WHAT IS WORKERS COMPENSATION INSURANCE?
Part 1 of the Workers Compensation or Workers Comp policy covers employees benefits if they are injured or become ill from their employment.
These benefits may include:
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Medical Care / Treatment
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Lost Wages
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Disability Benefits
Part 2 of the Workers Comp policy provides Employers Liability. This insurance coverage provides liability coverage for legal costs from an employee or family member bring suit against the business for a on the job injury or illness.
IS IT THE SAME IN EACH STATE?
Each state sets up statues that establish the type of programs allowed in the state, the amount of benefits an injured employee is entitled, and how medical care is to be delivered.
Some states are monopolistic meaning you can only get a Workers Compensation policy for that state from them. Currently Ohio, North Dakota, Washington and Wyoming are monopolistic.
Other states allow you to purchase coverage from different insurance companies. Depending on the insurance company, if you start working in another state, they may be able to add that state to your policy.
HOW ARE PREMIUMS CALCULATED?
Workers Compensation Premiums are calculated based on a rate for each industry classification code (a code for what the employee is actually doing) times per $100 of payroll. The higher the risk of getting injured in a specific industry, the higher the rate. Thus, tasks such as clerical work have a minimal rate but tasks involving higher risk like roofing have a much higher rate.
Another factor used to calculate your premium is the Experience Modification Rate or EMR or EMOD. A Experience Modification Rate changes the premium depending on your companies safety experience (claims). The standard EMR is a 1. Once your business becomes eligible for a EMR, the NCCI (National Council on Compensation Insurance) will look at your claims, both the severity and frequency and calculate a EMR based on the standard losses expected for your industry.
If you have more claims than standard, your rate may be more than 1. For example if your EMR was 1.5, this means they calculate your premium and times it by 1.5. Thus you are paying 50% more than other companies in your industry.
But if you have an excellent claim history, your EMR may be .7. This means they calculate your premium and times it by .7. Thus you are paying 30% less than other companies in your industry.
HOW CAN I WORK TO LOWER MY COSTS?
Most companies use the NCCI industry rates as a starting place. When working to control costs, business can look at two areas; Credit and the Experience Modification Rate.
Credit:
Insurance Companies can review the business practices, safety program and claims history on your business and decide if a credit is warranted. Companies that strive to control their losses with excellent safety programs are able to achieve credit up to 20%.
Experience Modification Rate:
Some claims happen without your control but they impact your Experience Modification Rate for 4 years. Working to minimize both the frequency and severity of claims each year helps bring your costs down.
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