Demystifying Workers' Compensation

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Understanding the Basics of Workers' Compensation

Workers' Compensation is an insurance that entitles eligible employees to receive benefits while they recover following a work-related injury. We will cover topics such as: what claims are covered, employer and employee benefits, and return-to-work programs for employees. 

After a work-related injury, workers' compensation ensures employees receive benefits while recovering from the injury. It is not a lawsuit, but instead a request for benefits. There is no federal law that requires employers to offer workers' compensation benefits. This is a state-level requirement that varies from state to state. States dictate who provides coverage and which employees must be covered. 

For example, the state of Tennessee requires employers to obtain coverage if they employ 5 or more people. As each state differs, it is imperative that your business understands your state’s requirements. If a company is not covered then the employee has the option to sue for both punitive and personal injuries. 

Types of Workers' Compensation Benefits

There are two types of workers' compensation benefits: Medical and Indemnity. Medical benefits are strictly used for medical care, rehabilitation, and anything physical as a result of the injury. Indemnity is a fancy word used to mean non-medical costs such as wage coverages, retraining costs, and survivor benefits. 

Who is Eligible for Workers' Compensation?

There are three basic requirements for employees to be eligible for workers' compensation benefits.

  1. The company has the coverage
  2. The person injured is an employee
  3. The injury must be work-related and accepted by the insurance company

Not all workers will be eligible to receive benefits. Workers that have been hired through a temp agency, volunteers, and contract workers using 1099s are examples of people that would not qualify for benefits. States such as Arizona and California have laws covering undocumented workers while many states do not cover these same people.

What is Covered Under Workers' Compensation?

Medical costs including treatment, rehabilitation, diagnostics necessary to treat, and medical devices such as crutches. Income replacement is available for lost wages and there is compensation in place for any serious, permanent injuries. Survivors’ benefits are also included for work-related deaths. These benefits are received by spouses, children, or anyone financially dependent upon the deceased.  Pain and suffering are not covered through Workers' Compensation. The only way an employee can collect for pain and suffering would be through a lawsuit. However, employees can not collect Workers' Compensation benefits and file a lawsuit against their employers for the same injury.

Employee Benefits for Workers' Compensation

Workers' Compensation is a way to pay medical bills during an employee’s recovery period. These benefits also include lost wages giving the employee a way to pay their bills. Many employees worry about employer retaliation when they exercise the right to pursue or receive benefits. Most states protect the employee in relation to employer retaliation and injured employees typically receive benefits quickly. 

Workers' Compensation Insurance Providers

When obtaining insurance there are three main choices:

  1. State-funded insurance
  2. Private insurance carriers
  3. Self-insurance (typically only large companies have the means to self-insure) 

Be sure to work with your benefits consultant or carrier to create a good relationship and communicate with them regularly. Having regular communication will allow you both to reach your goal of a safe workplace and fewer claims. 

Scheduling credits are offered by carriers and are adjustments to your planned premium by the underwriter. These are factors that are not taken into account in your experience modification rating or EMOD. The EMOD considers what type of industry you are in and your past claim history. The EMOD is basically the numbers behind your policy and reasoning for them. Things not included in EMOD may be workplace training and accident investigation. 

Workers' Compensation Employer Duties

  1. Most states require employers to post a notice with the Workers' Compensation law in an area visible to employees. These are available to you from the state or your insurance carrier once you purchase coverage. Alternatively, these can be part of a more wholistic labor law poster.
  2. Provide immediate medical treatment to any injured employee suffering from an on-the-job accident and follow up treatment when needed. 
  3. Complete the injury report with details and submit to your carrier to initiate the claim process. 
  4. Never initiate any type of retaliation on an employee that has filed a claim.

OSHA Requirements for Employers

OSHA’s general duty clause requires that each employee is free of any recognized hazards that are likely to cause serious physical harm or death. They require employers to provide safety training in a clear language that workers can understand. They also require that the OSHA poster is displayed that informs employees of the protections covered under the OSH Act.

Workers' Compensation Claim Prevention

Create a culture of safety. Just as you frequently discuss your customer service or marketing, discuss safety. Make the awareness of safety a priority. Avoid negative reinforcement such as the sign that counts the number of days since the last accident. No one wants to be the person that brings that number down to zero. This type of negative reinforcement postpones treatment and discourages injury reporting. Focus on reporting hazard remedies. If injuries aren’t reported there is no remedy to cure it and it will happen again. 

Covered Workers' Compensation Claims 

Generally, claims will be covered if it arises at the scope of employment. Workers' Compensation is a no-fault system regardless of who is at fault.  

“Going and Coming” Rule

This pertains to an employee’s commute because the injury doesn’t necessarily have to be on-site to be covered. However, although a standard commute is typically not covered what can be covered is an accident in a company car or traveling from the work site to a company meeting. These are examples that are considered an accident covered under Workers' Compensation. 

Injury vs. Illness

Workers' Compensation can cover problems that have developed over a period of time. Typically this comes in 2 forms.

  1. Repetitive Activity- this would include occupational diseases or disorders such as loss of hearing, carpal tunnel syndrome, and back problems.  
  2. Work-related Illnesses- these are illnesses that arrive through the course of employee exposure to toxic substances resulting in lung or skin disease. 

Claims that will not be covered even if the injury occurs at the worksite, but the employee is found at fault are: self-inflicted injuries. Intoxication or drug use, and being injured while committing a serious crime. 

Return-to-Work Programs

Outside of FMLA and ADA return-to-work programs are not typically required by the federal or state laws or the insurance carrier. However, a good return-to-work program will guide injured employees to modified or transitional positions in a timely manner. A return-to-work program is a formal program that focuses on getting employees back to work after a work-related injury in a timely manner. These can include offering light or modified duties. Don’t create work, find work for the employee. The company should have a policy in place before injuries can occur. 

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