What is workers' compensation insurance?
Workers' compensation insurance is a legally required insurance that offers benefits to your employees who become injured or ill at work. It functions as a worker's disability insurance scheme, offering monetary compensation, healthcare benefits, or both to your employees who get ill or injured on the job.
Related: Workers' compensation in California
What does insurance workers compensation cover?
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Medical costs: Insurance workers compensation covers all reasonable and necessary medical costs related to the work injury. This includes doctor visits, hospital care, prescription drugs, physical therapy, medical devices, and more.
Temporary Disability Benefits: If a work injury prevents your worker from performing their usual job duties, insurance workers' compensation provides wage replacement benefits when they cannot work.
According to the California Department of Insurance, the compensation will replace two-thirds of lost wages up to the current legal limit. Benefits are typically paid every two weeks until your employee returns to work or their condition becomes permanent and stationary. The length of time that temporary disability payments may be paid is regulated by state law. These restrictions are based on the type of damage and the accident date.
Permanent disability: For injuries that cause permanent physical impairment or loss of bodily function, insurance workers compensation may provide benefits to compensate for that loss. The amount depends on the extent of the disability.
Death benefits: If your worker dies from a work-related injury or illness, insurance workers compensation benefits eligible survivors and dependents, such as spouses, children, and others.
Vocational rehabilitation: According to the Rehabilitation Centre of Excellence, workers comp may cover the costs of retraining the worker for a different occupation for injuries that prevent a worker from returning to their job.
Related: Workers' Compensation in Massachusetts
What does insurance workers compensation not cover?
Travel to and from work: Injuries that happen while your employees commute to or from work are usually not covered. It must occur while performing job duties during work hours.
Intentionally self-inflicted injuries: Suicide attempts or international injuries are generally excluded from workers comp.
Illegal activities: Work injuries that occur while performing an illegal activity are usually excluded.
Workplace fight: According to Forbes Advisor, insurance workers' compensation may not cover the injuries if an injury happens during a fight with a colleague. One exception is if the fight was about work.
Related: Compensation Philisophy - What you need to know and Why
Who is required to have insurance workers compensation?
According to Insureon, most businesses are legally required to carry insurance workers' compensation to cover their employees' work-related injuries and illnesses. However, the requirements vary by state, industry, and business size. For instance, According to Insureon, insurance workers compensation is mandatory for all employers in California, even if the company only has one employee.
Businesses lacking adequate coverage may face significant penalties, legal claims, and criminal charges. The penalties for non-compliance can be severe. Non-insured employers risk fines, civil litigation, and criminal charges in some situations. This makes securing the proper insurance workers compensation essential for most businesses.
Work closely with your insurance agent or broker to understand your state's exact requirements and ensure you have an appropriate policy to protect your employees and your company.
Related: Small Business Insurance Workers Compensation
How insurance workers compensation is paid for?
Employers pay the full cost of insurance workers compensation premiums. Your employees do not pay any portion of the premiums. Premiums are based on factors like your industry, payroll, number of employees, and, most importantly, claims history.
If you have any previous injury claims, you typically pay higher premiums, but if you have few or no claims, you generally pay lower rates. Premiums are calculated to cover the total projected medical and lost wages from workplace injuries and illnesses, plus insurance company overhead and profit.
Insurance companies determine the appropriate premium for a business based on data they collect about workplace injury rates and costs within different industries. Premiums are typically paid periodically, either monthly, quarterly, or annually. The insurance company or state requirements set the payment schedule.
As an employer, you can sometimes qualify for discounts or credits on your premiums by implementing strong safety programs and other loss control measures. This helps reduce future injury claims. In some states, as an employer, you can be reimbursed a portion of your premiums after a period with no claims. This encourages loss prevention efforts.
Related: What is Employer's Liability Insurance?
How do your employees file insurance workers compensation claims?
Follow these steps when an employee is injured at your workplace:
- Have the employee report the injury to you immediately. By law, you need to be notified right away. Document how the injury occurred and its extent.
- Provide an accident or injury report form for the employee to fill out. This will provide details about what happened and when from the employee's perspective. Keep a copy for your records.
- Advise the employee to seek necessary medical care. Please encourage them to see a doctor as soon as possible to diagnose the injury and recommend proper treatment.
- Once treatment has begun, file a claim with your state's insurance workers compensation agency on the employee's behalf. You'll need details of the injury, your business information, the employee's, and their doctor's information.
- Cooperate fully with the insurance adjuster assigned to the claim. Provide all documents requested and be available to answer questions about what happened.
- Submit all required bills, records, and documentation from the employee and their medical providers to support the claim.
- Once the claim is approved, the employee will receive benefits to cover wages lost during treatment, medical, and medication costs as determined by your state's laws. You pay nothing directly as this is handled through your insurance workers compensation policy.
Related: 5 Things All Employees Should Understand About Workers' Compensation
What happens if your employee's insurance workers compensation claim is denied?
Your employee can appeal the denial within the workers' compensation system: Most states have an appeal process where the employee can submit additional evidence and have the claim reviewed by a higher authority within the insurance workers compensation system. There are typically deadlines for filing an appeal, so the employee should act quickly.
Your employee can hire an insurance workers compensation attorney: An experienced attorney can review the case and appeal, determine if there are grounds to overturn the denial and represent the employee through the appeals process. The attorney's fees are typically paid from a portion of the claimant's benefits if the appeal is successful.
Do nothing: Your employee can not appeal or take legal action. But this means forfeiting any lost wages, medical costs, and other benefits they may have been due through a successful insurance workers compensation claim.
Common Reasons for Denial of your employee's Insurance workers' Compensation Claims:
- The injury did not occur on the job or was not work-related: As an employer, you may dispute that the injury happened at work or during work hours.
- The injury is considered pre-existing: If it can be shown that the injury or medical condition existed before employment, your employee's claim may be denied.
- Your employee did not report the injury promptly: There are typically requirements to report an on-the-job injury immediately to you, the employer. Failure to do so can result in denial.
- There is insufficient medical evidence: If the doctor's reports, medical records, or other documentation do not support that a workplace injury occurred, your employee claim may be denied.
- Your employee violated safety rules. If an investigation finds that your employee was performing an unsafe act or violating safety procedures when injured, a claim can be denied on those grounds.
- The injury is self-inflicted or due to your employee's willful misconduct: Intentionally self-inflicted injuries or those resulting from the employee being under the influence of drugs or alcohol are not coverable.
- The injury is from a normal occupational risk: Insurance workers compensation generally covers accidents or unusual risks. Injuries from routine physical tasks or typical occupational hazards may be denied.
Can an employee sue you for a workplace injury?
While an employee can technically sue you for a workplace injury, it is not practical or likely to succeed in most cases. Workers' compensation is the exclusive remedy for most on-the-job injuries, providing employees with guaranteed benefits in exchange for giving up their right to sue employers for negligence.
For an employee's lawsuit to proceed, they would need to prove their employer acted with gross negligence or intentional misconduct that directly caused the injury, which is difficult to establish for typical workplace accidents. Unless an employee's insurance workers compensation claim was wrongfully denied in bad faith, pursuing remedies through the workers' comp system is a more straightforward option that does not require the high legal costs and hurdles of a lawsuit.
Conclusion
Employers are protected from costly litigation through insurance workers' compensation but must pay insurance premiums and comply with regulations. The system aims to fairly compensate injured workers while limiting liability for responsibly operating businesses. However, employees retain legal recourse for wrongfully denied claims, ensuring employers act in good faith.
References:
- Workers' Compensation: What It Is, How It Works, and Who Pays (investopedia.com)
- Workers Compensation Insurance | III
- Workers Compensation Insurance for Small Business | ADP
- Officer Exclusion from Workers' Compensation Insurance (thehortongroup.com)
- How to file a workers' compensation claim form (ca.gov)
- Was Your Workers' Comp Claim Denied? Here's What to Do | Nolo