to receive an experience rating. Or, after two to three years, your insurance company will reconfigure your premium payments based on your claims history and safety performance.

It's a good idea to double check the experience rating given to you by your insurer. You can analyze your own rating with worksheets from the NCCI. A good insurer will be vigilant about possible inaccurate claims made against you to the NCCI, since an inaccurate claim report can affect your premium for three years.

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Managed Care

More than half the states now allow HMOs, PPOs and other managed-care providers to handle worker's comp claims. Using managed care can help to reduce your medical costs. Your agent can help you find a worker's comp insurance plan that uses managed medical care to treat injured workers.

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Back-to-work Programs

It goes without saying that the sooner an injured worker returns to work, the lower your disability claims costs will be. Do whatever it takes to get your employee back to work -- lighten the work load, modify the workspace. This can also help boost the morale of the injured employee.

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State Insurance Pools

If you have a high number of claims or if you are a company that insurers don't like to cover, you may be part of a state insurance pool. If so, do everything you can to get out of it. State insurance pools are notorious for high premiums and poor service.

First, find out from us why you were assigned to a pool. If it is because you have a bad claims history, start instituting safety programs at your office. After a few years, you will be able to reestablish a good claims history. If it is because your industry is considered high risk, try joining a self-insured worker's comp pool. In this case, you save by not paying premiums to an insurance company, however, your company must pay for all claims. In either case, you need to work to get out of the high-risk pool.

Considering that worker's compensation may be your largest category of insurance cost, it is definitely worth your investment to minimize the risk of claims. By doing so, you will not only reduce your premiums and the number of claims you may have to pay, you will gain a safer and more productive workplace.

The number of claims filed by your employees directly affects your premium. If you have a lot of injuries, your insurer will consider you a greater risk for claims and you will pay higher premiums. But a higher premium isn't the only cost associated with workplace injuries. Consider also the costs of replacing injured employees, training new hires and delaying projects.

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What are the Causes of Claims?

Think that the majority of injuries happen to workers who operate complicated machinery, work with hazardous materials and use heavy equipment? Think again.

More than half of all workplace injuries are related to cumulative trauma disorders (CTDs) caused by repeated motions and exertions that eventually lead to discomfort, pain and physical impairment. In fact, this category of injuries is the fastest growing class of worker's comp claims, with an average cost of $43,500 per claim.

In keeping with the growing number of workers who currently work at computer keyboards, CTDs such as carpal tunnel syndrome, which commonly affects a worker's wrists and hands, have become more pervasive than all other occupational diseases combined. Carpal tunnel syndrome now afflicts nearly two million workers and costs American business an estimated $20 billion annually.

Adding to CTDs, other work-related stresses such as back problems, vision problems like eyestrain, headaches and neck aches are costing employers an estimated $100 billion annually. In fact, back problems are second only to the common cold in the amount of sick days they cost American business each year.

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Minimizing Your Risks

Ever heard of the saying "an ounce of prevention is worth a pound of cure"? The consequences of not making safety and health an integral part of your business can be very costly. Company policy should dictate that safety is a core value of the organization. Not only will this help save you money, it will improve the work environment, employee attendance, morale, loyalty and performance.

Statistics show that by reducing stress and fatigue at the workplace through tools and equipment that fit the physical and psychological requirements and capabilities of employees (ergonomics), employers may reduce worker's comp costs by one-half to two-thirds.

In addition to the tips listed below, agents are an excellent source for resources on improving workplace ergonomics, safety and health. Your insurance carrier, worker's comp medical group or your local OSHA office also may provide free consultation services. A final option is to hire an independent expert to evaluate existing conditions and provide a range of suggestions to improve them.

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Tips for Reducing Claims and Increasing Safety

• Emphasize safety and communicate the importance of safety to employees
• Provide proper equipment, safety devices and protective clothing
• Train and retrain your employees in safe procedures and in how to deal with emergencies
• Set up a safety committee made up of managers and workers
• Promote employee health by offering wellness and fitness programs
• Give employees a safety manual with mission statement, rules and safe work procedures
• Conduct regular inspections of the facility to identify and correct hazards such as poor lighting, unsafe storage and ergonomic standards
• Develop an effective system of accountability to ensure hazards are remedied
• Train people in the correct way to lift
• Employ ergonomics by customizing the workplace
• Use adjustable workstations to reduce stress injuries
• Use properly constructed office chairs with good back and arm support
• Reduce hazards by changing the way a job is performed, using new tools, rotating jobs or automating the job
• Train employees on correct posture and the correct way to use computers
• Create return-to-work programs
• Stay in close contact with employees who are out with injuries
• Award and recognize safe operations
• Keep written road-safety procedures for those who drive a vehicle for your business
• Keep detailed records of all accidents
• Include a discussion of the company's safety and health performance as part of board meetings or annual reports
• Keep detailed safety records
• Investigate the air quality in your building

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What to Do In Case of Injury?

• You know whether or not you are required to carry worker's compensation insurance. You know how much you need to carry. But, do you know what to do when one of your employees is hurt on the job?
• From the moment an on-the-job injury happens, your response to that injury will play a crucial part in a process that could lead to litigation. Thus, the actions you take, or fail to take, can prove critical to your financial future. Doing the right things, and documenting that you have done so, may be the most effective insurance you can get.
• To begin with, if one of your employees is injured, you should always treat it as legitimate -- even if you have suspicions about the circumstances surrounding the injury. Because worker's compensation laws may not completely insulate you from being sued, a quick, helpful response could keep you out of court.
• The following measures will help ensure that you are taking necessary precautions and dealing with the injury in a thorough and careful manner:
• Respond to the injured employee, provide assistance, get the facts from the employee about the accident, and tell the employee that there is a system available that will take care of the injuries.
• Give first aid or get medical attention and accompany the employee to the medical provider
• Report the incident within the company
• Notify the family
• Document the accident; write down what happened within 24 hours of the accident.
• Designate who will stay in touch with the family
• Ensure prompt medical treatment; follow up with the medical care provider after getting permission from the employee to do so.
• Work with the employee to file an accident report with the appropriate worker's compensation agency in your state. Your state has its own laws that determine the time period within which reports must be filed.
• Determine, on a preliminary basis, whether the injury is covered by workers' compensation
• Counsel employee and/or family on claims procedures, available benefits, company's continuing interest in employee's welfare, etc.
• After the first week coordinate payment of initial benefits, talk to treating physician to learn diagnosis and treatment plan, evaluate whether medical rehabilitation is necessary or appropriate, develop return-to-work plan, forward mail, contact the injured employee and/or the family
• After the first month send cards, phone calls, visits to reinforce company's concern, consider medical examination by independent physician, if warranted, reevaluate treatment plan based on new medical information, update return-to-work plan, contact the injured employee and/or the family
• On an ongoing basis continually reevaluate treatment plan, update return-to-work plan, refer for vocational rehabilitation, refer for pain management evaluation of chronic pain, if appropriate, maintain contact with the injured employee and/or the family.
• If you have concerns over whether or not an injury is work-related or whether a claim is fraudulent, you may want to make your own investigation. Ultimately, the worker's comp agency or the insurance company will make the final determination, however, your input could help to clarify the matter.

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