Workers’ compensation laws are quite complicated. Many business owners are at loss on how workers comp rules and regulations work. A particular question insurance companies always get is, “Will losses on my workers’ compensation policy impact my premiums?”. Claims losses greatly impact the cost of workers’ compensation insurance. Claims are directly proportional to premium rates. The more claims losses you have, the higher your workers’ comp premiums.
What is Workers Compensation Insurance?
Workers compensation insurance is a policy designed to protect workers against workplace hazards. It provides different benefits to employees suffering from occupational injuries or illnesses. Though workers’ comp laws’ goal is to protect employees, it also protects employers as well. It protects employers from sudden financial expenses, lawsuits, government fines, and penalties.
Workers Compensation State Laws
Every state has different workers compensation state laws. Though laws vary from state to state, most of them require business owners to carry workers’ comp insurance. All Colorado business owners must purchase workers’ compensation insurance for their employees. Whether part-time or full-time, family members or not, all employees must have a workman’s comp coverage. Exclusions only apply to independent contractors.
Workers’ compensation insurance provides numerous benefits for employees. An injured worker can get these benefits from workers comp insurance:
- Medical Benefits
Insurance companies pay for the medical expenses of employees with work-related injuries or illnesses. Workers’ comp covers all injuries and illnesses resulting from workplace activities and exposures. It covers emergency treatments, surgeries, rehabilitation, and outpatient treatments.
- Disability Benefits
Workers comp coverage provides compensation disability benefits for an injured employee with a temporary or permanent disability. It provides financial support to replace an employee’s lost income while the employee is unable to work. Workers’ compensation benefits vary according to state laws and type of disability.
- Supplemental Job Displacement Benefits
In some cases, workers suffer from workplace injury redeployment. An injury redeployment happens when an injured worker becomes medically unfit to perform their job role after an injury. Workers’ compensation coverage provides supplemental job displacement benefits to finance an employee’s skills development. This is to help injured workers look for an alternative job suitable to their post-injury condition.
- Burial and Death benefits
In case of death caused by work-related injury or illness, a workers’ compensation policy provides financial support to the bereaved family. These benefits will help pay burial and other expenses.
Violation of Workers Comp Laws*
Some businesses operate without workers’ comp insurance to cut operational costs. But skipping workers’ compensation coverage is never a good idea. Aside from the unexpected financial expenses, you will incur in case your employees get injured, the risk of lawsuits is high. Workers comp policy is mandatory in most states; failure to carry workman’s coverage is subject to fines and penalties.
Fines and Penalties Under Colorado Workers Compensation Laws*
- For the first offense, an uninsured employer will pay a $250 fine each day they fail to provide workers comp coverage.
- For next offenses, the fine might go up to $500 per day.
- The Department of Labor and Employment may also order employers to stop business operations until they secure workers’ comp coverage.
*Please note that we are not a law firm nor do we provide advice regarding lawsuits. The statements above were provided as an FYI.
How are Workers’ Comp Premiums Calculated?
The cost of workers comp is calculated based on the company’s payroll, employee class codes, and experience modification rate. The National Council on Compensation Insurance (NCCI) regulates and determines the employee’s class codes and experience modification ratings in most states.
How To Purchase Workers’ Compensation Insurance
Workers’ compensation insurance is offered through monopolistic or competitive state insurance funds. Businesses located in a monopolistic state can only purchase workers’ comp coverage from their state insurance fund.
States With Monopolistic State Insurance Fund
- North Dakota
Business owners with competitive state insurance funds have an option to get a workers’ comp policy from private insurance carriers or state funds.
Private Insurers that Offer Workers Comp Coverage
The best workers comp insurance providers in 2021 according to Investopedia are the following:
- AmTrust Financial
- The Hartford
Tips on How to Improve Claims Losses
Having a safe workplace and effective claims management will help improve your claims losses. Create programs to improve workplace conditions and claims management. It includes:
- Health and Safety Program
An effective safety program helps lessen the risks of workplace accidents and illness. Having a workplace health and safety program does not only keep your company safe but can also save you some money. Most insurance carriers offer discounts to businesses with health and safety programs in place. The State of Colorado has a Premium Cost Containment Program which provides 10% discounts to businesses with health and safety programs. An effective safety program must include the following:
- Management Support
A safety program will never succeed without commitment and support from the management. To show the management’s support to the company’s safety, they must do the following:
- Create a sound policy to address worker safety and health protection. Make sure the policy is conveyed to all employees.
- Provide adequate resources to improve workplace health and safety. Provide adequate and appropriate work equipment and employee training.
- Set a good example by showing safe and healthy behavior.
- Perform a risk assessment. A risk assessment will help identify risks present in the workplace.
- Safety Rules and Regulations
Every job role and work operation must have specific safety rules and regulations. Providing clear safety plans and work procedures to employees lessens the risks of mistakes and accidents. Safety rules and regulations must:
- Be completely understood by all employees
- Have reinforcement procedures like disciplinary actions and reorientation
- Risk Preventive Measures
Placing preventive measures against risks and hazards in the workplace reduces workplace accidents. Here are some risk preventive measures your company can adopt to maintain a safe and healthy work environment:
- Employ workers with appropriate works skills and experience
- Provide safety and development training
- Provide appropriate personal protection equipment (PPE)
- Conduct regular equipment and tools inspection and maintenance
- Maintain a clean and organized working environment
- Accident Investigation
Conducting an accident investigation helps reduce the frequency and severity of workplace accidents. It helps prevent future accidents by identifying and eliminating workplace hazards.
- Injury Triage
Safety and preventive measures are effective in reducing workplace injuries. But we all know some accidents cannot be prevented. An efficient injury triage ensures employees will receive appropriate and timely treatment in case of an accident. Insurance companies like AmTrust Financial and Travelers offer a free 24/7 injury triage hotline. They have nurses on standby that you can contact to help you manage workplace accidents and injuries. Businesses, especially the small ones, will benefit from having an injury triage.
Benefits of Injury Triage Hotline
- Avoid unnecessary emergency treatments
- Lessens frequency and severity of claims
- Make workplace injury reporting easy and cost-efficient
- Reduce the risk of lawsuits
- Employees can choose their preferred healthcare provider
- Provide accurate documentation for claims reporting
- Helps employees to quickly return to work
- Return To Work Program
A return to work program is one of the best ways to reduce claims losses and worker’s compensation costs. It provides appropriate transitional work duties to help employees go back to work quickly and safely. The return to work program reduces the cost of disability compensation and claims losses.
Factors That Affects Workers’ Comp PremiumWorker’s
- Classification Code
A workers’ classification code indicates the level of risk present in a specific job role. Office and desk jobs have lower accident risks. Jobs involving driving and construction have higher accident risks. The more risks your employees have, the higher your workers’ compensation rates.
- Payroll Size
The number of employees you have on your payroll directly affects the cost of your workers’ compensation premiums. An insurance company computes a company’s workers’ compensation premium based on its annual payroll. The more employees you have, the bigger your payroll is.
- State Requirements
The amount of coverage and policy limit of workers’ compensation a business owner must purchase depends on the state law. The price of a workers’ compensation insurance depends on the type of coverage and policy limits. Comprehensive coverage and higher policy limits increase the price of workers’ comp insurance.
- Experience Modification Rate
The frequency and severity of your claims losses affect the experience modification rate of your company. NCCI determines the company’s EMR based on its claims history. The higher your compensation claim loss, the higher your e-mod rating.
- Claims Management
Proper claims management reduces the costs of medical and compensation benefits. Proper management of injuries and illnesses lessens claims frequency and severity.
How to Get The Best Workers Comp Insurance
To ensure adequate employee protection, work with an experienced insurance broker. An experienced insurance broker is knowledgeable on workers’ compensation state laws. Insurance brokers provide customized insurance plans as they work with different insurance carriers. An insurance broker can help your shop around for different workers’ comp premiums and coverage.
All businesses suffer from claims losses. With the help of effective health and safety strategies, claims losses can be lessened. Having adequate insurance protection ensures your employees and your business are protected against risks and hazards.
Our team has excellent workers’ compensation insurance experts. We help all business owners, big or small, protect their business by securing insurance protection. We can customize insurance plans to meet every business’s needs. Call us now toll-free at (855) 973-1202 or (855) 712-6584, to know about the different business insurance products we offer.