There are about 150 million Americans covered by workers’ compensation insurance. Most small businesses hope their employees never need it. But when a company has one of its workers injured on the job, basic questions often arise, such as how the program works and how long workers’ comp pays out claims.
To answer these essential questions, Insurance.com interviewed Matt Zender, senior vice president of workers’ compensation strategy at AmTrust Financial, the third-largest provider of this type of insurance in the U.S.
Zender started by defining workers’ comp as a system that helps injured workers recover from their injuries and compensates them if they have a temporary or permanent disability. He went on to explain how benefits work, how long they last and how they differ from state to state.
A lightly edited version of Insurance.com’s conversation with Zender follows.
How does workers’ comp work? What do small business owners need to know?
The first thing that a business owner should know is that in almost every state, workers’ compensation is mandatory. Failure to have coverage in place can result in a suspension of operations. Most policies are issued annually, and the exposure base – which is used to calculate premiums – is estimated payroll.
At the conclusion of the policy term, a payroll audit will be completed to determine the exact payroll and the premium will be adjusted accordingly.
For small businesses, addressing the requirements of workers’ compensation can be intimidating and time-consuming.
However, insurance carriers offer small business owners resources to facilitate the process. These resources can streamline the premium audit process, can help provide safety training and can help augment a company’s wellness approach, just to name a few.
What types of injuries are typically covered by workers’ comp?
Workers’ compensation is what is called a “no fault” system. This means that most injuries that occur during the course and the scope of a worker’s employment should be covered. There are some exclusions, such as intentional acts or horseplay, but whether the employee could or should have prevented the injury normally does not preclude the claim from being covered.
The most common types of injuries in workers’ compensation depend on the industry but often involve strains (often from lifting) and slips and falls.
How does workers’ compensation work for employees?
The typical way that workers’ compensation works is that employees notify their employer when they are injured. The employer then reports the claim to its insurance carrier, which starts the process. Depending on the severity of the injury, the injured workers will either need immediate care – usually at an urgent care facility – or they will work with their claims adjuster to schedule treatment.
How long does workers' comp take to start paying? How long do payments usually last?
Most states have a waiting period before temporary disability commences. This varies by state but is often around three days. If a medical provider has determined that the injured worker is unable to work in any capacity, and the waiting period has been met, temporary disability payments will commence, most typically on a bi-weekly basis.
How long it lasts will vary widely. Some workers can return to work with no time off at all and others are able to return to work in a modified capacity. Modified return to work can be a valuable way for employees to continue to work and for the employer to benefit from the contributions of the employee – but care needs to be taken to ensure the parties stay within medical restrictions.
Another variable factor that affects how long the workers’ compensation process lasts is medical treatment. Typically, the care continues until an injured worker reaches a state called “maximum medical improvement.” This term implies that the injured worker’s condition would not change with additional treatment. At this point, the doctor will offer an opinion about whether there are any permanent restrictions. For example, a worker may have sustained a rotator cuff injury and has sustained permanent loss of rotation in the shoulder. In this case, a permanent disability award would be in order and can be accomplished via a settlement.
Does workers' comp pay employees’ full salaries?
In most states, a worker with a temporary disability would receive 66% of their pre-injury wages. Taxes are not due on disability payments, so this often approximates their take-home income. However, there are maximum limits on temporary disability payments, so high-wage earners would see a gap.
Can family medical leave and workers’ compensation work together?
Workers' compensation is primary, meaning that it would stand in front of any Family Medical Leave Act or disability programs. An injured worker would normally not have to use FMLA if they are medically disabled.
How does workers’ comp work for casual or part-time workers?
Workers’ compensation is the same for both full-time and part-time workers, so long as they are in the course and the scope of their employment. If the injured worker was working multiple jobs, the combined income will generally be used to determine their disability rate.
Do workers' comp laws vary by state? If so, can you give us an example?
The workers’ compensation system is state-administered, so the rules absolutely vary by state. For example, Iowa has a three-day waiting period before temporary disability commences, whereas Kansas’ rule is seven days. In another example, in Florida, permanent restrictions do not follow a schedule and are paid out according to degree of impairment, whereas in Delaware there is a schedule that outlines the impairment, and in Massachusetts the benefits are outlined in state legislation.
While there are administrative differences to how the workers’ compensation system is applied, the goals of the system, according to the U.S. Chamber of Commerce Analysis of Workers’ Compensation Laws, are generally consistent across all states:
- Provide sure, prompt and reasonable income and medical benefits to work-accident victims or income benefits to their dependents, regardless of fault.
- Provide a single remedy and reduce court delays, costs and workloads arising out of personal injury litigation.
- Relieve public and private charities of financially draining incidents associated with uncompensated industrial accidents.
- Eliminate payment of fees to lawyers and witnesses as well as time-consuming trials and appeals.
- Encourage maximum employer interest in safety and rehabilitation through appropriate experience-rating mechanisms.
- Promote frank study of causes of accidents (rather than concealment of fault) thereby reducing the number of preventable accidents and consequent human suffering.
Are employees allowed to travel while on workers' compensation?
Yes, employees can travel while on workers’ compensation. They would need to stay within their work restrictions as outlined by their doctor and would need to maintain their course of treatment, but travel is not prohibited.
