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Workers' Compensation 101
What Employers and Employees need to know

by Jamie Knotts
On Tap Assistant Editor
jknotts@wvu.edu

 

Unless the water utility you manage is in Texas, you need workers’ compensation insurance for your employees. It’s required in every state but the Lone Star and covers employees’ medical expenses and lost wages if they are injured on the job.

As Heather Williams notes in her article “The Basics of Workers’ Compensation Insurance,” laws vary from state to state, but the basic premise is that workers’ compensation is a compromise: Benefits are paid regardless of who is to blame for an accident or injury. This no-fault status, she writes, is key to workers’ comp—the employer does not admit liability for the injury or illness and recoups workers’ comp benefits without having to sue. “There’s no room for horseplay, drunken stumbling, or illegal drugs, though—if any of those lead to an injury, workers’ comp insurance will not pay,” she writes. “The same goes for self-inflicted injuries and for injuries incurred while a worker is off the job, committing a crime or violating company policy.”

For the employer, states mandate how much coverage an employer must buy and what percentage of the employee’s salary the employer must pay if an employee misses work due to a work-related injury. In some states, employers who meet minimum payroll or employment levels can self-insure, that is, not use an insurance company and, instead, pay workers’ comp claims out-of-pocket.

In some cases, employers—usually those with only a few employees—are exempt from carrying the insurance at all. The most common exemption is for employers with fewer than three employees, but some states provide the exemption to employers with fewer than four and others to employers with fewer than five. Of course, even if a business or utility is exempt, they may still be able to participate in the program if they choose.

And to make things more confusing, not all states require all employees to be covered under workers’ comp insurance. Frequently excluded workers include domestic employees in private homes, farm workers, maritime workers, railroad employees, and unpaid volunteers.

Because each state clearly defines requirements, workers’ comp packages offered by insurance companies are fairly standardized, with little variation among policies. Basic workers’ comp coverage includes medical treatment, rehabilitation costs, and lost-wage replacement, covering up to two-thirds of an employee’s regular salary while he or she is out of work. Many workers’ comp policies also include liability coverage, which kicks in if a worker’s family sues you for damages stemming from a workers’ comp claim.

“Accidents happen, but fewer accidents happen in safe workplaces.Taking necessary safety steps reduces injuries and means reduced business losses, reasonable insurance rates, and safer workers.” North Dakota’s workers’ compensation agency

Do employers have a choice for their insurers?
Not surprisingly, the states determine from whom an employer must buy workers comp insurance. North Dakota, Ohio, Washington, West Virginia, and Wyoming require employers to buy workers’ comp insurance through a state agency. These states, however, do not include employerliability insurance with their workers’ comp coverage. Liability insurance must be bought separately through a commercial insurer.

In other states, some of the nation’s largest insurers control the biggest slice of the workers’ comp pie. Liberty Mutual leads the pack in terms of premium dollars, followed by National Union Fire Insurance Company, Kemper, Travelers, and The Hartford

If your water utility is in a state that does not require businesses to purchase insurance through a state-appointed agency, and you are looking for workers’ comp, there may be two options in addition to private insurance: state insurance pools and self-insurance.
State workers’ comp insurance pools are similar to high-risk health insurance pools that operate in some states. These pools cater to the “residual market,” or companies or utilities that can’t buy workers’ comp insurance through normal means because they’re considered too risky. A poor safety track record or above-average number of claims could put a business or utility in this category. For that reason, buying workers’ comp insurance from a state pool is fairly costly.

In 47 states, businesses of a certain size have the option of self-insuring. This means they take on the risk of paying for work-related injuries themselves instead of paying an insurance company to do so.

Choosing the Right Agent and Carrier
If your utility uses a commercial insurance company, chances are the water system’s manager will choose a policy with the advice of a commercial agent. Ideally, that person should be able to work as the utility’s advocate with the insurer, says Brenda Vincent, vice president at Marsh Advantage America. Picking the right insurance company can make a big difference when it comes to a workers’ comp claim.

“Insurers familiar with the industry can reduce the effect of claims on customers through good loss control and claims departments,” Vincent says. “And the agency should understand that different states have rules that affect the workers’ comp rate, and be an advocate for the client in promoting the safety controls that warrant credit toward a lower premium.”

Red Flags of Workers’ Compensation Fraud Those investigating workers’ compensation fraud have spotted several indicators that an employee may be using and abusing the system to get a free ride. As an employer, you might take note of the following behaviors. Although no single item listed below can effectively prove fraud, taken collectively these behaviors may help you to identify a problem employee. 1. Employee has an extensive history of previous claims, including bodily injury or property damage claims or a history of falsifying claims. 2. A substantial delay occurred in reporting the accident. 3. The employee is never at home or is reported to be in bed under medication or is otherwise difficult to contact. 4. The employee refuses to go to the medical provider selected by the employer or refuses a diagnostic procedure to confirm an injury. 5. Employee frequently changes physicians or medical providers. 6. Employee has subjective, soft tissue injuries only: no objective injuries such as broken bones or cuts; there is no present organic basis for his injuries; or the disability claimed is beyond normal for the injury, either in rating or length of time. 7. The employee has a long relationship or history with a health care provider (other than his family doctor). 8. The employee has post-traumatic psychological stress-type claims or complaints. 9. Employee has excessive prescriptions. 10. Employee is either new on the job or nearing retirement age; or the injury coincides with layoffs, closings, early retirement offers, or firings. 11. Employee has a high absentee rate. 12. Employee benefits from workers’ compensation, other social programs, or other insurance or disability plans equal or exceed the employee’s regular take-home pay. 13. The employee has a history of self-employment or working for cash. 14. The injury occurs late on Friday afternoon or shortly after the employee reports to work on Monday. 15. The accident was not witnessed by anyone else. 16. Details of the accident, as found in the employee’s first report of the claim, the employee’s medical history, and third-party accident reports are vague or contradictory. 17. After the accident, the employee moves out of the state or country. 18. The employee receives mail at a post office box and has no reason for doing so. 19. Employee seeks treatment from a chiropractor only, and a medical doctor never examines him or her. 20. The treating physician is known for being involved in suspect claims. 21. Several different doctors are involved, and no one doctor is coordinating the medical treatment. 22. Physician or chiropractor will not consider employee returning to work at any level as part of the rehabilitation or treatment program. 23. There are substantial gaps in treatment. 24. The location of the treating doctor or chiropractor is inconsistent with the employee’s home or work location. 25. The treatment or diagnosis is inconsistent with the employee’s injuries. 26. Treatment occurs on holidays, weekends, or vacation. Source: Adapted from Missouri Employers Mutual Insurance Company’s Fraud Alert pamphlet

Controlling Costs
Workers’ compensation funds are feeling the strain as employees report more difficult-to-treat injuries. Now, private employers are showing hard-pressed public employers how to bring costs under control, says Tina Ruyter, a claims representative with Asset International, Inc.

“State laws govern how local governments and municipalities manage health care for injured employees,” Ruyter says. “Some states have laws that give public employers less control over their workers’ comp costs than private sector employers have. More often, the same laws govern workers’ comp coverage for both the private and public sectors.

Most states require coverage and set guidelines for how it should be provided. The original intent of the laws was to protect employees, but increasingly laws are intended to provide a balance between employer and employee interests. If employers self-insure, they can hire an outside administrator or self-administer, and they often buy insurance to cover catastrophic costs above the normal expense of day-to-day care. Employers can also choose to buy insurance for normal and catastrophic costs.

“The root of the problem, in large part, is the increasing number of claims for ‘soft tissue’ injuries to backs, elbows, knees, and wrists,” Ruyter says. While the numbers are difficult to dissect, one indication of the increase in these types of injuries is the appearance of carpal tunnel syndrome (CTS). In 1982-83, employers did not see enough incidences of CTS to report them separately in the National Council on Compensation Insurance survey. By 1992-93, CTS represented 1.7 percent of injuries among the private-sector employers in 40 states that were surveyed.

“Soft-tissue injuries can be more expensive than more visible injuries, such as broken legs or cut fingers,” says Ruyter. “Reaching agreement with an employee about when, and if, the injury is cured can be impossible if the employee insists that a strained wrist or knee still hurts. The employee’s private physician will often agree that he or she is still injured and cannot return to work. The medical profession has no way to prove whether or not the employee is lying. This element of doubt can delay the employee’s return to work and eventually can lead, in extreme cases, to disability retirement for those who do not want to return to work, adding to costs for retirement systems by turning employees who might still be contributing into early retirees.”

Tips for Employers
After an injury occurs, an employer can do several things to help the injured employee have an early and safe return to work and keep worker’s compensation costs down.

According to North Dakota’s Workers’ Compensation Agency, employers should:

• Stay in contact with the injured employee. Help the injured employee continue to feel that he or she is an important asset to the company or utility.
• If the doctor restricts the injured employee’s work, provide transitional or modified work duties. Provide the employee with a written transitional job offer that outlines the proposed job, work hours, and effective date.
• Investigate the incident that led to the employee’s injury. Do this immediately and address the following items:
• Look at the accident site.
• Determine why the incident happened.
• Document the circumstances surrounding the incident.
• Secure evidence and take photographs.
• Interview all witnesses and write down their statements.
• Take the necessary corrective action to prevent the injury from happening.

To head off future rate increases, North Dakota’s Workers’ Compensation Agency recommends that employers focus on safety. “Accidents happen, but fewer accidents happen in safe workplaces. Taking necessary safety steps reduces injuries and means reduced business losses, reasonable insurance rates, and safer workers.”

Workers’ Compensation Tips for Employees
The Gillman Insurance Group of Alpharetta, Georgia, offers this advice to employees: First and foremost, don’t lie about the injury. This not only can cause a lot of hassles, it is illegal in most, if not all, states. If you really hurt yourself playing softball last night, don’t do something stupid like say you hurt yourself at work. You will get caught.

Don’t exaggerate your symptoms expecting to receive a big payoff. It does not happen in workers’ compensation. The state’s workers’ compensation board or agency strictly regulates all disability payouts.

It is important that you try to prevent all injuries, not look for them. Prevention is the name of the game. By preventing injuries, it saves the utility money, which in turn can be passed on in pay raises and other benefits.

Make sure that you are properly trained and qualified for the job you are taking on. Pay attention to your supervisor or whoever is training you for the job. They want the job done correctly, the first time. Redoing the job means time and money for both you and the employer. Have respect for the employer.

If you are injured and put on temporary disability, keep in touch with your supervisor. Let them know what is going on, how you are doing, and when you are expected back. In other words, let your employer know that you are not just sitting home watching Oprah, hoping that you don’t have to go back to work.

For more information about workers' compensation, contact your state employment bureau.

About the Author
Jamie Knotts assistant editor, welcomes articles ideas and suggestions from readers. If you have an interesting topic you think others would enjoy reading about, send a note to jknotts @wvu.edu or call him at (800) 624-8301.