Workers’ Compensation Insurance in the USA: Detailed Information and Specifications of the Policy
Workers’ compensation in the USA is a state-based program, which provides insurance benefits to workers who become injured or ill at their workplace. So, what is workers’ compensation? All companies that have employees must cover the cost of workers’ insurance in case of injuries and other work-related disorders. Such compensation insurance is mandatory in a considerable majority of states and presupposes the coverage for lost wages, medical expenses, death benefits, and rehabilitation services. Despite all the businesses are obliged to purchase workers’ compensation insurance, there may be exceptions. Small businesses that are classified as employers can exempt from this obligation, in case their workers are officially non-employees.
Generally, workers’ compensation in the U.S. is part of an insurance system that presupposes wage replacement payments and medical benefits being financed through usual insurance premiums employers pay to insurers. The policy guarantees the maximum level of protection to employers, eliminating potential financial risks. Additionally, it preserves the fundamental human needs and rights of workers.
Considering the process of workers’ compensation and its specifications, it is essential to take into account such notions as compensation classification and class code.
Workers’ Compensation Classification
What benefit will the worker get in case of an injury or illness? The amount he/she receives is based on a specific classification system. According to it, all the employers are categorized in different groups that correspond to their business, as their workers face similar risks of injuries. Every classification represents a certain type of occupation and is assigned a rate. The National Council of Compensation Insurance (NCCI) has developed the most typically used classification system that identifies the job by description and a 4-digit code. The workman’s comp insurance rate may vary from state to state, but it is ultimately similar.
Workers’ Class Codes
Compensation class codes are generally 3- or 4-digit codes, which are used by insurance companies to estimate rates, based on the risk of the job performed by employees. So, how can these codes be used and help workers get the necessary compensation?
The main task of compensation codes is to show possible hazards associated with specific tasks, jobs, and positions. For instance, a clerk working at a computer is at a lower risk level of illness or injury than a welder who works with heavy metal constructions. Since the hazard of a ‘desk job’ is lower, if compared to a construction site work, the employee has to pay less to insure the clerical employee. If you are interested in the workers’ compensation insurance cost, check out the components of the formula, which is used to estimate the final price:
- Compensation class code of the employee;
- Experience modification factor;
- The payroll of the company.
Follow a simple formula to evaluate an approximate compensation range you may potentially get. You may also contact a lawyer or insurance specialist to help you deal with the necessary calculations.
Benefits of Workers’ Compensation
Workers’ compensation rules are also known as the Grand Bargain between employers and employees. According to the law, employers are obliged to provide benefits or compensations to workers who have been injured at their workplace. Responsible employers, who fulfill their duty, are completely protected from different lawsuits by injured employees. Following the law, workers are prohibited to sue their employers for any work-related illnesses or injuries, if such employees are covered by compensation insurance.
The benefits offered for workers are similar all around the USA and include the following:
- Disability (partial and total): partial reimbursement of salary lost as a result of a permanent or temporary disability;
- Rehabilitation: vocational training for employees, who must learn a new occupation due to the illness or injury gained at work;
- Medical coverage: medications, physical therapy, checkup, medical equipment, nursing care, and diagnostic tests;
- Death: benefits are paid to minor children and spouses of employees killed at their workplace.
While the types of benefits provided by the majority of states are the same, their amounts may differ drastically. For example, there may be a 500-week benefit for temporary disability in one state, and a 100-week one in another.
Workers’ Compensation Exemption: How It Works
In all the U.S. states, companies hiring workers must pay for their compensation insurance coverage to protect the business, as well as the worker, in case of a job-related injury or illness. When workers get employed, they exchange their right to sue employers for negligence in case of an accident and agree to be covered by the workers’ compensation benefit. Individual contractors frequently sign a workers’ compensation exemption form that allows them to be exempt from compensation payments. Check out the example of the form here.
Every single state offers various regulations, which exempt specific types of workers from workers’ compensation insurance coverage. Most commonly it refers to independent contractors, who are not employees, but self-employed individuals. This category of business owners can try to exempt themselves from being covered by the compensation insurance. It is necessary to fill in a workers’ compensation exemption form, mentioning the industry type you are working in, trade, or scope of work, and business document number.
Process of Workers’ Compensation Claim
Once the accident has happened and the employee got injured, it is inevitable to follow the correct process of workers’ compensation claims. Filling a claim prior to the state deadline is the #1 requirement. Since there is a restricted amount of time to submit papers and get workers’ compensation benefits, the employer and the employee must act fast and promptly. There are requirements and obligations for each part of the conflict.
The employer must:
- Provide the worker with appropriate paperwork and guide through the process;
- Work with the insurer to file a claim;
- Comply with the law for reporting injuries at work.
The employee must:
- Inform the employer about the injury, mentioning the date, time, cause and type of injury he/she has got;
- File a formal worker compensation claim.
Keep in mind that worker compensation is regulated by the state, so the process can differ, depending on where the worker is located. Anyway, the employee should file the compensation claim in case the injuries were sustained within the scope of the employment, mainly including trauma injuries, occupational accidents, illnesses and diseases caused by exposure to chemicals or work activities.
Make sure all the statements are true before you start filing a claim:
- The employer offers a workers’ compensation policy;
- The employee has got injured at work;
- The injured person is a worker of the company, not a contractor.
The compensation will not cover:
- Injuries caused by horseplay or fight;
- Injuries that happened while going to or from work;
- Accidents incurred under the influence of alcohol or drugs;
- Self-inflicted injuries;
- Psychiatric injuries.
Once you have checked all the specifications of the workers’ compensation insurance, check the details of the claim process to be aware of all the stages.
5 Steps to File a Workers’ Compensation Claim
If you are an official employee of the company and you got injured while at work, follow the rules and get the necessary compensation.
- The worker notifies his/her employer of an injury. To make a compensation claim, the illness or injury of the employee must be work-related. Developing cancer as a result of exposure to toxic substances, slipping on an icy patch on the parking lot, and similar conditions may qualify. If emergency instances occur, the employee should address the nearest emergency room. In other cases, the worker should go to a doctor, get a diagnosis and obtain a medical report to file a compensation claim. Provide the employer with the written notice of the instance as soon as possible (in the majority of instances, within 30 days).
- The employer provides the worker with the necessary paperwork. The moment the employer has got informed about the problem, he/she should provide the worker with the following:
- Reporting forms for the compensation insurance provider;
- Reporting form for the state compensation board;
- Proper information about employee’s rights and benefits;
- Information about an opportunity to return back to work.
- The employer files the compensation claim. In most cases, the employer is in charge of paperwork submission, while the workers’ doctor should also send a medical report. Besides, the employer may need to provide documentation to the state compensation board.
- The claim is approved or denied by the insurer. Once all the documents are collected and the claim is filed, it is up to the insurer to make a determination. Once the claim gets approved, the insurer contacts the worker with payment details. The employee can accept the employer’s payment offer that will cover medicines, part of lost wages, disability payment and medical bills, or negotiate for a larger structured settlement.
- The employee gets back to work. The worker should send a written notice to both the insurance company and the employer that he/she has fully recovered and is ready to return to work. Depending on the type and severity of the injury, the insurer may continue to pay benefits related to disability.
However, if the insurance company denies a claim, the employer has a right to contact a lawyer to address the workers’ compensation appeals board and reconsider the decision.