How workers comp works?
Workers' compensation is insurance that provides cash benefits and/or medical care for workers who are injured or become ill as a direct result of their job. Employers pay for this insurance, and shall not require the employee to contribute to the cost of compensation.
Wanna know exactly how this insurance works? You’re in the right place.
You’re also busy, so let’s get right into it.
Workers’ compensation (aka workers’ comp or workmans’ comp) is an insurance policy designed to protect business owners and their employees. Through workers’ compensation, an employee who gets injured on the job can receive benefits to help cover expenses such as lost wages, medical costs, and more. Employers benefit from having comprehensive workers’ compensation coverage because it can protect the business from having to cover those expenses out of pocket. Plus, it can protect the business from potential legal action taken by the employee (if they decide to lawyer up).
Workers’ compensation can sometimes be overwhelming without the right background and guidance to help you through the process. There are deadlines to adhere to, important factors to consider, and specific steps to follow (but don’t worry, we’ll walk you through ‘em).
As an employer, workers’ comp benefits you in three key ways:
Nearly every industry can benefit from workers’ comp coverage. Although some may need the benefits more than others, there’s no replacement for comprehensive workers’ comp coverage if you own a business. That’s because without it, your business could face devastating financial impacts if you or an employee is injured while working. Some of the industries that should consider workers’ comp include:
The employer pays for workers’ comp premiums to provide coverage for employees. This coverage is in exchange for the protection workers’ comp gives employers against liability related to workplace injuries. If you’re concerned about how much workers’ comp may cost, check out our guide to lowering workers’ comp costs.
How much you’ll pay for workers’ comp, also known as your premium, will be determined based on a variety of factors unique to your business, including:
At Cerity we take all these factors into detailed consideration, so you can be sure you’re not paying more than you need to for your business.
One important factor used to help determine your workers’ comp insurance premium is your business’s annual payroll or the wages your full-time and part-time employees receive annually. Insurers use the gross payroll, which may include salaries, wages, commissions, bonuses, stock, PTO, pension, or anything else received by the employee as a part of their pay.
Employees should file for workers’ comp if they have experienced injuries or illnesses that occurred as a direct result of doing their job. This includes workplace accidents and diseases or illnesses caused by workplace situations such as exposure to toxic chemicals.
Before filing a claim, employees must be sure that their company has a workers’ comp insurance policy, that they are an official employee of the business — not an independent contractor — and that the injury or illness occurred while on the job.
Yes. Workers’ compensation typically will not cover on-the-job injuries related to:
For more information on what workers’ comp covers, visit our helpful guide.
The workers’ comp process is different depending on where your business is located. When it comes to each state, the legal requirements and deadlines to file for coverage vary for each. For example, let’s go over some commonly asked about states and some specific information about them:
The first — and arguably most important — step of the workers’ compensation claims process is for the injured employee to receive prompt medical treatment. Whether that means receiving emergency care immediately following the incident or visiting a primary care doctor as soon as possible after the injury, employees have a better chance for a full recovery if they seek treatment swiftly.
In addition, employees will need to have medical records documenting their treatment steps to file for a workers’ comp claim through most policies. If the injury does not require emergency care, employees should check with their employer to see if a specific doctor must be seen to be covered by the workers’ comp policy.
Even if employees feel fine following a workplace accident, it’s important to seek medical attention as there could be long-term effects from the accident that may not appear immediately. Having records that show a need for compensation are essential.
Early reporting consistently results in a better outcome to a claim, which can include a faster return to work, fewer prolonged injuries, and a lower cost of medical treatment. A favorable outcome is important for both the injured worker and the business.
After a workplace accident, it is essential to inform employers as soon as possible about the event and any injuries related to it. A written notification of the event details as soon as possible after the event is best, even if the employee has already reported the information verbally.
Laws may vary by state, but often employees have a limited window in which to report a workplace injury to qualify for workers’ compensation benefits. If employees are not sure if they were injured in the accident, it’s still best to report the incident so that if they experience injury ramifications later they can still qualify for workers’ comp coverage.
After the employer has been notified, an official workers’ comp claim can begin. Typically, this involves the injured employee filling out the required reporting forms provided by the employer. These forms vary and are based on the state in which the business is based, the type of injury or illness, and the insurer requirements. Often businesses are required to provide workers’ comp policy details and forms to new employees upon their hiring, depending on local laws.
Typically the forms include important details about the event such as the nature of the injury, where and when the injury occurred, details surrounding the incident, medical treatment required in relation to the injury, and more.
After the injured employee returns the form to their employer, the employer takes the next step in the claims process by filing the claim and associated paperwork with their workers’ compensation insurance provider and the state workers’ comp board, depending on local state laws. There are laws surrounding the employer’s responsibility in filing workers’ comp claims that protect employees and give employers the incentive to take swift action.
After the claim has been filed by the employer and the insurer has received medical documentation from the injured employee’s physician, the insurance company evaluates the claim and notifies the employer and the injured employee whether or not the claim has been approved.
Workers’ comp claims can be denied for a variety of reasons, however, many denials occur due to common workers’ comp claim process pitfalls. If denied, employees typically have the opportunity to appeal or ask the insurer to review their decision. The insurance company will report their decision to the workers’ compensation board, depending on state laws. If desired, an employee can seek legal representation.
If approved, employees will be notified about their compensation, which may cover costs such as medical expenses, disability, lost wages, and more. When applicable, the employee can choose to accept the compensation amount via either a lump sum or a structured settlement. The employee can also choose to seek legal representation if they’d like assistance at any point in the claim or settlement process.
When a worker is injured or gets sick while working and their employer has workers’ compensation coverage, the insurer is responsible for paying all of the reasonable medical treatment, lost wages, and other benefits as outlined in the insurance policy.
Ideally, once medical care is provided and the employee is recovered, they can go back to work and their workers’ comp claim can be closed. Sometimes a workers’ comp claim must be closed with a settlement that is negotiated between the insurance provider, the employee’s legal representation, and the employee. Settlements can be agreed upon outside of court, but sometimes an agreement cannot be made and the settlement must be taken to court. This process can take a lot of time and can sometimes be taken to a hearing in which a judge ultimately determines the settlement amount. Once determined, the settlement amount may be offered to the employee in one of two ways — one lump sum payment or a structured settlement paid out in installments over time.
When a workers’ compensation claim is filed, employees are protected against paying for certain costs related to the employee’s injuries. These costs include medical care, lost wages, and more. In addition, employers are protected from liability suits regarding the incident. However, there are some direct and indirect costs that employers may face if their employees file workers’ comp claims. For example, an employer may be directly affected in the form of higher insurance premiums. This is because insurers use a business’s workers’ comp claim history to determine insurance premium amounts. In terms of indirect costs, OSHA outlines many indirect expenses related to workplace injuries and workers’ comp claims.
No. The opposite is, in fact, true. Although the laws vary from state to state, most businesses are legally required to have workers’ comp coverage. This coverage not only helps them stay within legal regulations but also helps provide much-needed financial protection when an employee is injured or sick while on the job. Even business owners who aren’t legally required to have coverage can experience many benefits of workers’ comp.
Once injured employees have recovered, they must notify their employer and the workers’ comp insurance company when they are ready and able to come back to work. Disability benefits may or may not continue once the employee has returned, depending on the severity and longevity of the injury.
If a business continues to see its employees injured on the job, there is a chance that the company’s workers’ comp premiums, or costs, could increase. To help prevent injuries and keep premiums low, businesses should prioritize employee training programs, enact workplace policies that encourage safety, and maintain a workplace culture where safety is a top priority.
It’s crucial that employers and employees follow the steps in the claim process completely and quickly. Avoiding missteps during the claims process will help ensure the best possible outcome from workplace injuries or illnesses.
That’s why Cerity is here — to make workers’ comp easy and smooth for busy business owners. We offer simple policies, month-to-month pricing, and no sneaky fees—in addition to a clear and transparent claims process.
If you have additional questions about how workers’ compensation works, how to handle workplace injuries, or what the workers’ compensation claim process is like, check out the resources in our Learning Center or contact us 24/7 via our online portal or our claims reporting hotline at 844-423-7489.
Workers’ compensation, commonly referred to as “workers’ comp,” is a government-mandated program that provides benefits to workers who become injured or ill on the job or as a result of the job. It is effectively a disability insurance program for workers, providing cash benefits, healthcare benefits, or both to workers who suffer injury or illness as a direct result of their jobs.
In the United States, workers’ compensation is handled primarily by the individual states. The required benefits vary greatly state by state.
Texas is the only state that does not require employers to maintain workers’ compensation insurance.
Workers’ compensation benefits may include partial wage replacement for the period during which the employee cannot work. The benefits may also include reimbursement for healthcare services and occupational therapy.
Most workers’ compensation programs are paid for by private insurers, from premiums paid by the individual employers. Each state has a Workers’ Compensation Board, a state agency that oversees the program and intervenes in disputes.
There are federal workers’ compensation programs that cover federal employees, longshore and harbor workers, and energy employees. Another federal program, the Black Lung Program, handles death and disability benefits for coal miners and their dependents.
Requirements for workers’ compensation vary from state to state, and not all employees are covered in some states. Some states, for example, exclude small businesses from the mandate for coverage. Others have different requirements for various industries. The National Federation of Independent Business (NFIB) maintains a summary of each state’s worker compensation requirements.
The salary replacement paid to an employee under workers’ compensation is typically less than the person’s full salary. The most generous programs pay about two-thirds of the person’s gross salary.
Workers’ compensation benefits are not usually taxable at the state or federal level, compensating for much of the lost income. Taxes may be due to recipients who also have income from the Social Security Disability or Supplemental Security Income programs.
Healthcare Cost Reimbursement and Survivor Benefits
Most compensation plans offer coverage of medical expenses only related to injuries incurred as a direct result of employment. For example, a construction worker could claim compensation for an injury suffered in a fall from scaffolding, but not for an injury incurred while driving to the job site.
In other situations, workers can receive the equivalent of sick pay while they are on medical leave. If an employee dies as a result of a work-related incident, workers’ compensation makes payments to the worker’s dependents.
By agreeing to receive workers’ compensation, workers give up their right to sue their employer for negligence.
This compensation bargain is intended to protect both workers and employers. Workers are giving up further recourse in exchange for guaranteed compensation, while employers consent to a degree of liability while avoiding the potentially greater cost of a negligence lawsuit.
A claim for workers’ compensation may be disputed by an employer. In that case, the Workers’ Compensation Board may be asked to resolve the dispute.
Disputes can arise over whether the employer is actually liable for an injury or illness.
Workers’ compensation payments are also susceptible to insurance fraud. An employee may falsely report that an injury was sustained on the job, exaggerate the severity of an injury, or invent an injury.
In fact, the National Insurance Crime Board asserts that there are “organized criminal conspiracies of crooked physicians, attorneys, and patients” who submit false claims to medical insurance companies for workers’ compensation and other benefits.
In most states, only regular employees are eligible for workers’ compensation; independent contractors are not. That was one of the main points of contention in the debate over a California ballot measure that sought to extend employee benefits to drivers for ride-sharing apps like Uber and Lyft.
Like the so-called gig economy, the issue of workers’ compensation and other benefits for contract workers isn’t going away. In 2020, about 17 million Americans were working full time as contractors and more than 34 million worked part time or occasionally as contractors.
In the U.S., workers’ compensation rules are handled by the individual states. The U.S. Department of Labor houses an Office of Workers’ Compensation Programs, but it is responsible only for coverage of federal employees, longshoremen and harbor workers, energy employees, and coal miners.
The lack of federal standards for workers’ compensation has resulted in extremely varied policies for the same kinds of injuries from state to state.
Identical injuries can receive radically different kinds of compensation depending on where a worker resides. A paper by the Occupational Safety and Health Administration (OSHA) flatly calls workers’ compensation a “broken system,” and estimates that 50% of the costs of workplace injury and illness are borne by the individuals who suffer them. Low-wage and immigrant workers often don’t even apply for benefits.
There are two types of workers’ compensation coverage: Coverage A and Coverage B.
Workers who accept workers’ compensation generally waive the right to sue their employers, agreeing to a no-fault contract in doing so. However, state legislation and court rulings in a number of states have restored the employees’ right to sue in various strictly defined circumstances. Thus, an employer may opt to purchase a policy that combines Coverage A and Coverage B.
Every state (except Texas) requires employers to provide workers’ compensation coverage to at least some of their employees. The states write the rules, so there are many exceptions and exemptions. Contractors and freelancers are rarely covered, and many states exclude certain professions from the mandate or otherwise limit the scope of the benefits.
If you want to be prepared for a claim, you need to know what to expect. Here’s a rundown on the basics of workers’ comp.
Workers’ compensation insurance covers an employee’s medical care costs and wage replacement for work-related injuries and illnesses. Nearly every state requires businesses with employees to have workers’ comp coverage.
Most policies include employer's liability insurance, which shields employers from lawsuits once an employee has accepted workers' comp benefits.
If your company has at least one employee, you need workers’ comp insurance. In fact, many state laws require businesses to purchase this coverage as soon as they hire their first employee.
There are a few exceptions, though. Texas and South Dakota are the only states where workers’ compensation insurance is optional for employers. Other state workers' compensation laws don’t require the coverage until a company hires its second, third, or fourth employee.
Even if your business is in a state that doesn’t require a workers’ comp insurance policy for just one employee, you should still strongly consider a policy as soon as you hire someone.
If that employee suffers a work-related illness or is injured on the job, you could be left paying for some hefty legal and medical bills.
Workers’ compensation insurance safeguards both your business and your employees.
Workers’ comp protects your small business when an employee becomes ill or injured on the job.
It will pay for the employee’s medical expenses and partial lost wages – expenses you’d likely have to pay out-of-pocket if you didn’t have coverage. Most policies also include a death benefit to help reduce the financial burden of funeral expenses if an employee suffers a fatal accident at work.
In most states, a workers’ compensation policy will also include employer’s liability insurance. Policies with this benefit will cover legal fees, settlements, and judgements if an employee decides to sue your company over their injuries.
If your business is in a state where workers’ comp insurance doesn’t include employer's liability coverage, like states with a workers’ compensation state fund, you may want to purchase stop gap insurance to protect you from employee lawsuits.
In most states, businesses are required to buy workers compensation insurance for their employees—possibly even if they only have one employee.
Workers compensation provides wages and medical care costs for people who are hurt on the job. Employers pay for workers comp coverage. Employees don’t contribute to the fund.
A workers compensation is paid if the employer or insurance company confirms that the injury or illness was work-related. If the insurer or employer rejects the workers comp claim, a workers compensation judge decides on the case.
In addition to paying for injuries and rehabilitation, workers compensation may compensate a family after a work-related death.
Let’s take a closer look at the benefits covered by workers comp insurance.
Medical expenses including hospital visits, medications and emergency surgeries are all covered by workers compensation.
Workers comp benefits are paid no matter who was at fault. And workers compensation laws typically prevent employees from suing their employers for a work-related injury or illness.
Related: Best Business Insurance Companies
Depending on your state and occupation, you may be eligible for workers compensation for Covid-19 if you were exposed to the virus at your workplace. According to the National Conference of State Legislatures:
Employees are covered for workers compensation regardless of the number of hours they work.
However, there are exclusions, which could result in a denied workers comp claim, including:
Need to buy workers compensation insurance for your employees? You’ve got different options depending on your state: You might buy workers comp from private insurance companies or purchase it from a state-run agency—or you might have both options.
Private workers compensation insurance companies set their own prices and approve or reject customers. You may get a better price from a private insurer than from a state fund.
If you are not able to purchase the workers compensation coverage that you want from a private insurer, you may want to check out a state-funded program.
In a competitive, state-funded workers comp program, private insurers and state-funded programs compete for customers.
In monolithic, state-funded workers comp programs, businesses have no choice but to get workers compensation coverage from a state-funded program. Ohio, North Dakota, Washington and Wyoming are examples of states with monolithic state-funded programs for workers compensation.
Workers comp premiums are based on the job classifications of employees and these classifications reflect the riskiness of the job. For example, a construction worker or electrician would be considered high-risk jobs. Other high-risk jobs include police officers, firefighters, lumberjacks and telecommunications repair workers.
The payroll of the business and any past workers comp claims also impact workers compensation premiums.
Workers comp insurance costs an average of $1 for every $100 in payroll, according to The Hartford. This average varies considerably by state.
“If there is confusion about workers comp, it’s usually around how the premium is determined in part by the number of employees on the payroll,” says Andrew Dalton, assistant vice president for The Hartford’s small commercial workers compensation line of business. “Each year, state law typically requires every workers comp insurance company to perform an audit of the premium paid.”
“It’s important to keep in mind that this audit is required and it’s important to be certain that the business owner is accounting for their employees throughout the year,” Dalton says.
The audit looks at the past year’s payroll for the business and determines whether premiums were over- or under-collected, or just right. It also determines what the next year’s premium should be. This audit can result in the business owner getting a refund or credit or owing more on their workers comp premium.
The first step in filing a workers comp claim is for the employee to report their work-related illness or injury to the employer.
Next, the employer should notify the insurance provider and the state workers compensation board if required.
In addition, the employer will need to report severe workers comp injuries to the Occupational Safety and Health Administration.
Workers comp claims can be disputed if an employer does not believe the injury or illness was caused by work. And the employee may need to appear before a workers compensation board to make their case for receiving workers compensation benefits.
By working to control your business’s risk of workers comp claims, you can keep control of future premiums.
“There’s a lot that can help a business owner control their risk associated with employee injuries,” says Dalton. “You don’t want to leave these things to chance and you want to be certain you have safety protocols and procedures and that your business has taken steps to reduce the kinds of things that can cause injury.”
Training employees on workplace safety is a key approach to minimizing worker injuries and accidents. Many states offer workers compensation insurance discounts if the business implements a workplace safety program. This safety program could include:
The State of Connecticut Workers’ Compensation Program is centrally administered through the Department of Administrative Services (DAS), under authority of C.G.S. 31-284a.
DAS is committed to administering the State of Connecticut Workers’ Compensation Program to be current with the standards of an ever-changing industry. The main objective is to achieve the delicate balance between cost effectiveness for our organization and the delivery of a responsive program to our injured employees. The goal is to empower and support state agencies to meet the established operational procedures within the program as well as assisting them to promote a culture of safety within their respective workforces.
Note the following:
If you are a workers’ compensation liaison for your State agency, and you are seeking access to additional content on the DAS Business Network (BizNet), then you will need to create an account. BizNet access roles are available to all state agency workers’ compensation liaisons through the DAS Workers’ Compensation Division.
How do I create an account?
Contact the DAS Workers' Compensation Division at (860) 713-5002 with any questions regarding access.
State of Connecticut Workers’ Compensation Claim Reporting
Policy The State of Connecticut Workers’ Compensation Program requires that an employee report a work-related injury or illness to his/her employer immediately. For injuries prohibiting the employee from immediately notifying his/her supervisor, the supervisor, on behalf of the injured employee, can directly report the claim.
Employing state agencies must accept all reports of injury from an employee. The employing state agency cannot deny the employee from filing a claim. The Third Party Administrator (TPA) determines issues of compensability and causation, based in part on the information facilitated through the claim reporting process.
Preface The following is selected and summarized information relating to the Workers’ Compensation Act of the Connecticut General Statutes. It is supplied here as a quick reference to the Connecticut Workers’ Compensation system. The Act provides medical treatment, “wage replacement” and other similar benefits to employees who suffer work related injury or illness.
See the Workers’ Compensation Information Packet at the Workers’ Compensation Commission (WCC) Websitefor more detailed information and expanded text. Introduction It is every employee’s responsibility to work safely. Unfortunately, situations do arise where employees are injured or become ill while in the performance of their job duties. The Connecticut Workers’ Compensation Act was first enacted in 1913. Note the following:
The agency created in the Act is the Connecticut Workers’ Compensation Commission (WCC), which administers the statutes of the Act. The Commission does the following:
The Commission is headquartered in Hartford, with eight satellite district offices across the State. These district offices are in the following cities and towns:
See the following listing for Connecticut Towns and WCC Districts.
Claim Filing and Administration The State contracts with a third party administrator (TPA) for workers’ compensation. The TPA does the following:
The Reporting Process goes as follows:
Benefits paid by workers’ compensation include medical expenses and lost wages. For those who qualify, additional benefits may be available. These may include the following:
The third party administrator approves or contests claims. For contested claims, either party (the TPA or the employee) may request a Hearing with the Workers’ Compensation Commission. After a claimant receives a notice to contest, all related medical bills must be submitted to their health carrier for payment. If the claim is later approved, the health carrier has the right to pursue his/her reimbursement of medical expenditures.
There are five types of Hearings, as follows:
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