Every small business employer must have workers compensation insurance if they have any employees for any length of time throughout the year. Most small business owners purchase private insurance plans or state fund plans as they do not have the capital reserves to set up qualified self-insurance plans. As a last resort they might sign up for assigned risk plans but those tend to be very expensive.
There are six states where the employer is mandated to buy insurance from that states monopolistic state fund. Those six states are Wyoming, West Virginia, Washington, Ohio, North Dakota, and Nevada.
It is important for you to know as the business owner who is covered and who is not covered under these plans. Only your employees are covered and not independent contractors. All full-time employees, temporary employees and/or lease employees would fall under the category of insurance coverage. Usually the owners and partners of the company as well as some corporate officers have the ability to exclude themselves from coverage on the workers compensation policy. They also have the option to opt in and be covered as a regular employee. Many owners try to sidestep paying employer taxes for employees and increased workers comp premiums for employees by treating actual employees as if they were independent contractors. Most federal and state regulators have seen through that ploy and hold the business owners responsible for workers compensation benefits for the injured employees. We have other articles on our website with regards to what is and what is not an independent contractor. Plus you can go to the IRS website and read what the IRS says about what is and is not an employee or independent contractor.
Worker’s Compensation insurance has two main coverage parts, Coverage A and a Coverage B.
The Coverage A deals with the workers compensation benefits mandated by law and Coverage B deals with the employer’s liability that is outside the workers compensation mandates. The Coverage A benefits that are typically provided throughout the US are as follows:
- Medical services payments which are unlimited as to the amount that will be paid and there is no deductible for the employee.
- Disability payments whether permanent or temporary are also paid to compensate for wages that are last due to the injury or illness.
- The amount of lost wages varies state to state. Rehabilitation services are also a part of the benefit package.
- The rehabilitation can be physical which would entail physical therapy services and vocational rehabilitation which would include rehabilitation for their past job or possibly for a new job due to some permanent disability from the injury.
The objectives and goals of the workers comp system that is in place throughout the United States can be summarized as:
• The elimination or reduction of payment delays in legal costs by having prompt payments and adequate payments for medical services to the injured employee.
• The promotion of overall safety and hygiene throughout the commerce of business for all workers of all industries.
Worker’s Compensation laws by statue impose strict liability on the employer. It is a no fault type system whereby the injured employee does not have to sue his employer to collect his medical benefits for the injuries or illnesses incurred during the workplace.