Avoiding a World of Hurt
By Encharter Insurance
If you are an employer in Massachusetts with one or more employees, workers’ compensation is a mandatory business-insurance coverage. An employer may be an individual, a partnership, a corporation, or any other form of ownership that has employees. Failure to carry workers’ compensation coverage can result in an immediate stop work order and fines for every day that no coverage was available.
Besides being the law, here’s why you need it: workers’ compensation is essentially a no-fault system designed to protect both employers and employees should a workplace injury or illness occur. Your workers’ comp insurance policy would cover payment for medical care related to the employee’s injury, and would pay wage-replacement benefits, also called indemnity payments. In exchange for these benefits, workers’ comp, rather than the courtroom, becomes the employee’s exclusive remedy.
Individual states have jurisdiction over their own systems, so specific regulations and benefits vary by state. In Massachusetts, the Department of Industrial Accidents (DIA) manages the workers’ compensation system, adjudicating any disputes or appeals that arise. Meanwhile, the Massachusetts Workers Compensation Rating and Inspection Bureau sets rates.
How Is Coverage Obtained?
Most employers secure their workers’ compensation from an insurance agent. Large employers sometimes self-insure but must pass several regulatory gating issues to qualify for self-insurance.
If two or more insurance companies decline to insure your organization, you may have to seek coverage in the Massachusetts residual market, also known as an assigned risk pool.
Workers’ compensation insurance can be canceled by the insurance company, but only for the reasons of non-payment of premium, fraud or material misrepresentation, or a substantial increase in the hazard being insured. Your insurance company would need to notify you of cancellation with 10 days written notice.
How Are Rates Set?
The cost of the insurance is based on anticipated loss experience and is comprised of two basic components.
Under manual premium, the cost for your workers’ compensation policy is determined by your payroll and the classification of the work your employees do. The riskier the work, the higher the rate for the class code. There are thousands of class codes set by the Workers Compensation Rating & Inspection Bureau (WCRIB) in Massachusetts.
Under modified premium, once you have purchased workers’ compensation for two years, if the sum of the premiums for two years is $11,000 or more, your policy will be subject to experience rating. Manual premium is multiplied by an experience rating factor (or ‘e-mod’) reflecting your specific organization’s loss history. Much like the experience rating system used by many states to develop auto insurance rates, a bad year will impact an employer for years to come, as three prior years’ experience are used to develop a workers’ compensation e-mod.
What Benefits Does Workers’ Comp Provide to an Injured Worker?
Workers’ compensation coverage provides unlimited medical expenses, lost wages (also referred to as wage replacement or indemnity), rehabilitation expenses, and dependent and funeral expenses up to a state’s limits
The amount and duration of wage replacement and medical benefits varies based on each state’s law. Generally, the injured worker faces no out-of-pocket medical costs.
What Are Your Responsibilities as an Employer?
• Obtain workers’ compensation insurance coverage. Failure to carry coverage can result in stop-work orders and daily fines for the uncovered duration.
• Show proof of that coverage by posting notice in a public and visible place that all employees use.
• Provide a safe workplace, as required by OSHA.
• If an employee is injured, send them for medical care. In Massachusetts, you have the option to choose the physician for the first appointment.
• Report a medical-only injury (one with no anticipated lost time) to your insurer.
• Report a workplace injury with five or more days of absence, or a death, to the Massachusetts Division of Insurance.
What Are Some Best Practices to
You can lower your workers’ comp costs by working to the lowest possible e-mod. There are two variables that you should work to control: the frequency of injuries, or how many work-related incidents occur; and the severity of workplace injuries, or the duration of time away from work. Here are best practices to help control both and to help you attain the lowest possible experience e-mod:
• Maintain a safe and healthy workplace. The least costly injuries are the ones that never happen. Control frequency by setting the expectation for an injury-free workplace, training employees to work safely, requiring personal protective equipment, and conducting periodic walk-through audits. Your insurance company can often provide safety resources.
• Have a plan for point-of-injury response. A quick, caring, non-judgmental response to a work injury will help to set the trajectory for a positive outcome for all. Ensure that employees and managers know what to do if an injury occurs. Escort the injured worker to medical treatment.
• Partner with a nearby occupational doctor or medical clinic. Massachusetts allows employers to choose the first medical contact. Choose a top-quality physician or a clinic experienced in workplace injuries. Your insurance company may have a good network.
• Report injuries to your insurer in a timely manner. Early reporting is extremely important — numerous studies have demonstrated that the sooner injuries are reported, the better the outcome. Aim for same-day reporting.
• Prepare for return to work. It’s important to get employees back to work and on the team as soon as possible to help prevent disability syndrome. Plan for a transitional or modified job duties to help the employ re-acclimate and work-harden to their regular job.