Workers Compensation Part 1 Flashcards
WC Statute
- Obligates ER to pay specified medical disability, rehab and death benefits
- Job Related
- Regardless of Fault
Benefit Requirements
- Must arise out of and in the course of employment
- Occupational Disease covered
- Cause and Effect relationship
Benefits Provided
- Medical
- Full and unlimited medical expenses benefits of covered injury or disease
- First Dollar Coverage: no deductible or co-insurance
Disability
Work will eventually resume all duties
1) Temporary Partial Disability:
2) Temporary Total Disability
3) Permanent Partial Disability
4) Permanent Total Disability
Temporary Partial Disability
prevents injured worker from performing some job duties for a definite period of time
Temporary Total Disability
unable to perform any job duties fora specific period of time
Permanent Partial Disability
Suffers an irreversible injury but can return to some work duty; lose an eye
Permanent Total Disability
They will never be able to perform job duties again
Disability Benefits
- Loss of wages during injury period
- Deductible: Waiting period
- Paid Weekly
- % of salary; varies by state
- compensation also for losing specific body parts
- Does not hinge on wage loss
Rehabilitation Benefits
- Goal to return to work
- Pay expenses for physical therapy
- Can cut the cost of claims
- Cuts costs/saves money
Death Benefit
- Burial expense
- Partial Replacement of worker’s former weekly wage
- Varies based on the number and types of dependents
Out of State Law Application
- When traveling in another state
- File in the state injury occurred
- File in state where employer/job is located
- ## File in the state where the EE resides
What drives the decision on state to file?
State the pays the most
Methods to meet WC Obligation
1) Private Insurance
2) Assigned Risk Plans
3) State Funds
4) Self Insurance
Private Insurance
- Pay premium: insurer pays and administers claims
- Highly experienced based
Assigned Risk Plans
- Can’t acquire private insurance
- Unable to meet insurer underwriting requirements
- Poor experience
- Varies by state
- Usually a pool of business accepted by private carriers funneled via the state
- Common with auto is both mandatory
State Funds
- Half of states have set up funds
- Controlled by state but function like private insurer
- Accept any good faith application by a state company
- Some states compete with private carriers
- Some states is only option
Competitive State Funds
- Some states’ funds compete with private carriers
- ER can buy from state or private carrier
Monopolistic State Funds
- Some states it is only option
- Unable to purchase rom private carrier
- North Dakota, Ohio, Washington, West Virginia, Wyoming, and Puerto Rico
Self Insurance
- Long tail (Non Volatile) appealing with time value of money
- Allowed by state if financial capacity is demonstrated
- Sometimes must post bond with state
- Must also demonstrate an ability to properly administer a plan
- Appropriate for ERs large and with good experience
Self Insurance Challenges
- ER often purchases excess coverage to cover a catastrophic loss when self insuring
- Aggregate Excess: covers total losses past retention point to a stated limit and not tied to a specific location; only claims in total
- Specific Excess: Retention Amount to a maximum
- On per claim basis
Policy - WC
- WC + EL Policy
- WC and ER Liability
- Policy Form is filed and maintained most states
- Not ISO
- National Council on Compensation Insurance (NCCI)
Policy: Part 1
- WC
- Pays for obligations required by law
- Insurer also defends in a lawsuit
- Also pays for a penalty to ER
ER Penalty List
1) Willful Misconduct
2) Illegal Employment
3) Failure to comply with health and safety laws
4) Discrimination against any EE who files a WC claim
Policy: Part 2
- ER Liability
- Pays for EE injury, not WC
- 3rd party lawsuit
- Family member lawsuit (loss of consortium); spouse injury asbestos
Policy: Part 2 Exclusions
- Injury outside US or Canada
- Punitive damages due to illegal EE
- Intentional bodily injury on part of Insured
Policy: Part 3
- Other state’s insurance
- Extends WC and EL automatically to any state listed in section 3
- Section 3A lists states currently operating
- 3C are states you might operate
- Must inform insurer when 3C star becomes active
- If you enter state that is not on 3A or 3C - must notify insurer within 30 days
- Why not just say all states; might not be licensed, some monopolistic, insurer must avoid states not licensed or monopolistic states
Why not just say all states in WC policy?
- might not be licensed,
- some monopolistic,
- insurer must avoid states not licensed or monopolistic states
Stop Gap Coverage
- Insured has operations in monopolistic state
- State policies do not include Er’s liability
- Can be part of your WC policy that applies to there states
- Could also be part of your CGL
Rating WC
- MCCI files forms and endorsements for insurer in many sates
- Some states have their own rating bureaus
- Set tables used to create manual or “book rates”
- Premium uses payroll as its basis
Worker Classification
- Identify group of EEs to set rate on appropriate risk
- Governing classification is what best describes overall operation
- Not all EEs fit into this description/Classification
- Except in some situations; governing classification is what prevails in setting manual rates
WC Premium: Experience Rating
- Premium for particular insured is increased or decreed in future periods
- Tied to the experience of the inured
- Also tied to credibility of results; time and size
WC Premium: Retrospective
- Premium for an insured is increased or decreased in current premiums
- Pay a minimum premium
- Depending on results during policy period; refund or bill for additional premium
WC Premium: Large Deductible Plan
- Essentially self funding with catastrophic coverage
- Allows insured to self insure without going through the state requirements to set up self insurance program
- Not high deductible plan!
- Range from $50,000 to $250,000 per claim
Retrospective Good For?
- Insurer who is concerned about a marginal account
- Insured that is confident that claims will be low
