A Case for Providing Workers' Compensation Coverage
As a business, one of your most important assets is your people. So when an employee suffers a work-related injury or illness, you feel it emotionally and financially. Workers’ compensation provides employers and their employees with workplace injury protection under a “no fault” system. Meaning the insurance company will pay for an injury during the course and scope of employment regardless of fault. In exchange for medical care and lost time benefits resulting from the work related injury, the employee gives up the right to sue the employer as a result of the injury.
In Texas, employers have the option to either purchase workers' compensation or not. Some employers elect not to purchase the coverage under the assumption that health insurance will pay for a work related injury, while in fact, employment related illnesses and injuries are specifically excluded under the majority of these programs. If coverage would apply, then your employee would still be subject to out of pocket expenses such as deductibles and coinsurance. Also, health insurance will not respond at all to loss time benefits, which would cause your employees extreme financial hardships.
Another reason many elect not to purchase workers' compensation is because they think the cost is too high. The cost has gone down due to the following:
- Tort Reform: Several years ago, before much of the tort reform came into play regarding the caps for injuries, the workers' compensation premiums were 40% higher and continuing to grow. Tort reform has done much for the cost of this important coverage. The base cost of this coverage is down by 40% and experience modifications are lower than they have been historically, due to the claims cost decrease.
- Network Credit: Carriers today have a network of physicians willing to accept negotiated rates for services on the basis of volume provided. Many carriers can offer discounts up to 15% for your willingness to direct your employees to these physicians.
- Competitive Market: Carriers may offer additional credits based upon each individual risk, up to 40% in some instances.
Statistics prove that the majority of workers’ compensation claims are preventable. There are many critical factors that affect cost in work-related injuries that are within the employer’s control, such as accident prevention. This can be implemented by an evaluation of the workplace and a walk-through identifying possible work hazards.
Once an incident occurs, a timely and company-mandated investigation is key. Gathering information as quickly as possible and reporting it to the insurance company prevents a broader claim of injuries than what may have really occurred and prevents further injuries of the same nature.
Finally, ongoing communication is a necessity. A common mistake made by employers is failure to keep open lines of communication with employees after a work-related injury. This can often have a negative impact on the outcome of a claim because many employees misread the lack of contact as a lack of caring.
While workers' compensation is an elective coverage, failure to carry it could put your business assets at risk because you are still obligated to provide the medical, lost time and death benefit to your employees - you just no longer have the insurance mechanism to do so.
Dennis Northington, Frost Insurance