Workers’ compensation is an insurance policy that employers in most states must carry to protect their employees in the event they are injured or sickened at work. Most employers understand that they must carry it and pay for it by law, but they often don’t know many details about how worker’s comp actually works.
Many employers just pay the premium bill and forget about it until an employee experiences an injury at work. To avoid confusion when you have worker injury claims to file, here is an overview of what you can expect from workers’ comp and how it all works.
Workers’ Compensation FAQ
There are many business owners who may be wondering how workers’ compensation can work for their business. The most common questions we receive about workers’ compensation can be found here.
What Are the Different Types of Coverage?
How Can Workers’ Compensation Protect Your Business?
What Injuries Does Workers’ Compensation Cover?
How Much Does Workers’ Compensation Cost the Employer?
How Can a Workers’ Compensation Claim Affect My Business?
What Is the Workers’ Compensation Process?
What Are the Different Types of Coverage?
Depending on the state you live in, the requirements and types of workers’ comp insurance policies may vary slightly. Some states allow employers to choose private insurance, or they may mandate state-funded insurance, and in some cases, self insurance can be possible.
State-Funded Monopolistic
There are four states with mandated monopolistic coverage, and if you live and work in these areas, you’ll be required to purchase a state-funded insurance policy. North Dakota, Wyoming, Ohio, and Washington State all have monopolistic state funds.
Private Policy
Most states except the four mentioned above allow you to purchase a policy from a private insurance carrier. This works the same way any insurance policy does. You can shop and choose the policy with the best price and features for your business.
Self Insured
If a business has very deep pockets and extensive financial resources, a state may allow them to forgo the insurance policy and agree to pay for worker injuries and related costs out of their own pockets. This doesn’t change the rules for employee protection. All the rules that apply to eligible injuries and required payouts still must be strictly adhered to.
How Can Workers’ Compensation Protect Your Business?
The workers’ compensation policy is designed to protect both the employee and the employer. Some of the ways a workers’ compensation policy is designed to protect businesses include:
- Employee rights to sue: In the majority of circumstances, and in most states, you relinquish your right to sue your employer when you are covered by a workers’ compensation claim. This protects both the business owner and the employee by preventing costly and lengthy legal proceedings.
- Legal protection: Workers’ compensation policies in many states offer protection in the event you are sued as a result of an employee injury. While most circumstances prohibit the employee from suing an employer, exceptions always exist. The policies may cover things like attorney fees and the judgment or settlement amount.
- Medical coverage: When a worker is hurt or becomes ill on the job, workers’ compensation policies will pay for medical treatment so that you don’t have to. The policy will also pay for part of your employee’s lost wages, saving you the expense of paying these mandated expenses yourself.
- Death benefits: If an employee suffers a fatal work accident, workers’ compensation policies often include a death benefit. This can help the family to cover funeral, burial, or cremation costs and relieve them of some of the financial burdens.
What Injuries does Workers’ Compensation Cover?
Employee injuries that happen while on the job are generally covered whether they are the employee’s fault or not. However, exceptions to this rule exist. If your employee was under the influence, violating laws, violating company policy, or sustained a self-inflicted injury, the claim can be denied.
What the policy will cover are injuries that happen at work or illnesses that are a result of the work they do. For example, breathing toxic fumes can lead to lung injuries that would be covered by workers’ comp. An employee slipping in a puddle of water can cause a broken wrist that would also be covered.
More examples of injuries that can be covered include:
- Injuries from car accidents when driving for work purposes
- Repetitive strain or stress injuries (RSIs), including back pain and carpal tunnel syndrome
- Exposure to harmful substances or environments, including COVID-19 exposure
- Bone fractures
- Getting crushed or stuck between objects
- Overexertion
- Cuts, lacerations, and punctures
- Transportation accidents
- Muscle sprains, strains, and tears
- Electrocution
- Slips, trips, and falls
- Violence by humans or attacks by animals
- Being struck by an object or equipment
- Falls from heights
While this list is far from comprehensive, it gives you an idea of the variety of injuries that can be covered by workers’ comp. It can be prohibitively expensive to treat many of these injuries, and having your policy in place can protect you and your employees from financial hardship.
How Much does Workers’ Compensation Cost the Employer?
Several factors can influence the cost of your worker’s compensation premiums. Your state laws are one factor that will determine whether you have a choice in insurance providers or not. Other factors that are taken into consideration when pricing insurance policies will include:
- Your industry: The premiums for an accountancy firm are going to be less than the premiums paid by a construction company. The level of risk involved in your industry is a huge determining factor.
- Your payroll: The company is generally billed based on the annual payroll. When you are looking for the best insurance company for your needs, you will need to be aware of your organization’s annual payroll costs.
- Your claims history: The number and severity of your previous claims will be a determining factor in the cost of your workers’ compensation insurance premiums.
- Your state’s workers’ compensation laws: Individual state laws may impact your premiums.
The cost of your premiums will vary depending on the size and nature of your business. But in most states, you will be able to shop to choose the provider that is right for you.
What About OSHA Compliance?
Injuries in the workplace can include the involvement of OSHA. For most businesses, OSHA reporting is required for severe injuries or death in the workplace. Failure to report can result in fines and penalties, so be certain to check the compliance laws of your state.
To report a death or serious injury to OSHA, you can do so by calling their 24-hour hotline at 1-800-321-6742 (OSHA) or reporting it online.
How Can a Workers’ Compensation Claim Affect My Business?
Like a car insurance policy, the more accidents you have, the more your policy premiums will increase. It’s never a great feeling for a business owner to deal with an injured worker, but the protection that workers’ compensation can provide will reduce the bottom-line impact on your business.
Without a workers’ compensation policy, you are subject to lawsuits or paying for employee injuries and benefits out of pocket.
Some of the ways a business could be impacted by a workers’ compensation claim could include:
- Premium cost increase: If you have one simple incident, it may not increase your premium. However, multiple accidents or an increase in your modification rate can raise the monthly costs of your policy.
- Productivity issues: Morale, scheduling changes, accommodating the injured employee, or the learning curve of new employees can result in lost productivity.
- Fines and penalties: OSHA fines are a potential expense.
- Work stoppage: In certain circumstances, work may need to come to a halt due to the nature of your employee’s injuries.
- Overtime pay: If others are required to cover the shifts of the injured worker, you may need to pay overtime.
- Administrative costs: The cost of completing the administrative duties associated with the claim may become an additional expense.
- Training costs: Hiring and training replacement workers may be necessary to make up the labor for the worker who was injured.
- Property damage: If equipment or property was damaged during the injury, it may need to be cleaned up, repaired, or replaced.
The best way to avoid these costs is to maintain workplace safety and health protocols, keep your operations as safe as possible and educate your employees on the potential safety hazards.
What Is the Workers’ Compensation Process?
You have an employee enter your office under the escort of his concerned coworker. The employee has a towel wrapped around his hand, and you can see that there has been an injury that involves blood. Your employee is in obvious pain and seems a little shocked.
You obviously want to help and find out what happened, but you also need to follow procedures and protect your business.
Here is what to do next and what to expect when dealing with a workers’ compensation claim.
Injury at Work
An employee experiences a covered injury on the job. What is important is that you direct them to seek medical care or call 911 if the injury is life-threatening.
Some states do not cover injuries that are a result of refusing to wear a safety device or other acts of negligence, self-inflicted injuries, or injuries that occurred due to drug or alcohol use. If you are unsure of the circumstances surrounding the injury, get help for your employee and let the workers’ comp sort out the details later.
Medical Care Is Provided
The employee should be directed to seek medical attention when necessary. Your insurer or your company may have a designated urgent care facility that they prefer to use. In any case, the hospital or physician’s office will usually ask if the injury is related to work so they can bill the proper entity. If an employee must pay upfront, they can be eligible for reimbursement later.
The Claim Is Filed
Employees who are injured on the job should report injuries immediately. In many states, if an injury isn’t reported within the legally allowable time frame, the employee can lose the right to collect their benefits.
You, as the employer, should be able to provide them with a claim form to fill out. You’ll then report the incident to the necessary entities as directed by your state laws and file the claim with your provider.
Investigation
The insurance company will conduct its own investigation into the incident. They will look at the medical documentation and may want to interview you, the employee, or others involved. Following their review, they either pay the claim or deny it. The employee is entitled to appeal claim denials with your state’s workers’ compensation agency.
Benefits Paid
As long as the claim is not denied, the employee should receive their payments. This can include a number of benefits that cover numerous costs associated with the injury.
Workers’ compensation benefits can include payments for:
- Disability: Partial payment of their wages to compensate for the time off work
- Medical costs: These payments are typically sent directly to the healthcare provider
- Rehabilitation benefits: These payments help the employee to recover and might include payment for physical therapy, occupational therapy, or even vocational rehabilitation training
- Death benefits: If the employee suffered a fatal accident, funeral costs and ongoing survivor benefits may be paid
Workers’ compensation generally covers about 66% of weekly wages for the entirety of the disability but may be subject to minimum or maximum limits set by the state.
Contact NetPEO for Workers’ Compensation Help and Liability Management Today
NetPEO allows you to save time by finding the right PEO for your business. We take on the challenge of locating the perfect PEO so that you don’t have to take more onto your already overflowing plate. Nearly 1,000 PEOs work in the U.S., and the right one for you is out there. If you aren’t 100% thrilled with our first attempt, we will get you a better one.
Let NetPEO help you find the right company to help you reduce your claims, contain your costs, manage your business, and implement your HR strategies. We also offer administrative services for online workers’ comp settlements. Don’t let the rising costs of workers’ compensation detract from your business. Our professionals can help you find the right solutions for you.
