| American employers have generally been required to | | | | Workers Compensation expense without self-insuring |
| carry Workers Compensation Insurance, or provide a | | | | or replacing Workers Compensation completely. The |
| suitable alternative coverage for their employees, | | | | company's employees earn an average of $2000 per |
| since the early 1900s. The early benefit employers | | | | month, so the Workers Compensation premium is |
| received from participating in Workers Compensation | | | | based on 2000 units of $100 dollars each.Various job |
| plans -- a reduction in litigation -- is no longer | | | | classifications are applied as appropriate. Instead of |
| self-evident. In fact, new causes for litigation | | | | having the employer pay for accident plans for all |
| addressing job-related illness and injury have risen | | | | employees, let's assume the employees are |
| over the decades.Workers Compensation typically | | | | encouraged to join a voluntary insurance plan. The |
| covers three expenses: medical treatment for | | | | national average for participation in voluntary benefits |
| job-related injuries (they may not have to occur on | | | | is about 50%. And let's assume this company allows |
| the job, but each state's laws govern specific criteria) | | | | its employees to pre-tax their premium |
| or illnesses, providing for the support of disabled | | | | deductions.Depending on features, a voluntary |
| workers, and (in some cases) providing for | | | | accident plan may cost each employee between $20 |
| rehabilitation of injured and disabled workers. Each | | | | and $60 per month. 50 employees accept the |
| state sets the criteria under which its compensation | | | | minimum accident plan ($20 per month), so the |
| act is to be applied.Although the states mandate | | | | after-tax payroll is reduced by $1000 per month. The |
| basic Workers Compensation premium rates, other | | | | company may save from $12 to $100 per month on |
| factors which affect your premiums include the | | | | Workers Compensation premium. Annual savings may |
| industry classification of your company, the size of | | | | range from about $144 to $1200.And the company |
| your payroll, job classifications for your employees, | | | | may realize other savings. If they match employee |
| and the frequency and severity of filed claims. In the | | | | F.I.C.A. contributions (6.2% for Social Security and |
| early 2000s, the cost of Workers Compensation as a | | | | 1.45% for Medicare), they realize a monthly savings |
| percentage of payroll rose from about 1.6% to 1.8%, | | | | of $153, or about $1800 per year (assuming no caps |
| according to the U.S. Bureau of Labor Statistics.As | | | | are reached). The company may save between |
| Workers Compensation claims and costs continued to | | | | $2000 and $3000 per year just by allowing |
| rise in the 1990s, many employers pressured their | | | | employees to purchase a low-cost voluntary accident |
| states to take action. Insurers responded by arguing | | | | plan. If a Disability plan is also offered to employees, |
| they paid more for claims than they were receiving in | | | | another $2000 to $3000 in savings may be realized |
| premiums. Some state legislatures therefore allowed | | | | (but pre-taxing Disability Insurance premium |
| insurers to raise premiums and to reduce benefits. | | | | deductions is not recommended because employees' |
| And attorneys who actively sought Workers | | | | benefits will be taxable).While an employer must still |
| Compensation claims often earned contingency fees | | | | cope with lost productivity and possibly having to |
| from settlements. So, both insurers and employers | | | | train a replacement for a disabled employee, the |
| received some relief, but workers came out | | | | prospect of litigation may be reduced. Claims may still |
| worse.The incentive to reduce Workers | | | | be contested or investigated by providers, but |
| Compensation costs remains strong. Although | | | | disputes would be resolved between employees and |
| employers benefit from implementing accident | | | | the provider. Some providers don't raise rates on |
| prevention programs and developing worksite safety | | | | voluntary plans. They just market new plans when |
| strategies, insurers may in some cases adjust | | | | they need to adjust premiums. Existing coverages |
| Workers Compensation premium rates up or down if | | | | are not affected.Disability insurance, sometimes called |
| employers do or do not carry health insurance.Health | | | | "Paycheck Protection", may be more flexible than |
| insurance includes major medical, dental, and accident | | | | Workers Compensation. For example, qualifying |
| plans (among others). The more options employees | | | | employees may use Short-Term Disability plans to |
| have for treating injuries and illness, the fewer | | | | pay for maternity leave. Disability insurance doesn't |
| Worker Compensation claims employers experience.In | | | | replace the employee's entire salary, so employees |
| states where employers may elect not to particpate | | | | who can return to work have financial incentive to do |
| in Workers Compensation insurance, the employers | | | | so. Also, coordination between Disability insurance and |
| may retain liability for worksite-related injuries and | | | | Workers Compensation prevents employees from |
| illnesses. States which allow employers to opt out of | | | | "double dipping". They cannot profit from Disability |
| Workers Compensation insurance may require those | | | | insurance.Regardless of whether you self-insure or |
| employers to prove their capability for meeting | | | | pay the Workers Compensation insurance premium, |
| liability.Some insurance agents may suggest that an | | | | you as an employer will be held accountable for job |
| accident plan combined with disability may replace | | | | related illnesses, injuries, and disabilities. Relying solely |
| Workers Compensation. Not every agent agrees with | | | | upon Workers Compensation may prove to be more |
| that point of view. But let's see how accident plans | | | | expensive than offering employees access to |
| can help employers in other ways.A basic accident | | | | voluntary plans which offer benefits they won't |
| plan provides some health coverage, may cover | | | | receive from Workers Compensation.Michael Martinez |
| off-the-job injuries (eliminating "Monday Morning | | | | is a licensed Life and Health insurance agent in the |
| Syndrome"), and may help reduce employer Workers | | | | state of Texas. Insurance and benefits programs |
| Compensation premium rates if it is qualifying health | | | | may be subject to both Federal and state regulations |
| insurance. The more comprehensive the plan, the | | | | in your state. This article does not offer legal, tax, or |
| more benefit both employer and employee realize | | | | financial advice. Workers Compensation insurance, or |
| from it. An employer may be required to pay the | | | | a suitable alternative, is mandated by various state |
| premiums for accident insurance in order to qualify a | | | | laws for most employers. Consult your state |
| reduction in Workers Compensation premium. | | | | government or Workers Compensation insurance |
| Employers should consult their Workers | | | | provider to understand your obligations and options |
| Compensation providers to learn how to reduce their | | | | under the law and your Workers Compensation |
| premiums.However, even voluntary accident plans, | | | | insurance. Consult a licensed supplemental benefits |
| where employees pay the premiums, may have an | | | | broker in your area to learn more about how |
| impact on Workers Compensation costs. For | | | | supplemental or voluntary plans may help reduce your |
| illustration purposes, let's examine a hypothetical | | | | expenses. |
| 100-employee company that wants to reduce its | | | | |