workers' compensation claims Archives

What Is An Assigned Risk Pool?

What Is An Assigned Risk Plan? text overlaying image of a bunch of hands holding pieces of a puzzle An assigned risk plan is a workers compensation plan set up by the state for businesses that cannot get a workers compensation plan from a ‘regular’ insurer. Plans with an assigned risk are also known as the leftover market or the assigned risk pool. This safety net is the last option for employers who don’t have any other way to get coverage. All states except those that have a monopoly have made a plan. How the plan is run and paid for depends on the laws in each state.

Reasons You Could Be In The Assigned Risk Pool

When insurance companies don’t want to write a workers’ comp contract for a specific business (for reasons we’ll list below), that business goes into the workers’ comp pool to be assigned to an insurance company. These less desirable businesses will be spread out fairly among the workers’ compensation carriers. You may be in the workers’ comp pool for the following reasons:

Poor claims history – If a business has too many claims for injuries, insurers might think that its owners don’t care about safety.
New company – An insurer can’t tell much about a new company because it doesn’t have a track record. This makes it difficult to judge the risk the company would take by insuring you.
High-risk industry – Many insurance companies don’t want to cover employers in dangerous jobs like logging, trucking, and roofs with workers’ compensation insurance.

Insurance companies think that businesses with these traits are more likely to have a claim, so they may not want to offer a workers’ comp insurance. But because most states require workers’ comp insurance, the pools are set up to choose a company for you.

Assigned Risk Plan Administration

All states have a person in charge of running the plan and making sure policies are given out. In most states, the National Council on Compensation Insurance (NCCI), the state competitive insurance fund, the state rating group, or a third party is in charge of managing workers’ compensation insurance. The NCCI is in charge of running assigned risk plans for 22 states. Each of these 22 states requires all workers’ compensation insurers that do business within its borders to take part in the assigned risk plan. Insurance companies can either be:

Direct assignment – This means the NCCI assigns workers’ compensation policies from the companies that have to purchase a policy through the assigned risk pool. The business applies then the NCCI hands their application to one of the direct assignment companies.
Reinsurance – The insurers in this group basically insure the direct assignment companies. So if a direct assignment insurer has a claim or policies that they cannot pay for themselves the reinsurance company financially protects them so they can pay the claim without being bankrupt.

In some states, the state competition fund is in charge of running the assigned risk plan. This means they give businesses the option to either buy from the state fund or buy from private insurers. So, the state fund competes with the private insurance companies for business. These states are:

Most of the other states have either chosen their rating group or an insurance company to run their plans.

Cost Of Assigned Risk Plans

The assigned risk pool is supposed to be a last-resort market for high-risk businesses. Because of this, the rates are supposed to reflect the risk that the insurance companies are taking by covering this group of high-risk plans. Rates vary from state to state, but in general, it’s safe to think that the rates in the pool are the highest available for most workers’ compensation class codes. In fact, many companies in the standard voluntary market base their rates on the rates of the given risk pool.

Getting Coverage

If you or your insurance agent can’t find workers’ compensation coverage for your business in the standard market, you or your agent can send an application to your state’s assigned risk plan provider. How to apply changes from state to state. If your state’s plan is run by the NCCI, you can apply online 24 hours a day or send your application through the U.S. Postal Service to the NCCI. To get coverage from an assigned risk pool, you must have tried to get coverage from an insurer, but have been turned down. Each state has its own rules about how many rejects are needed. For example, West Virginia companies can only apply for coverage in the assigned risk plan if they can show that two insurers have turned them down.

Getting Out Of The Assigned Risk Pool

If you’re in the pool, there are no extra fees or charges. The only problem is that you don’t get to choose your insurance company, and you usually don’t have much choice about how to pay. Your payments can also be up to 400% higher than those of businesses that aren’t in the risk pool. If that bothers you, you may want to get out of the workers’ comp pool as soon as possible. This is how:

Improve Your Claims History

If you are in the workers’ compensation pool because you have made too many claims in the past, the only way out is to make fewer claims in the future. And a detailed safety plan is the best way to cut down on claims. This should include figuring out what the risks are and how to deal with them, as well as giving all workers ongoing safety training. You could also set up a safety committee or use tools for safety or incident management.

Even if you do all of the above, you can’t stop all accidents from happening, so it’s also important to know how to handle them when they do. This is because, in addition to how often you file a claim, the length of a claim can also make your workers’ compensation costs go up. Insurance companies want as few open claims as possible, so claims that take a long time to settle will make your workers’ comp cost go up.

Because of this, you should have a plan to help wounded workers get back to work as soon as possible. This could include a strategy called “light duty,” which lets employees go back to work without having to do any tasks that will make their injury worse.

Have Patience

If your business is new and you are in the workers’ compensation pool, you have no choice but to wait it out. If you don’t have any claims and don’t work in a high-risk business, you should be able to get out of the workers’ comp pool in a few years. So patience is key here. Bide your time in the risk pool and put safety procedures in place to keep your claims low and claims length short that way when it’s time to move out of the pool you can do so easily.

Work With An Independent Agent

If your business is in a high-risk field, you may not be able to do anything. Because of your risk, insurers might not be ready to give you a policy. Each provider is different, though. Just because one insurance company won’t give you a policy doesn’t mean that no one else will. Even if one insurance company doesn’t take your business one year, that doesn’t mean they won’t the next. Carrier insurance rules change so often that the same rules may not apply from one year to the next.

So you might be able to do a little research to see if there is a company that will take you on. Even better, you could work with an independent agent who can shop around to different companies to find one that might be willing to cover you.

How EZ Can Help

Workers’ compensation can be stressful. Hope is often at the end of the tunnel. There are usually ways to improve your workers’ compensation position. An independent insurance agent can help you choose a workers’ comp company. They can also assist you in managing your workers’ compensation policy in other ways that save time and money. EZ is the place to go if you need workers’ compensation insurance for your business. We are proud of the fact that we pay attention to each customer as a person and try to make sure you feel comfortable while you shop.

We offer personalized service and instant, free quotes from an agent picked based on your needs. If you’d like to get started with a quote you can enter your zip code in the box above. We want you to make the best decision possible and get the best deal for your money. Our services are always free, and there are no hassles or obligations to sign up. You can also call us at 877-670-3538 if you still have questions. You can talk to an insurance agent in your area, who will be able to answer all of your questions and help you find the best workers’ compensation policy for your business.

No matter what type of business you own, if you have employees, you’ll need workers’ compensation insurance. Workers’ compensation, also known as “workers’ comp,” is a legally required type of insurance policy that pays benefits to your employees in the event that they are injured on the job. It functions as a disability insurance fund, providing monetary compensation, healthcare benefits, or both, to employees. Workers’ compensation guidelines vary by state, so check out our workers’ compensation state pages to find out how your state handles workers’ comp regulations.

How Workers’ Compensation Works

The majority of workers’ compensation policies are funded by premiums the insurance carrier collects from you as the business owner. When disagreements arise, the Workers’ Compensation Board, the state entity that manages the program, steps in to handle them.

There are different types of workers’ comp, depending on your industry, with some policies administered by the government in special cases. For example, government employees, longshore and harbor workers, and energy workers are all covered by federal workers’ compensation programs. And for coal miners and their families, the Black Lung Program administers death and disability benefits.

Benefits of Workers’ Compensation

Workers’ compensation benefits may include a portion of lost wages for the time your employee was unable to work. Reimbursement for medical services and occupational therapy may also be paid to your injured employee.

Salary Replacement

In most cases, a workers’ compensation applicant will get some replacement for their lost wages. But it will usually be less than their full pay. The majority of policies cover roughly two-thirds of the beneficiary’s gross pay. Although the payout is often not taxable at the state or federal levels, recipients who receive money from the Supplemental Security Income or Social Security Disability programs may have to pay taxes on those benefits.

Medical Expenses

Workers’ compensation insurance also offers coverage for medical costs associated with an illness or accidents sustained at work. This may include trips to the hospital, surgeries, and medication. In the case of workplace-related illnesses or injuries that are so serious that they require multiple treatments, workers’ comp will cover ongoing care. It will also cover repetitive injuries that manifest over time.

It’s important to note that the majority of workers’ compensation policies only cover medical costs for injuries sustained directly as a result of working. A construction worker, for instance, could seek reimbursement for injuries sustained in a fall from scaffolding, but not for those sustained while traveling to the job site.

Disability Coverage

Some workplace accidents could be severe enough to render your employee permanently or temporarily disabled. In this case, your disabled employee may be eligible for benefits under your workers’ compensation policy to assist with paying their medical expenses and to partially make up for lost wages.

Survivor Benefits

Workers’ compensation can help pay for funeral costs, as well as pay survivor benefits to your employee’s dependents if your employee passes away as a result of a work-related incident.

Types of Workers’ Compensation

Each state is responsible for enforcing workers’ comp laws. There are no federal standards for this type of insurance, so depending on your location, the same injuries may result in radically different types of compensation.

But, when it comes to policy types, there are two types of workers’ compensation policies you can buy for your staff:

Coverage A – This type of policy includes all of the basic state-mandated benefits that an injured or ill employee is entitled to. In addition to salary replacement payments, it also includes any necessary medical treatment, rehabilitation, and death benefits. These benefits are available in every state, with the exception of Texas. Although the payouts vary greatly from state-to-state and are not always available to all employees.
Coverage B – This type of policy provides benefits over the basic minimum required, as offered by Coverage A. With coverage B though, employees are typically only compensated following the employee’s successful lawsuit alleging negligence or other wrongdoing.

In most states employees forfeit their right to hold their employer accountable for negligence by agreeing to receive workers’ compensation. The goal of this wage agreement is to safeguard both employees and employers. In exchange for assurance of payment, workers forgo additional recourse, and employers accept some liability in order to avoid the possibly higher costs of a negligence action.

Even though employees who receive workers’ compensation typically consent to a “no-fault” contract by giving up their right to sue their employers, state legislation and court decisions in certain jurisdictions have restored employees’ abilities to file lawsuits in a number of strictly limited situations. So, depending on where your business is located, you may decide to buy insurance that combines Coverage A and Coverage B.

Who Is Covered by Workers’ Compensation Insurance?

Who must be covered by workers’ compensation insurance depends on a number of factors—the size of your company, and the types of employees you have. For example, in some states, a company must have a certain minimum number of workers before it is required to have workers’ compensation insurance. And, while regulations vary by state, in the majority of states, all full-time employees are required to be covered by workers’ compensation insurance. Workers’ compensation regulations for independent contractors, temporary employees, and interns vary by state.

The industry you work in also makes a difference. For example, in certain states, coverage for workers’ compensation is not necessary for:

Farmhands
Insurance agents
Family members under a certain age
Casual workers
Business owners and partners
Real estate agents

Additionally, employees of the federal government are not protected by state-mandated workers’ compensation insurance. They are instead covered by federal workers’ compensation.

You should be familiar with the workers’ compensation regulations in your state, because these exceptions do not apply in every state.

The Cost of Workers’ Compensation

Workers’ comp insurance premiums are generally set based on every $100 of your company’s payroll. Even so, it’s difficult to pinpoint an exact price without evaluating the different factors for your specific company. On average you can expect to pay anywhere from $0.60 to $2.27 per every $100 on your payroll.

To understand how the cost of your workers’ compensation insurance will be determined, you need to understand a few basic components of the equation:

Payroll

Every workers’ compensation insurance rate is calculated by dividing your payroll by $100. That means the more employees you have, the higher your rate will be. It’s important to keep in mind, though, that you’ll need coverage in some states as soon as you have a single employee, while in others you won’t need it unless you have three or more employees.

Depending on the regulations of your state, you might have employees who do not have to have coverage. For instance, you are probably not required to obtain workers’ compensation for yourself as the business owner. The same often holds true for company executives and limited liability company (LLC) members.

Workers’ Compensation Industry Classification

Certain industries pose higher risks than others. For example, someone working on oil rigs have a substantially higher risk of serious injury than an office worker. Workers in some professions, including contracting and building, run an increased risk. Which drives up the cost of insurance for those people.

States provide a class code for each type of industry. And each code is then given a base rate based on its risk for injury. 38 states employ class codes that were created by the NCCI. Others make use of independent rating agencies, while some have developed their own systems.

Employee Modification Rate

The EMR is a multiplier that represents the history of your claims. Your state workers’ compensation board or its ratings bureau compares your prior workers’ compensation claims to those of businesses in your industry to determine your EMR. Businesses with lower EMRs often pay less for their workers’ compensation insurance, with the typical range of EMRs being 0.75 to 1.25.

State Insurance Factors

Workers’ compensation insurance premiums vary from state-to-state because state laws regulate coverage. The cost of workers’ compensation will most certainly be higher in a state that provides higher or more payments to injured workers, or in a state with a lot of high-risk industries.

Several states though, give employers discounts if they take steps to increase safety and decrease claims. For instance, many state governments offer discounts for setting up safety committees, fall prevention programs, and drug-free workplaces.

Insurance Carriers

While most of the above factors are out of your control, you can still find the best price for your business by shopping around among different insurance carriers. Although this isn’t a universal rule, some workers’ compensation insurance carriers charge higher premiums than others.

The Calculations

The basic formula for estimating workers’ compensation costs takes into account your industry, past claims, and total payroll. The basic formula is your annual employee payroll divided by 100. That sum is then multiplied by the workers comp insurance rate. That total is the estimated cost of your workers compensation premiums.

There are many moving parts in the precise formulas that insurers use to compute your workers’ compensation premium, and the methods they use to do so can differ from one insurer to another. Additionally, these formulas are based on your state-specific workers’ compensation regulations.

You should also take into account that there will be an option to pay your premium annually or monthly. This decision can also affect your price.

You should also consider any adjustments that might be made to your payroll during the year, including changes in your number of employees, your business class code, and your workers’ compensation rate, in order to choose the appropriate payment method for your company.

How to Save on Workers’ Compensation Insurance

The best way to make sure you can get affordable workers’ compensation insurance rates is to reduce the number and cost of your workers’ compensation claims.

You won’t have many options for cost-cutting when an employee submits a claim. To avoid having to pay large premiums in the future, you must put your plans in place as soon as possible.

You should think about implementing the following steps, which could be beneficial to both your company and your employees:

Return to Work Programs

Return to work programs help you get your employees back to work as soon as they are healthy enough.

A return-to-work program might help an employee ease back into their old responsibilities gradually, rather than having to wait until they’re fully recover to handle them. Until they are able to return to their regular tasks, the employee may perform light or modified work.

As part of this program, your employee can receive new training in a different skill set in order to earn their regular pay, instead of the lower rate provided as part of their workers’ compensation claim.

The advantage of this program is that you save money on wages given to any temporary workers you would have had to recruit to cover for your injured employee while they were recovering.

Work Safety Initiatives

The easiest way to reduce the price of workers’ compensation insurance is to avoid work-related illnesses and injuries as much as possible.

To motivate your employees to maintain a safe workplace and lower injury risks, be proactive about encouraging workplace safety measures. Here are some actions you can take to encourage a safer workplace:

Conduct regular safety training – Reaffirm best practices for conduct and safety, and keep on top of employee training for things like equipment usage.
Create a welcoming environment with an open door policy – It should be easy for your employees to approach you with questions about their safety. Remind them to visit you if they want to discuss workplace safety. Pay attention to their concerns, then take appropriate steps to reduce the risks and guarantee the safety of your staff.
Be open and honest about workers’ compensation benefits – When you hire new employees, you should tell them about your company’s policies on workers’ compensation. To remind current employees how workers’ compensation works if they are hurt on the job, arrange an employee benefits refresher.

Your team will feel more at ease and valued if you communicate openly and honestly about the policies you have in place to safeguard and promote their safety.

FAQs

Who pays workers’ compensation premiums?

By law, you as the employer pay the workers’ compensation premium. You can not deduct workers’ compensation payments through your employee’s paycheck.

Who is exempt from workers’ compensation?

Most of the time, only your employees can get workers’ compensation. Contractors or freelancers are almost never included in your plan. Aside from that each state makes its own laws. Arkansas, for example, does not require farm workers or real estate agents to have workers’ compensation.

How many employees do I need to get workers’ compensation insurance?

Every state has different requirements for workers’ compensation. Some states have you get coverage with even 1 employee while others require 3 or more.

Keep in mind that workers’ compensation insurance exists to safeguard both your company and your employees. EZ’s experienced representatives are here to answer any additional questions you may have about the specifics of workers’ compensation in your state or industry. Call 877-670-3538 to be directly connected to one of our agents who can help answer any questions you may have.

Compare

Reasons You Could Be In The Assigned Risk Pool

Assigned Risk Plan Administration

Cost Of Assigned Risk Plans

Getting Coverage

Getting Out Of The Assigned Risk Pool

Improve Your Claims History

Compare

Have Patience

Work With An Independent Agent

How EZ Can Help

Compare

Jump To:

How Workers’ Compensation Works

Compare Commercial Insurance Plans

Benefits of Workers’ Compensation

Salary Replacement

Medical Expenses

Disability Coverage

Survivor Benefits

Types of Workers’ Compensation

Who Is Covered by Workers’ Compensation Insurance?

Compare Commercial Insurance Plans

The Cost of Workers’ Compensation

Payroll

Workers’ Compensation Industry Classification

Employee Modification Rate

Insurance Carriers

The Calculations

How to Save on Workers’ Compensation Insurance

Return to Work Programs

Work Safety Initiatives

FAQs

Who pays workers’ compensation premiums?

Who is exempt from workers’ compensation?

How many employees do I need to get workers’ compensation insurance?

Compare Commercial Insurance Plans