Types of Workers' Compensation
In the U.S., individual states handle workers' compensation rules. The U.S. Department of Labor houses an Office of Worker's Compensation Programs. Still, it is responsible only for the coverage of federal employees, dockers and harbor workers, energy employees, and coal miners.
The lack of federal standards for workers' compensation has resulted in highly varied policies for the same kinds of injuries from state to state.
Identical injuries can receive radically different compensation depending on where a worker resides. A paper by the Occupational Safety and Health Administration flatly calls workers' compensation a "broken system." It estimates that 50% of workplace injury and illness costs are borne by the individuals who suffer them. Low-wage and immigrant workers often don't even apply for benefits.
Workers' Compensation Coverage A vs. Coverage B
There are two types of workers' compensation coverage, called Coverage A and Coverage B.
- Coverage A includes all of the state-mandated benefits that an injured or ill employee receives from the employer's insurance. It covers salary replacement payments and medical care, rehabilitation, and death benefits as necessary. All states except Texas have such benefits, although they vary widely from state to state, and many states exclude some employees from eligibility.
- Coverage B pays benefits that exceed the minimums required by Coverage A. They usually are paid only as of the result of a successful lawsuit brought by the employee for negligence or other misconduct by the employer.
Workers who accept workers' compensation generally waive the right to sue their employers, agreeing to a "no-fault" contract. However, several states' state legislation and court rulings have restored the employees' right to sue in various strictly-defined circumstances. Thus, an employer may purchase a policy combining Coverage A and Coverage B.
Who Pays Workers' Compensation Insurance Premiums?
The employer pays the workers' compensation insurance premiums. There is no payroll deduction for Social Security benefits. The employer is required to pay workers' compensation benefits as established by individual state laws.
How Much Does Workers' Compensation Cost?
The cost of workers' compensation insurance varies by state, as do the mandated benefits. There are also different rates depending on whether the employees covered perform low-risk or high-risk jobs.The fees for the insurance are based on the company's payroll numbers. Just as examples:
- In California, workers' comp costs an average of 40 cents for every $100 in payroll for low-risk workers and $33.57 for high-risk jobs.
- In Florida, the average is 26 cents per $100 for low-risk jobs and $19.40 for high-risk jobs.
- In New York, the average is 7 cents per $100 for low-risk jobs and $29.93 per $100 for high-risk jobs.
How Do You Apply for Workers' Compensation?
The rules for applying for workers' compensation vary by state. In general, a worker with a job-related injury or illness should: Write down the details of the injury or illness, with photos and the names of witnesses when possible.
Report the injury or illness to your employer. The employer should take it from there, filing your claim with the insurer.
- You can follow through with the employer's insurance company to ensure a claim is filed.
- You can appeal the decision with your state's workers' compensation board if your claim is denied.
Who Is Exempt From Workers' Compensation?
Generally, only salaried employees are eligible for workers' compensation, not contractors or freelancers. Beyond that, every state writes its own rules. For example, Arkansas excludes farm laborers and real estate agents from eligibility. Idaho excludes domestic workers. Louisiana excludes musicians and crop-dusting airplane crew members.
Conclusion
Every state (except Texas) requires employers to provide workers' compensation coverage to at least some employees. The states write the rules, so there are many exceptions and exemptions. Contractors and freelancers are rarely covered, and many states exclude certain professions from the mandate or limit the benefits' scope. Most states have online sites that can help determine if workers' compensation insurance covers you. For example, the state of Florida's Division of Workers' Compensation has information on its program, links to the necessary forms, and a database that can tell you whether your employer has coverage.