Workers Compensation Insurance in California

WORKERS COMPENSATION INSURANCE

Reasons to choose us:

1. We have over 200 insurance companies to find the best Workers Comp coverages at lowest rates for you.
2. We do not charge any Broker Fee.
3. We can cover just about any business in California with the insurance coverages they desire.
4. You will not waste time calling a dozen agents or insurance companies with limited selection of coverages.

Read State of California information brochure on Workers Compensation Insurance

Read State of California Guidelines to Workers Comp (ENGLISH)

Read State of California Guidelines to Workers Comp (SPANISH)

Employers are legally obligated to take reasonable care to assure that their workplaces are safe. Nevertheless, accidents happen. When they do, workers compensation insurance provides coverage. Carrying Workers Compensation insurance protects employees by providing benefits for job-related injuries or illnesses. And it helps protect you and your company by reducing the risk of lawsuits.

Call us to find the right coverage need for your business. We are an independent insurance agency where we shop for you needs among a number of eligible companies. You not only win with price, but have options to choose from that can be even more important like calculation of premiums, deductibles, assigned risk, and more. We are happy to go over it all with you. Call us today with any questions you might have, even on your existing policy!

Please call us for a FREE QUOTE (310) 860-0700 or email us at: info@kamaliins.com

We offer multiple rates by different insurance companies below. 

Our Workers Comp Insurance Carriers

NEWS ABOUT CALIFORNIA WORKERS COMPENSATION

Read State of California information brochure on Workers Compensation Insurance

The Workers Compensation Insurance Board is recommending an increase of 16 percent, effective January 1, 2009. Nearly 11 percent of the requested increase reflects rising medical care costs. The recommendation does not take into account recent changes in the permanent disability rating schedule proposed by the Division of Workers Compensation, which add another 3.7 percent. If the increase of 16 percent is approved, average rates in January 2009 will be $1.95 per $100 of payroll compared with a pre-reform rate of $4.81.

An appeals court in San Francisco upheld numerical limits for treatments in a case where an injured worker sought to have the system pay for 76 visits to a chiropractor. The 2004 reform law set a limit of 24 visits. In its ruling in June, the court said that the Constitution does not require unlimited treatments and that it is up to lawmakers to decide on the details of what is appropriate and take measures to keep the system solvent. Some labor groups have complained that the reforms of 2003 and 2004 have deprived injured workers of necessary medical care.

A report prepared by the California Workers Compensation Institute on the impact of reform legislation shows that in five of six types of services there were fewer visits and lower amounts paid per claim. The greatest decrease was in chiropractic manipulation and physical therapy, with visits decreasing by 68.9 percent and 16.3 percent respectively between pre-reform 2002 and post-reform June 2006, and payments by 74 percent and 61 percent. Studies by the state’s Division of Workers Compensation show that more workers have returned to work after injury since the passage of SB 899 in 2004 which included incentives to return to work at the former employer.

ABOUT WORKERS COMPENSATION

Workers compensation insurance covers the cost of medical care and rehabilitation for workers injured on the job. It also compensates them for lost wages and provides death benefits for their dependents if they are killed in work-related accidents, including terrorist attacks. The workers compensation system is the “exclusive remedy” for on-the-job injuries suffered by employees. As part of the social contract embedded in California law, the employee gives up the right to sue the employer for injuries caused by the employer’s negligence.

Workers receive benefits regardless of who was at fault in the accident. If a worker is killed while working, workers comp provides death benefits for the worker’s dependents.

Workers comp insurance is not part of a Business owners Policy (BOP). It must be purchased as a separate insurance policy.

Premiums are based on the employer’s industry classification code and payroll. Premiums for the most dangerous enterprises, such as trash hauling or logging, may be much higher than premiums for an accounting firm. Location has also become a factor in workers comp premiums. Since the terrorist attacks of September 11, 2001, workers compensation insurers have been taking a closer look at their exposures to catastrophes, both natural and man-made. For businesses located in an area at high risk of catastrophe, premiums may be higher, regardless of the nature of the business itself.

Employers with an annual premium above a certain amount are usually eligible for experience rating, which adjusts the premium up or down depending on the claims history of the company relative to other companies in that industry category. Businesses with higher than average claims will pay a higher premium and those with lower claims will generally pay less. Experience rating is more sensitive to the number of claims (loss frequency) than the dollar value of claims (loss severity). This is because of the insurance industry maxim, “frequency breeds severity.” Insurers know from experience that where more accidents occur, there is a greater likelihood of big losses. A greater number of accidents indicates that overall in working conditions are not as safe as an environment where fewer accidents occur, even if in a given year the few accidents that occurred were more costly.

KEY ELEMENTS OF A WORKERS COMPENSATION POLICY

Usually a workers comp policy has two parts: "Part One, Workers Compensation" and "Part Two, Employers’ Liability."

Under "Part One", the insurer contracts to pay whatever the state-required amounts of compensation may be. Unlike other types of insurance, workers comp coverage has no ceiling or limit on the policy amount. The insurance company accepts a transfer of the employer’s entire statutory obligation—whatever the employer is legally obligated to pay as a result of the injury.

"Part Two" of the policy provides coverage for an employer who is sued by an employee for work-related bodily injury or illness that isn’t subject to state statutory benefits. It has a monetary limit.

Employers' liability also insures an employer in some other situations. One is so-called “third-party over suits,” where an injured worker files suit against someone other than the employer (a third party) and that third party then seeks to hold the employer responsible. For example, an employee injured while working with a machine might file suit against the manufacturer of the machine. The manufacturer might then sue the employer claiming that the cause of the injury was modifications the employer made to the machine or improper use. Another situation where this liability coverage applies is when the spouse of an injured worker sues the employer for loss of consortium.

THINGS THAT CAN BE DONE TO REDUCE WORKERS COMPENSATION INSURANCE COSTS:


* Manage Your Risks
* Take Advantage of Saving Opportunities
* Be Sure Your Premium is Correctly Figured
* Raise Your Deductibles
* Try to Avoid Assigned Risk
* Coordinate Disability Programs

How to Maximize Your Workers’ Compensation Benefits
Longer the Time more the money, especially with workers’ compensation claims. If you take long time to report a work-related injury or illness, the more that claim can cost your employer in medical, legal, and insurance fees. Those expenses can cause cutbacks that could potentially impact your job security. Conversely, when you report a claim promptly, you help reduce expenses, stabilize the business where you work, and enable workers' compensation reform to continue strengthening California’s economy.

Before a work injury or illness occurs
Take some time and carefully read the Notice to Employees poster in your workplace. This poster is designed to help you know:

Information on how to get emergency medical treatment.
Emergency phone numbers of the doctor, hospital, ambulance, fire, and police.
Your workers’ compensation benefits and rights.
Your insurance carrier’s medical provider network (MPN).
After a work injury or illness occurs
Tell your supervisor as soon as possible (best within 24 hours).
Complete a Workers’ Compensation Claim Form from your supervisor by describing your injury:
How it occurred
When it occurred
Where it occurred
Return the completed form to your employer.

When referred, see your employer’s MPN physician (unless you have already predesignated your personal physician). After the first MPN visit, you can select a different physician from the MPN network if you prefer.
If you experience a disability due to the injury or illness, ask your employer about a Return to Work (RTW) program.

Within the RTW program, discuss solutions for modifying an existing job or identifying an alternative job with your employer, the treating physician, and the assigned State Fund claims adjuster.
Reporting your claim promptly, using the MPN, and exploring your RTW options can net you and your employer the best results for quality medical care and reduced workers’ compensation costs.

Facts for the California Employer
Accidents happen, and it can happen at work with anyone. Workers’ compensation insurance protects you, the employer, against losses due to work-related accidents and illnesses. In addition, this insurance provides the injured employee with benefits to compensate for lost wages or decreased ability to work. The California workers’ compensation system is a no-fault system, which means an injured worker is entitled to benefits without regard to negligence or fault.

What is workers’ compensation insurance?

Workers’ compensation provides benefits to employees who are injured or become ill during the course of or due to employment. In California every employer is required to carry insurance to cover the cost of occupational injuries and illnesses. This insurance requirement is mandatory even if you have only one part-time employee. Companies based out of state with employees hired in California must also have California workers’ compensation insurance.

Is workers’ compensation the same as State Disability Insurance?

No. Workers’ compensation is only for injuries or illnesses that occur due to employment. State Disability Insurance (SDI) is for injuries or illnesses that are not work-related, and it is a benefit that the Employment Development Department provides.

How is the workers’ compensation premium calculated?

Before 1995 the Workers’ Compensation Insurance Rating Bureau (WCIRB) established the rates applied to your premium. Since January 1, 1995, all insurance carriers have been responsible for establishing their own rates. This system of determining rates is called the competitive rating system.  competitive rating, State Fund’s pricing is based on the classifications, the size of payroll, and the individual risk characteristics of each business. We multiply these base rates for each class code by the employer’s payroll .“Understanding Your Quote for Insurance” (form 10502) is available upon request from any State Fund office. The form explains in more detail how we calculate your insurance premium.

Does company’s accident record affect my premium?

Yes. Your ability to control workplace accidents can affect your insurance premium. If your safety record is better than the average for your industry, your premium could decree a s e by a percentage. A worse-than-average loss history could result in an increase in premium. This calculation is called experience modification (ex-mod). If your payroll generates a minimum level set by the Workers’ Compensation Insurance Rating Bureau (WCIRB), the WCIRB will automatically begin calculation of an ex-mod for your business. Employers with a poor loss record or unsafe working conditions may also pay more than basic rates, due to a surcharge applied to their premium .

When you apply for insurance with State Fund, we may perform a risk evaluation of your operations to ensure a fair price representation. Additionally, after you become a State Fund insured, we can inspect your workplace at any time to observe conditions.

How is having a Return to Work program beneficial for my business?

Most studies indicate that injured employees recover faster when they return to work sooner. The evidence supporting Return to Work (RTW) programs is so compelling that workers’ compensation law now includes RTW provisions that allow for monetary reimbursements and/or reduced costs when an eligible employer makes workplace modifications to accommodate the employee’s return to modified or alternative work. Reimbursements to qualified employers may be payable to the employer from the state Division of Workers’ Compensation, and can be up to $1,250 or $2,500 for workplace modifications, depending on whether the employee is temporarily disabled or permanently disabled. An RTW program can also achieve cost savings by reducing or eliminating temporary disability (TD) payments, reducing permanent disability (PD) payments by 15 percent (for qualifying employers), and reducing or preventing the Supplemental Job Displacement Benefit (SJDB) voucher for retraining.

What if my employee is a victim of a crime in the workplace?

Under Labor Code §3553, in the event that an employee is a victim of a crime in the workplace, you must notify y o u r employee of his or her eligibility for workers’
compensation for injuries, including psychiatric injuries, that may have resulted from a workplace crime. You are required by workers’ compensation law to provide the notice, either personally or by first-class mail, within one (1) working day of the crime, or within one (1) working day of the date you reasonably should have known of the crime.

What are workers’ compensation benefits and rights?

Medical care. Within one day after an employee files a claim form, the law requires the employer to authorize medical treatment as required and limited by the law, until the claim is accepted or rejected, up to a limit of $10,000 in total. All medical treatment is provided in accordance with the medical treatment utilization schedule. If State Fund accepts the employee’s claim, State Fund will pay all approved medical care that is reasonable, necessary, and supported by evidence-based treatment guidelines. This care may include doctors, hospital services, physical therapy, lab tests, x-rays, medicines, and related reasonable transportation expenses. For injuries on or after January 1, 2004, there are limits on the number of chiropractic, occupational therapy, and physical therapy visits. State Fund pays for all authorized treatment, so the employee should not receive any bills. The law states that the employee is not responsible for co-payments or balance- due bills after we have paid the provider.

Pre-designation of physician. The employee can pre-designate a personal physician. However, effective April 19, 2004, there are new requirements and thresholds for pre-designation. State Fund advises employers to provide all new and existing employees with the New Employee’s Guide to Workers’ Compensation brochure (form 15765), which contains the new provisions of the law and includes the new pre-designation form.

Temporary Disability. The employee receives this payment every two weeks to replace a portion of the wages lost while recovering from the injury. Payments begin after the third calendar day the employee is unable to work. The amount is two-thirds of the employee’s weekly earnings, within a minimum and maximum benefit amount, as determined by current law.

Permanent Disability. This benefit is money that compensates an employee for any permanent disability suffered as a result of the injury. The amount of compensation is based upon a formula that takes the factors of the permanent impairment reported by the examining physicians, as well as the employee’s age, occupation, and diminished future earning capacity.

Vocational rehabilitation and SJDB. For injuries occurring before January 1, 2004, if the employee is unable to return to his or her job due to a workers’ compensation injury, he or she may qualify for vocational rehabilitation benefits. There habilitation plan may be as simple as a modification of the current job to accommodate any limitations suffered , or it may involve training for a new job. Our vocational rehabilitation counselors will help the employee obtain any needed services. For injuries on or after January 1, 2004, if the injury results in permanent disability, and the employee is unable to return to work within 60 days after the last payment of temporary disability, or you do not offer modified or alternative work within 30 days of the end of temporary disability, a non-transferable voucher for education-related costs is payable to a state-approved school. The voucher can range up to $10,000, depending on the level of permanent disability. This benefit is called a Supplemental Job Displacement Benefit (SJDB). The following table shows the different ranges.

Supplemental Job Displacement Benefits (SJDB)
Permanent Disability Level SJDB Voucher Amount

Less than 15% Up to $4,000

15% to 25% Up to $6,000

26% to 49% Up to $8,000

50% to 99% Up to $10,000

Death benefit. If the injury causes death, a benefit is payable to qualified surviving dependents. In addition , burial expenses are covered up to a maximum limit. Note: Death benefits will be paid until the youngest minor child reaches age 18 and will continue even if the aggregate total exceeds the statutory maximum amount. This coverage applies only to injuries on or after January 1, 1990. For injuries on or after January 1, 2003, benefits will be paid to a dependent child for life when physically or mentally incapacitated from earning. Effective January 1, 2004, if no dependents exist, $250,000 will be paid to the employee’s estate.

What is State Compensation Insurance Fund?

The California Legislature established State Fund in 1914 for two reasons: to provide employers with an available market for workers’ compensation insurance at the lowest possible cost; and to make certain that injured workers receive prompt and complete care for a work-related injury or illness.

Though it was established by the Legislature, State Fund has never been tax-supported. State Fund operates competitively with other insurance carriers while acting as a yardstick for the maintenance of fair premium rates for employers and the fair treatment of injured employees. State Fund offers a high level of service to its policyholders and their injured workers. Our complete professional staff consists of servicing underwriters, claims adjusters, safety specialists, auditors , attorneys, Return to Work consultants, and vocational rehabilitation counselors.

I want to report a claim as quickly as I can. Is there a service available to allow me to report a claim immediately?

Our policyholders may report an injury immediately t h rough our Claims Reporting Center, which is available 24 hours a day, 7 days a week. To report an injury using this service, simply call. We encourage our policyholders to use this service to expedite completion of the Employer’s Report of Occupational Injury or illness (form 3067) directly over the phone, thus avoiding additional paperwork.

What is first aid?

First aid is defined in Labor Code §5401 as “any one-t i m e treatment, and any follow-up visit for the purpose of observation of minor scratches, cuts, burns and splinters, or other minor industrial injury, which do not ordinarily require medical care.” This section further provides “this one-time treatment, and follow-up visit for the purpose of observation, is considered first aid even though provided by a physician or registered professional personnel.”

If the employee needs additional care or there is lost time from work beyond the employee’s work shift, the injury is no longer considered first aid and an employee claim form (form 3301/DWC1) must be provided to the employee and an Employer’s Report of Injury (form 3067) is to be completed.

All industrial injuries, including “first-aid” injuries, require the filing of a Doctor’s First Report of Occupational Injury or Illness ( form 5021). Workers ’ compensation law mandates that all physicians must complete and submit the Doctor’s First Report to the employer’s claims administrator within 5 days.

Upon receipt of the Doctor’s First Report, State Fund will send a copy to the California Department of Industrial Relations. At that point State Fund will determine whether the injury/illness meets the Labor Code definition of first aid. If it does, the Doctor’s First Report will be sent to the employer along with any related medical bills. If an employer does not want to handle payment of first-aid injuries, State Fund will draw up a claim and pay the approved bills. If you have any questions, please contact your State Fund claims representative.

How can I obtain a policy with State Fund?

We need to know how many employees you have, their estimated annual payroll, and what kind of work they do. You can complete and return the questionnaire by mail or take it to the State Fund office nearest you. Once we have reviewed the information and assessed your operations, we can p rocess your application. In some cases, we can write your policy while you wait at our office. You may also obtain coverage through your insurance broker.

Can I get a quote over the phone?

Determining the correct job classifications and rates for premium calculation is not as simple as it may sound . Jobs that appear to be similar may be considered different for classification purposes. State Fund reviews your operations carefully to make sure that your charges are the correct rates. For this reason, we cannot give estimates over the phone.

Need more information ?

You can contact your broker or the State Fund location nearest you for more information about our services. Locations and phone numbers are listed on the back of this brochure.

Heat Illness in the Workplace: How You Can Control the Risk
When temperatures increase, workers face a greater risk of experiencing heat illness. This type of hot condition strikes employees in many different industries and can be fatal in the most extreme cases. Cal/OSHA requires employers of outdoor workers to control their employees’ exposure to excessive heat to prevent the debilitating effects of heat illness,

Take All The Preventive Steps That You Can Take

By following some simple guidelines, employers can better protect their employees against heat illness.

The Cal/OSHA Heat Advisory lists seven steps employers can take to reduce heat risks:

Recognize the hazards of heat and working conditions

Supply adequate drinking water

Provide shaded working and rest areas

Acclimate workers to hotter conditions

Schedule rest breaks

Recognize the symptoms of heat illness and get prompt medical attention

Establish heat illness training for supervisors and employees

Group Insurance Savings
Enjoy the Advantages of a Group Plan
it is easy to get more workers’ compensation coverage by joining a group program. State Fund offers Group Workers’ Compensation Insurance through more than 200 trade associations, representing a wide range of industries throughout California. Group members enjoy numerous advantages that add value to a workers’ compensation policy, including:

Cost savings
Convenient service
Safety programs
If you are an individual State Fund policyholder, consider converting to a group program at renewal and discover the difference.

Savings Advantages
All group policies receive a 6 percent discount. Because this group discount is combinable with other State Fund discounts, employers save more on their premiums.

Small employers with low payroll save by paying a reduced group minimum premium.
Because of a group’s mandatory loss-control threshold, employers have an added incentive to create safer workplaces and decrease their claims costs and experience modifications.

Group policyholders may also benefit from additional claims-management services, such as the Alternative Dispute Resolution program.

Service Benefits
Trade association programs may provide advice on business procedures, legislative advocacy, and necessary forms and documents. Other group services may include health and dental plans, legal services, and life insurance.

Many associations perform claims reviews. Close monitoring of claims can help resolve them sooner, which can result in reduced experience modification.

As a group member, you receive an additional layer of service from State Fund’s staff of group specialists. These resources can help employers more effectively take advantage of the trusted core of State Fund services.

Membership gives employers a voice for member feedback as well as a network for contacts and information.
Safety Enhancements

Group members share a commitment to maintaining a good safety record, with selective underwriting review to maintain low group losses.

Employers get industry-focused safety services that may include the interpretation of regulations, emergency-care planning, safety seminars, and a review of workplace accidents and their costs and trends.
 

How to Qualify

Must be a current member in good standing of a qualifying association.
Must meet the requirements of having the proper designated governing class code or schedule.
Must meet the group underwriting criteria for the specific association.

GLOSSARY OF WORKERS COMPENSATION TERMS

Advisory Organization
The new designation for what were formerly known as rating bureaus (such as the NCCI). This new term, recently coined by the National Association of Insurance Commissioners, is meant to reflect more accurately the role of NCCI and other such organizations (like Insurance Services Office) which compile rating data and file policy forms for use by member insurance companies.

ALE - Allocated Loss Expenses
Insurance company costs for adjusting and settling claims which can be identified with a specific claim. The ALE are often then included in the claims costs used to adjust premium in some loss-sensitive premium adjustment types of workers' comp policies, such as sliding scale dividend plans or some retro- or retention plans.

ARAP - Assigned Risk Adjustment Program
An additional debit charge placed on Assigned Risk policies (In NCCI jurisdictions) with experience modification factors higher than 1.00. The notable exception is Massachusetts, where ARAP stands for All Risk Adjustment Factor. This is a surcharge that increases premiums over and above the experience modifier, and in MA the ARAP can be levied against all employers, not just those in the Assigned Risk Plan.

Assigned Risk Plan
Sometimes called "the Pool", this is a mechanism established by individual states to make sure that employers can obtain workers' compensation insurance even if insurance companies are not willing to write such insurance on a voluntary basis. Assigned risk plans in many states carry higher rates than the voluntary market.

Audited Premium
The final premium for the policy term, produced by auditing actual payroll exposures.

Audit work paper
Worksheet prepared by the premium auditor, can be either hand-written or computerized, showing how the auditor arrived at the payroll numbers that are used to determine the audited premium.

Carve-Out
An option allowed in California and some other states, where an employer and the union for the employer's workers agree to collectively bargain a separate schedule of Workers' Compensation benefits that differs from the statutory program imposed by the state.

Classification Code
Also called Class Code. The workers' comp premium rate commensurate with the risk associated with that workplace exposure. For example, the classification code for an office clerk should carry a significantly lower rate than the code for a roofer. Misclassification is one of the most common causes of overcharges.

Direct Writer
An insurance company that does not work through independent insurance agents. The largest direct writer of workers' compensation insurance is Liberty Mutual. Agents for direct writers are employees of the insurance company.

Dividend
A return of premium, calculated after policy expiration, based on the over-all performance of the insurance company or of a group of insured's. Dividends cannot be guaranteed in advance, although they are often shown on proposals for insurance.

Employers' Liability
Section B of the standard Workers' Compensation insurance policy, this is the part of the policy that has a dollar limit shown for the coverage. This section insures employers for liability towards employees that is not covered by the statutory Workers' Compensation provisions of the state (which are insured in Section A and have no set dollar limit on the policy).

Excess Losses
In the Experience Modification Factor, the amount of any single claim that exceeds $5,000.

Experience Modification Factor
An adjustment to Manual Premium, calculated by an advisory organization (also known as rating bureaus) such as NCCI, based on historic loss and payroll data of a particular insured. Also called Experience Modifier, or Experience Mod.

Experience Period
The window of time from which loss and payroll data is used to calculate an experience modification factor for an employer. Normally this window is a three year period, starting four years prior to the effective date of the experience modifier. However, rating bureaus do not wait until three full years of data are in the experience period before producing an experience rating for an employer. If an employer reaches a certain, relatively low threshold of workers' compensation insurance premiums in any one of the three years in the experience period "window", this will make that employer eligible for experience rating.

Fronting
An arrangement between two insurance companies to produce an insurance policy (usually workers' compensation) for a third party wherein one insurance company produces the official policy (for a fee) but cedes all losses from that policy to the other insurer. This kind of arrangement is used in situations where the insurer writing the risk is not an admitted company in a particular state, and the coverage needs to be written by an admitted carrier. In order to meet the statutory requirements, the first insurer pays a second (admitted) insurer to "front" the policy, even though the first insurer remains responsible for paying all losses arising under the policy. This kind of arrangement is often used by captive insurers when they are not admitted carriers in a particular state.

Governing Classification
The classification code on an employer's workers' compensation insurance policy that generates the most payroll aside from standard exception classifications such as clerical or outside sales (unless there is no other workplace classification applicable other than a standard exception).

Guaranteed Cost
A Workers' Compensation insurance policy that is not subject to adjustment due to losses that occur during the policy term. In a guaranteed cost policy, the only variable affecting premium that should change between policy inception and audit is payroll. This is in contrast to the various kinds of loss sensitive plans, such as retrospective rating, retention plans, or sliding scale dividend plans, where there is a premium adjustment made based on losses incurred during the policy term.

Incurred Losses
Paid losses plus loss reserves for estimated future claims costs. Many loss sensitive insurance policies adjust premium based on incurred losses rather than just on paid losses.

Interstate Rating
An experience modification factor that applies across more than one state. Interstate ratings are calculated by NCCI for employers whose past workers compensation insurance policies show payroll in more than one state. Most, but not all states, participate in the interstate rating system. A few states, such as Michigan, Pennsylvania, and Delaware, do not participate in interstate rating, but instead continue to calculate separate experience ratings for employers who operate in their jurisdictions, even if those employers also qualify for interstate rating. Those employers thus have one experience modifier applying to their operations in most states but a separate modifier calculated by the stand-alone state rating bureau. The separate stand-alone mod would apply only to workers compensation insurance premiums developed for the employer's operations in that stand-alone state.

Manual Premium
Workers' compensation premium calculated by multiplying payrolls by appropriate rates, before application of experience modifier, schedule credit, or premium discount.

Medical-Only Claims
Claims for which the only cost is medical care, without any lost-time benefits being paid.

Merit Rating
A premium adjustment used in some NCCI states for employers too small to qualify for an experience modification factor. It provides either a premium credit or a debit for such employers based on prior claims (or lack of them.)

Modified Premium
Workers' Compensation premium calculated after application of experience modification factor. Similar to standard premium, but does not reflect any schedule credits or debits.

NCCI: The National Council on Compensation Insurance
The organization responsible in many states for determining proper Workers' Compensation classifications, experience modification factors, and collecting data used for ratemaking. NCCI also writes the manuals used in many states to calculate Workers' Compensation premiums, and also administers the Assigned Risk Plan in many jurisdictions. NCCI is a private organization, not connected with government, although it is often mistakenly thought to be a governmental agency. In fact, it is a non-profit privately held corporation owned by major insurance companies, whose executives constitute a majority of the directors on NCCI's board.

Premium Auditor
A harmless drudge (with apologies to Samuel Johnson and auditors everywhere -- just kidding!) The premium auditor determines actual exposure (remuneration) for a policy period, in order to determine the final audited premium. The auditor typically works either directly for the insurance company, or for a third-party company retained by the insurance company.

Premium Discount
A premium credit, based on size of the premium paid. It is normally given automatically on voluntary market policies, although retrospective rating or sliding scale dividend policies usually do not have a premium discount.

Primary Losses
In the experience modification factor, the first $5,000 of any single loss.

Rating Bureau, or Rating Organization
See NCCI. Some states maintain their own separate rating bureau, although these often follow NCCI rules and use NCCI manuals. Currently, the states of California, Delaware, Hawaii, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Texas, and Wyoming operate their own non-NCCI rating bureaus. Many of these largely follow NCCI rules for computing premiums and classifications, but California, Delaware, Texas, and Pennsylvania are notably different than NCCI in some aspects of classification and premium computation.

Remuneration
The basis for calculating Workers' Compensation premium. Remuneration is primarily payroll, but may also include other forms of employee compensation. Workers' Compensation premium is computed by applying varying rates (for different classifications) (per hundred dollars of remuneration).

Residual Market
Workers' comp written through an assigned risk plan.

Retrospective Rating
A Workers' compensation insurance policy that makes a subsequent adjustment to premium, after policy expiration, based on losses generated during the policy period. The adjustment can go up or down, within set parameters, based on the losses generated during the policy period.

Retention Plan
Similar to Retrospective Rating, this is a Workers' Compensation policy format that adjusts the premium, up or down, based on losses (and associated costs) that occur during the policy period.

Schedule Credit/Debit
A discretionary premium adjustment based on underwriters evaluation of special characteristics of a risk not reflected in the experience modifier.

Scopes Manual
Manual produced by NCCI which details what kinds of workplace exposures belong in particular Workers' Compensation classification codes.

Sliding Scale Dividend
A return of premium, after policy expiration, based on the actual loss experience of the insured business. The size of the dividend varies with the actual loss ratio of the insured business.

Short Rate Penalty
A penalty applied by insurers when a Workers' Compensation insurance policy is cancelled by the insured before the expiration date of the policy. This penalty is steep in the early days of the policy, and gradually tapers off the closer the policy gets to the expiration date.

Standard Exception
Classifications which are normally not included in the governing classification. These are clerical, outside sales, and often (but not always) drivers.

Standard Premium
Premium after application of Experience Modifier and Schedule Credit/Debit, but before Premium Discount.

Voluntary Compensation
An endorsement to the standard Workers' Compensation insurance policy which extends coverage to employees not required to be covered under the state's statutory Workers' Compensation provisions.

Voluntary Market
Workers' Compensation insurance written outside of the Assigned Risk Plan.

Workers' compensation
Workers' compensation (colloquially known as workers' comp in North America or compo in Australia) is a form of insurance that provides compensation medical care for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as "the compensation bargain." While plans differ between jurisdictions, provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in worker compensation plans.

Employees' compensation laws are usually a feature of highly developed industrial societies, implemented after long and hard-fought struggles by trade unions. Supporters of such schemes believe they improve working conditions and provide an economic safety net for employees. Conversely, these schemes are often criticized for removing or restricting workers' common-law rights (such as suit in tort for negligence) in order to reduce governments' or insurance companies' financial liability. These laws were first enacted in Europe and Oceania, with the United States following shortly thereafter.

Compensation prior to statutory law
Prior to the statutory establishment of workers' compensation, employees who were injured on the job were only able to pursue their employer through civil or tort law. In the United Kingdom, the legal view of employment as a master-servant relationship required employees to prove employer malice or negligence, a high burden for employees to meet. Although employers' liability was unlimited, courts usually ruled in favor of employers, paying little attention to the full losses experienced by workers, including medical costs, lost wages, and loss of future earning capacity.

Statutory compensation law

Statutory compensation law provides advantages to both employees and employers. A schedule is drawn out to state the amount and forms of compensation to which an employee is entitled, if he/she has sustained the stipulated kinds of injuries. Employers can buy insurance against such occurrences. However, the specific form of the statutory compensation scheme may provide detriments. Statutory schemes often award a set amount based on the types of injury. These payments are based on the ability of the worker to find employment in a partial capacity: a worker who has lost an arm can still find work as a proportion of a fully-able person. This does not account for the difficulty in finding work suiting disability. When employers are required to put injured staff on "light-duties" the employer may simply state that no light duty work exists, and sack the worker as unable to fulfill specified duties. When new forms of workplace injury are discovered, for instance: stress, repetitive strain injury, silicosis; the law often lags behind actual injury and offers no suitable compensation, forcing the employer and employee back to the courts (although in common-law jurisdictions these are usually one-off instances). Finally, caps on the value of disabilities may not reflect the total cost of providing for a disabled worker. The government may legislate the value of total spinal incapacity at far below the amount required to keep a worker in reasonable living conditions for the remainder of his life.

A related issue is that the same physical loss can have a markedly different impact on the earning capacity of individuals in different professions. For instance, the loss of a finger could have a moderate impact on a banker's ability to do his or her job, but the same injury would totally ruin a pianist.

Statutory compensation in Australia
As Australia experienced a relatively influential labor movement in the late 19th and early 20th century, statutory compensation was implemented very early in Australia.

Workers' compensation in Brazil
The Welfare (called Instituto Nacional do Seguro Social - INSS) is the social insurance for those who contribute. It is a public institution that aims to recognize and grant rights to its policyholders. The amount transferred by the Welfare is used to replace the income of the worker taxpayer, when he loses the ability to work, by sickness, disability, age, death, involuntary unemployment, or even maternity and imprisonment. During the first 15 days worker’s salary is paid by his employers and after that by Welfare, while inability to work lasts. It is up to 75% of the workers’ wages.

The Brazilian Welfare went through several conceptual and structural changes, involving the degree of coverage, the list of benefits and how the system is financed. In the other hand, if workers intend to receive a compensation from their former employer, there is a time limit for filling a claim (2 years), which must be legally supported. Workers’ compensation laws are the same in the whole country and tend to be protective.

Statutory compensation in Canada
Workers' compensation was Canada's first social program to be introduced as it was favored by both workers' groups and employers hoping to avoid lawsuits. The system arose after an inquiry by Ontario Chief Justice William Meredith who outlined a system that workers should be compensated for workplace injuries, but that they must give up their right to sue their employers. It was introduced in the various provinces at different dates Ontario was first in 1915, Manitoba in 1916, British Columbia in 1917. It remains a provincial responsibility and thus the exact rules vary from province to province. In some provinces, such as Ontario's Workplace Safety and Insurance Board, the program also had a preventative role ensuring workplace safety. In British Columbia, the occupational health and safety mandate is legislated. In most provinces it remains solely concerned with insurance. It is paid by employers based on their payroll, industry sector and history of injuries (or lack thereof) in their workplace, sometimes known as "injury experience".

Statutory compensation in the United States
Workers' compensation laws were enacted to reduce the need for litigation, and to mitigate the requirement that injured workers prove their injuries were their employer's "fault". The first state law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906. By 1949, all states had enacted some kind of workers' compensation regime. Such schemes were originally known as "workman's compensation," but today, most jurisdictions have adopted the term "workers' compensation" as a gender-neutral alternative.

In the United States, most employees who are injured on the job have an absolute right to medical care for that injury, and in many cases, monetary payments to compensate for resulting temporary or permanent disabilities. Most employers are required to subscribe to insurance for workers' compensation, and an employer who does not may have financial penalties imposed. In many states, there are public uninsured employer funds to pay benefits to workers employed by companies who illegally fail to purchase insurance. Insurance policies are available to employers through commercial insurance companies: if the employer is deemed an excessive risk to insure at market rates, it can obtain coverage through an assigned-risk program.

In the vast majority of states, workers' compensation is solely provided by private insurance companies. 12 states operate a state fund (which serves as a model to private insurers and insures state employees), and a handful have state-owned monopolies. To keep the state funds from crowding out private insurers, they are generally required to act as assigned-risk programs or insurers of last resort, and they can only write workers' compensation policies. In contrast, private insurers can turn away the worst risks and can write comprehensive insurance packages covering general liability, natural disasters, and so on. Of the 12 state funds, the largest is California's State Compensation Insurance Fund. The federal government pays its workers' compensation obligations for its own employees through regular appropriations.

It is illegal in most states for an employer to terminate or refuse to hire an employee for having reported a workplace injury or filed a workers' compensation claim. However, it is often not easy to prove discrimination on the basis of the employee's claims history. To abate discrimination of this type, some states have created a "subsequent injury trust fund" which will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable injury. It is also suggested that laws should be made to prohibit inclusion of claims history in databases or to make it anonymous. (See privacy laws.)

Employees may not falsely claim benefits. There have been instances where the sub rosa videos recorded by private investigators show employees engaging in sports or other strenuous physical activities, although the employees allegedly suffered disability or injury. [citation needed]. Such evidence may not be admissible at a trial, if it is found that the taping infringed on the employees' reasonable expectation of privacy. citation needed]

Some employers vigorously contest employee claims for workers' compensation payments. In any contested case, or in any case involving serious injury, a lawyer with specific experience in handling workers' compensation claims on behalf of injured workers should be consulted. Laws in many states limit a claimant's legal expenses to a certain fraction of an award; such "contingency fees" are payable only if the recovery is successful. In some states this fee can be as high as 40% or as little as 11% of the monetary award recovered, if any.[citation needed]

In the vast majority of states, original jurisdiction over workers' compensation disputes has been transferred by statute from the trial courts to special administrative agencies.[citation needed] Within such agencies, disputes are usually handled informally by administrative law judges. Appeals may be taken to an appeals board and from there into the state court system. However, such appeals are difficult and are regarded skeptically by most state appellate courts, because the point of workers' compensation was to reduce litigation. A few states still allow the employee to initiate a lawsuit in a trial court against the employer. Ohio allows appeals to go before a jury.[1]

Alternate forms of statutory compensation in the United States
Employees of common carriers by rail have a statutory remedy under the Federal Employers' Liability Act, 45 U.S.C. sec. 51, which provides that a carrier "shall be liable" to an employee who is injured by the negligence of the employer. To enforce his compensation rights, the employee may file suit in United States district court or in a state court. The FELA remedy is based on tort principles of ordinary negligence and differs significantly from most state workers' compensation benefit schedules.

Seafarers employed on United States vessels who are injured because of the owner's or the operator's negligence can sue their employers under the Jones Act, 46 U.S.C. App. 688., essentially a remedy very similar to the FELA one.

Opposition to statutory compensation in the United States
Opponents argue that workers' compensation laws may hurt the U.S. workers they were designed to help citation needed]. Large employers may have an incentive to move segments of their business -- and their jobs -- to areas where workers' compensation benefits (and other employee protections) are less generous or are harder to obtain. This is because the United States lacks a unified and national set of employee entitlements covering minimum wage, wage and hour, or collective bargaining rights in addition to compensation. Labor unions describe this system as a race to the bottom, as state legislatures cut employee entitlements to attract capital. Moreover, applying laws to citizens (or organizations) abroad, is an exception rather than the rule under common law.

United States employers can also move some operations to other countries where employee entitlements are much lower than in the U.S., and where there may be no workers' compensation or other legal remedies at all for workers who are injured or who are exposed to hazardous substances while on the job. Such countries may also have weaker or no legal protections available for employees in areas such as job discrimination, social security, or the right to organize or to join a trade union. Some small business owners complain that the cost of workers’ compensation, which they pay in the form of insurance premiums, places a heavy burden on them.

Economists who favor the distributism system of economics cite workers' compensation as an example of how far the modern capitalist economic system approaches what they call the "servile state" or "slavery worker" system. They say that in past times, when ownership of the means of production were more widely distributed, it would not be natural to hold an employer responsible for a worker's injury, since the worker was freely choosing to work for that employer. Distributors assert that in modern times, with the vast majority of people dispossessed of the means of production, requiring employers to have workers compensation shows how much workers really are dependent on being employed and are essentially forced to work for someone else to survive. Some distributors who feel that capitalism is heading in the direction of a slavery system feel that this will come about by workers exchanging their personal freedom for economic benefits like workers' compensation.

Workers' Compensation Cost Containment
Many things can be done to reduce the cost of workers' compensation. While many business owners and managers initially think "workers' compensation is the cost of doing business," this is not really true and there are many controls that can be put in place inside a company to make sure an employer pays only for legitimate injuries, from the time an employee is medically unable to return to any productive task at the workplace.

This field of risk management is a specialized niche called "post loss cost containment," "injury management cost reduction," and several other names. The specialty centers around actions an employer can do to "manage" the processes in the workplace immediately after an injury occurs. There are four stages to the workers' comp cost containment process including: assessment & recommendations, design & development, implementation and rollout.

Cost drivers
The areas generally considered to be key cost drivers are:

building management commitment,
working with the insurance company & insurance adjusters,
implementing an effective return to work & transitional duty program,
coordinating medical care,
medical cost management,
recognizing fraud and abuse,
improving communication with employees, and
training supervisors.
Employers should use a "holistic" approach to workers' compensation cost containment by looking at the total problem, rather than focusing only on one area such as reducing medical bills. By taking a "can do" approach, employers focus on controlling procedures within their control rather than the many things they cannot control. For example, employers cannot quickly or easily change the workers' comp laws or eliminate plaintiff's lawyers or the legal system, items that are frequently mentioned as "causes" of high workers' comp costs; however, an employer can implement a "post-injury response procedure" in their own workplace specifying what an employee must do if injured. Employers must "take charge" of those things within their control.

Policies
Having consistent policies and forms helps the employer remain in control of the process. Even very small companies should have a tight post-injury procedure to help management control the post-injury process. The overall goal is for 95% of injured employees to return to work within 1-4 days after the injury unless they are medically unable to perform any productive role for the employer. The time out of work should be proportionate to the length of the disability. The Average Cost Per Employee in 2006, according to the 2006 RIMS Benchmarking Survey is $618 for all employers combined.


History
Workers' Compensation in the U.S. began in 1911 during the Progressive Era when Wisconsin passed the first statutory system. Other U.S. jurisdictions followed suit. In general, statutory Workers' Compensation systems strike a compromise, guaranteeing workers medical care and payment for lost time on a no-fault basis. Prior to the enactment of Workers' Compensation laws, injured workers had to file suit against employers (usually for the tort of negligence), and such legal actions had significant drawbacks for workers. At the same time, a successful suit could impose very large and unpredictable costs on an employer. Statutory Workers' Compensation systems provide for prompt payment of medical, rehabilitation, and lost time costs to injured workers, while placing limits on the cost of the system for employers. This trade-off became known as the "workers' compensation bargain"; that is, the worker traded his/her right to bring a tort suit against their employer in exchange for prompt medical care and disability payments (indemnity payments). Thus workers compensation is the original "Tort Reform."

In many states today, Workers' Compensation represents a major cost of business for employers, and there is ongoing political maneuvering by both business and labor groups to shift the compromise balance struck by Workers' Compensation statutes (for an example see California's Senate Bill (SB) 899). In general, business groups seek to limit the cost of Workers' Compensation coverage, while labor groups seek to increase benefits paid to workers.

For the commercial insurance market, Workers' Compensation represents a major line of business, although one that is sometimes problematic for the insurance industry. Premiums are large, but many insurers find it difficult to turn a profit in many states, as benefit costs sometimes exceed premiums. This line of insurance is regulated fairly closely by most states, although in recent years many states have allowed insurance companies greater flexibility in pricing this line of coverage. The hope has been that by encouraging price competition among insurers for Workers' Compensation insurance, employers would benefit by being able to obtain lower overall premiums. However, the introduction of competitive pricing for Workers' Compensation insurance has also led to significant swings in cost, as the insurance market moves between 'hard' and 'soft' markets. Employers often benefit from lower premiums in 'soft' insurance markets, only to see their premiums increase exponentially during 'hard' insurance markets.

Injured Workers sometimes complain that insurance companies do not treat them fairly or in compliance with the law, while employers often complain about their costs of insurance being driven up by exaggerated or fraudulent claims. Thus, the field engenders a considerable amount of controversy and litigation. These disputed areas include both claims and premium computations.

The statute of limitations for filing a compensation claim for an accidental injury varies from state to state.