What is workers' compensation insurance?
Employers are legally obligated to take reasonable care to assure that their workplaces are safe. Nevertheless, accidents happen. When they do, workers compensation insurance provides coverage.
Workers compensation insurance serves two purposes: It assures that injured workers get medical care and compensation for a portion of the income they lose while they are unable to return to work and it usually protects employers from lawsuits by workers injured while working.
Workers receive benefits regardless of who was at fault in the accident. If a worker is killed while working, workers comp (as it is often abbreviated) provides death benefits for the worker’s dependents.
EACH STATE IS DIFFERENT
Workers compensation systems are established by statutes in each state. State laws and court decisions control the program in that state and no two states have exactly the same laws and regulations.
States determine such features as the amount of benefits to which an employee is entitled, what impairments and injuries are covered, how impairments are to be evaluated and how medical care is to be delivered. In addition, states dictate whether workers compensation insurance is provided by state-run agencies and by private insurance companies or by the state alone. States also establish how claims are to be handled, how disputes are resolved and they may devise strategies, such as limits on chiropractic care, to control costs.
To learn about the requirements where you live, visit your state’s workers compensation department Web site.
If your business expands to another state, you may have to deal with very different rules in the new state. The discussion here covers the general features of workers compensation programs.
WHAT INJURIES ARE COVERED?
Injuries employees sustain on the workplace premises or anywhere else while the employee is acting in the “course and scope” of employment are covered if their employer has workers comp insurance. For example, the leading cause of workers comp death claims is traffic accidents that occur when the employee is in a vehicle for work purposes, whether the trip is made in the company’s car or the employee’s own vehicle. Accidents driving to and from work are not covered.
In addition to injuries from accidents, workers comp covers injuries employees may sustain from other events that may occur while they are working, including workplace violence, terrorist attacks and natural disasters.
Workers comp insurance also covers certain illnesses and occupational diseases (defined in the state statutes) contracted as a result of employment. For example, employees who work with toxic chemicals can be made ill by exposure to the chemicals.
WHAT TREATMENT DO INJURED WORKERS RECEIVE?
Injured workers receive all medically necessary and appropriate treatment. With medical costs soaring, many states have adopted measures designed to rein in expenditures. These include utilization management guidelines, which describe acceptable treatment protocols and diagnostic tests for specific injuries.
WHAT BENEFITS DO INJURED WORKERS RECEIVE?
Income replacement benefits are based on whether the disability is total or partial and whether it is permanent or temporary. Impairment is generally defined as a reduction in earnings capacity, sometimes using the American Medical Association’s criteria.
Most states require that benefits be paid for the duration of the disability, but some specify a maximum number of weeks, particularly for temporary disabilities. The benefit amount is a percentage of the worker’s weekly wage (actual or state average).
DO I HAVE TO BUY WORKERS COMPENSATION INSURANCE?
In most states sole proprietors and partnerships aren’t required to purchase workers compensation unless and until they have employees who aren’t owners. Most states will allow sole proprietors and partners to cover themselves for workers comp if they choose to. Some states don’t require employees to be covered if they are paid solely on commission.
