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Workers’ Comp vs. Health Insurance for Technology Businesses

Workers’ Comp vs. Health Insurance for Technology Businesses

Friday, February 26, 2016/Categories: workers-compensation-insurance

Workers’ Compensation Insurance and health insurance offer related – but distinctly different – types of coverage to a business and its employees. These policies differ not only in how they work and when they’re used, but also in how state and federal law regulate them.

Understanding each is important, especially if your tech business is growing to the point that you need employees. We’ve provided a brief overview of Workers’ Comp vs. health insurance, as well as more detailed explanations below.

Workers’ Comp vs. Health Insurance

 

Workers’ Compensation Insurance

Health Insurance

Benefits

Coverage for employees’ medical expenses and lost wages following a work-related injury or illness.

Employer’s Liability Insurance (typically included) offers coverage for legal defense if employee sues.

Coverage for employees’ personal medical expenses.

Who pays

The employer pays the whole premium.

The employer can choose to pay the premium in part or in whole. The employee pays for the remainder.

How businesses can get it

Through private insurers, insurance agencies, or state-run programs, depending on the state.

Through private insurers, insurance agencies, or the Healthcare.gov Marketplace.

Important Regulations

State law determines which businesses need Workers’ Comp and how they can purchase it.

Small businesses with fewer than 50 FTE employees are not required to carry it, but if they do, federal law requires that it must be offered to all employees.

Workers’ Compensation Kicks in for Work-Related Injuries

Workers’ Compensation Insurance serves a specific role – essentially, to provide a safety net for workers who are hurt on the job.

Generally speaking, it’s the employer’s legal responsibility to cover an employee’s medical costs and lost wages when that employee…

  • Is involved in a work accident.
  • Suffers a work-related injury.
  • Becomes ill because of his or her work.

Employers purchase Workers’ Compensation Insurance, which can offer the funds for this coverage. These funds can be used to pay for the employee’s hospital stay, rehab, medication, etc., as well as the wages that they miss due to the injury.

The flip side of this is that, if covered by Workers’ Compensation, employees give up their right to sue their employer for additional damages – but there are exceptions. If the worker alleges that the employer’s negligence caused the accident that injured them, they can sue, and Employer’s Liability Insurance (included as part of most Worker’s Comp policies) can cover the legal costs for the business.

Perhaps the most important thing to realize about Workers’ Comp Insurance is that employers are required to carry it in almost every state. Some states have monopolistic, state-run policies that businesses must buy into while others allow private Workers’ Comp polices to be purchased. Check your state’s laws to see what your business is legally obligated to do.

Health Insurance Is for Non-Work-Related Medical Expenses

Health insurance offered through an employer can be used by employees for personal medical expenses, unrelated to work-caused injuries or illnesses.

Business health insurance works very similarly to a private health insurance plan, except the employer usually pays for at least part of the premium – effectively subsidizing it for the employee – and the plan can cover the group of employees as a whole, as well as their spouses and dependents.

Although health insurance is regularly offered as a benefit to attract and retain talented employees and not required by law, there are some regulations that may affect it. Under the federal Affordable Care Act…

  • Businesses with at least 50 full-time employees are required to offer a group health insurance plan to their employees or else be charged penalties.
  • All employers with fewer than 50 employees are guaranteed group coverage should they choose to purchase it.
  • If you offer coverage to any employee, all of your employee must be offered coverage.
  • Employees can’t be denied coverage based on preexisting conditions.
  • Small businesses may be able to receive tax credits if they pay for at least half of their employee’s healthcare premiums.

For more information on business health insurance, check out HealthCoverageGuide.org’s group coverage basics, or HealthCare.gov’s overview of the Small Business Health Options Program Marketplace.

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