As you may have read in our previous post “What Is Workers’ Compensation Insurance?”, Workers’ Comp (aka “Workers’ Compensation Insurance or “Workman’s Comp”) is an insurance policy that benefits your employees when they suffer a workplace injury or illness. Most policies cover medical expenses as well as a portion of the wages an employee loses when they are unable to work.
Workers’ Comp is one of the few types of insurance that is regulated at the state level. Because of this, it’s extremely important that small-business owners understand not only their coverage obligations, but also how this coverage works.
Employers: What Are Your Workers’ Compensation Insurance Rights & Responsibilities?
Employers must follow state laws when they insure employees with Workers’ Compensation coverage. But Workers’ Comp laws entitle employers to certain rights, too.
Your responsibilities and rights may vary slightly from state to state (which you can learn more about in our state-by-state guide to Workers’ Comp Insurance laws). For the sake of brevity, we’ll outline the most common particulars below, starting with your Workman’s Comp responsibilities:
- Provide coverage for eligible employees. Most states require that you carry Workers’ Compensation coverage as soon as you hire eligible employees. A state’s definition of “eligible employee” may vary, so be sure you understand your local regulations.
- Post notice. Your state laws may demand that you “post notice” of your insurance coverage where employees are likely to see it, such as a break room. You must also provide this information to new hires. Additionally, most states require that notices display specific information (e.g., your policy number and your insurer’s contact information).
- Keep accurate records. Employers must keep accurate payroll and employee classification records. You must also document all workplace injuries and illnesses – even if the claims were dropped. Your local laws will outline the kinds of records you need to keep and for how long.
- Be transparent. Your state regulations may permit your local Workers’ Compensation Board to access all your records upon request.
- Comply with claim filing procedures. Each state has a slightly different filing procedure that employers must follow. In general, you must be sure to use the proper claims forms, provide necessary and accurate claims information, and file the paperwork according to your state’s deadlines. Your insurance provider usually supplies you with these forms.
Your state realizes that unfounded Workers’ Compensation claims would have a negative effect on your business. That’s why your local regulations detail your rights, too. Generally, you have the right to…
- Contest a claim. If you feel that an employee has filed an unfounded claim, you can ask your insurance company to contest it. However, your insurance provider does not have to contest the claim just because you requested it.
- Access to claims information. State law usually allows employers to attend claims hearings and access a claim’s case file.
- Report fraud. If an employer suspects fraud, they can report it to the proper authorities.
- Appeal a claims decision. After you receive a notice of decision, you can file to have that decision reviewed and appealed. However, if you do not have reasonable foundations for doing so, you could be penalized.
- Secure a reliable workforce. Your state laws usually protect you when you decide to terminate an employee for filing a fraudulent Workers’ Compensation Insurance claim – so as long as the termination is not “retaliatory.”
To get an idea of a state’s specific regulations, check out New York’s Employer’s Handbook. And now that you have an understanding of your responsibilities and rights, let’s take a look at how the claims process works.
What Happens When an Employee Files for Workers’ Comp?
When an employee suffers a work injury or illness, it is their responsibility to notify you, their employer, as soon as possible. But their benefits are time sensitive. Some states allow a couple years to report, while others only allow a few days. Because of this time crunch, you should be ready to supply injured workers with the following:
- Access to an approved medical practitioner. Except in the event of an emergency, a medical professional approved by your state’s Workers’ Compensation Board must treat all workplace injuries and illnesses. Once your employee reports an injury, refer them to an approved healthcare provider. (If an employee goes to an out-of-network healthcare professional, they may not receive coverage.) The approved doctor will fill out the appropriate paperwork to file with the claim. If granted compensation, your employee may be required get their prescriptions filled at an approved pharmacy.
- Information about your Workers’ Comp policy. In a pamphlet, outline the name of your insurance provider and details about your policy. This includes your employees’ rights, the types of injuries / illnesses covered by your policy, and the benefits your policy offers.
- A claims form. When an employee notifies you of an eligible injury, you should send them the appropriate claims form within the next 24 hours. Your state can provide you with more information about the types of forms. As an example, take a look at the U.S. Department of Labor’s Notice of Occupational Disease and Claim for Compensation form.
- Compensation for minor injuries. If the injury in question is minor (as defined by your state’s regulations), employers can choose to pay for treatment out of pocket and avoid filing a claim with their insurance company.
After an employee notifies you of an injury or illness, they will receive their first medical treatment by an approved healthcare provider who will fill out a medical report. This report must be sent to all relevant parties (e.g., you, your insurer, the appropriate state office, and the employee). Meanwhile, the employee may file their claim with the appropriate state board.
From there, it’s up to you to file the claim with your insurance provider and verify that the case is properly investigated, documented, and reported. Your insurer will decide whether the employee is eligible for benefits. If the employee’s injury / illness is covered, payments will begin.
To make sure you understand all the details of your state’s system, contact your state’s employment department or the U.S. Department of Labor’s Office of Workers’ Compensation Programs page.
How Are Your Workman’s Compensation Insurance Premiums Calculated?
The National Council on Compensation Insurance (NCCI) and your state’s Compensation Insurance Rating Board influence what your Workman’s Compensation premiums will be. Both entities calculate rates based on your business’s industry classification.
Each type of industry has a certain “loss cost.” These estimate the cost of claims associated with businesses similar to yours. Businesses that tend to have more Workers’ Compensation Insurance claims will end up paying higher rates for coverage; those with fewer claims will likely pay less.
Sometimes, your employees will fall into different classes based on their position in your business. For example, if you own a construction business, most of your workers will fall under a classification that accounts for the occupational hazards of the job. But your bookkeeper, who is exposed to far less risk, might be classified under a clerical code.
These costs and your payroll are plugged into an equation to determine your insurance rate. If your premium is over a certain amount (for New York, it’s $5,000 or more a year), your insurance provider may adjust the premium based on your business’s specific claims history (rather than the history of businesses that share your classification code). A clean claims history may reduce your insurance costs.
To learn more about Workers' Comp rates, check out our Workers' Comp Insurance Quote Analysis.