Monopolistic workers’ compensation states

Most states require employers to provide workers' compensation insurance for their workers. While the majority of states allow small business owners to choose where they purchase insurance, monopolistic states require coverage to be purchased through a state-run fund rather than a private insurance company.

Some monopolistic states allow businesses to self-insure if they meet certain criteria, but most businesses must purchase coverage from the state fund.

Workers' compensation covers medical costs and lost wages when employees are injured or fall ill on the job. State laws determine when businesses are required to provide coverage, typically after the first employee is hired.

Sole proprietors, independent contractors, and other single-person businesses without employees are generally not required to carry workers' compensation. But many elect to do so, as private health insurance may deny work-related injury claims.

In Ohio, workers' compensation is required for small businesses with one or more employees. This includes both full-time and part-time employees. Employers must purchase workers' comp through the Ohio Bureau of Workers' Compensation (BWC).

Ohio also requires independent contractors, subcontractors, and corporations with more than one officer to carry workers' comp. Domestic household employees, including housekeepers, who receive more than $160 in a calendar quarter are also required to be covered by workers' comp.

The BWC determines rates based on annual payroll, which is adjusted each July. If a business doesn't report its payroll on time, it is subject to a penalty.

Small businesses that are considered financially stable and meet certain qualifications are eligible to elect for self-insurance.

Ohio businesses that fail to provide the necessary coverage can face fines or liens for nonpayment.

North Dakota requires businesses with any number of employees to carry workers' compensation. Their policy must be purchased from the North Dakota Workforce Safety & Insurance (WSI).

Independent contractors do not need to purchase workers' comp for themselves, but they must apply for annual exemptions if they elect not to carry coverage.

Employers who fail to provide workers' comp for all employees could face a $10,000 penalty and an additional $100 daily penalty for noncompliance.

Businesses that are found to be falsely reporting worker hours or payroll information could face a penalty of up to 10 times the premium amount.

Washington State requires businesses with any number of employees to carry workers' comp coverage. Policies must be purchased from the Washington State Department of Labor and Industries.

Some businesses in Washington also need to provide coverage for independent contractors. There are a number of independent contractor exemptions, including domestic workers who work certain hours per week, gardeners, maintenance workers, musicians, children under 18 employed by their parents on a farm, and cosmetologists.

Certain Washington employers may elect to self-insure, but they must certify their self-insured status with the state.

Businesses that fail to provide adequate coverage for employees may face fines of up to $1,000, as well as other fines for noncompliance with recordkeeping and statutory provisions.

Wyoming state law requires employers to provide workers' compensation for all employees. They also need to register with the Wyoming Department of Workforce Services.

Sole proprietors and single-person businesses are not required to carry coverage. Other exemptions include professional athletes, domestic workers, nurses who work for private parties, volunteers, government employees, and casual laborers.

Penalties for failing to provide adequate coverage include a fine and up to a year in prison.

Generally speaking, workers' compensation policies are limited to the state where the employer maintains the policy.

Some states, such as Washington and North Dakota, have agreements with other states that allow workers to temporarily maintain their state-run workers' coverage in the reciprocal state for a set period. This prevents business owners from having to carry multiple policies for employees who travel across state lines for work.

Reciprocity agreements are temporary and employers must request approval by the state where they will be working in order for coverage to be effective.

For example, an electrician is employed and insured in North Dakota through the state fund. They can travel to seven states, including Utah, Oregon, and Wyoming, while maintaining their workers' comp coverage with the state fund where they are based.

Small business owners in the monopolistic states must purchase workers' compensation through their state insurance fund.

States with competitive workers' compensation funds can elect to purchase from a state fund or through the private insurance market.

There are nineteen competitive fund states: California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, and Utah.

Competitive state funds offer greater flexibility and coverage options, while monopolistic states tend to have a fairer, more even set of coverage for all employers and employees.

Employer's liability insurance covers legal expenses and settlements that result from lawsuits related to employee injuries. Most private workers' comp policies include this as a standard, but it is not included in monopolistic state fund policies.

If an employer in a monopolistic state wants to add employers' liability coverage, they can purchase a stop gap policy and add it as an endorsement to a general liability policy.

If a business with a home base in a non-monopolistic state carries private insurance but has an employee working in a monopolistic state for a period of time, they are required to register with that state's fund.

For example, in Ohio, employees from other states who work in the state for more than 90 consecutive days must be registered with the state fund. However, in Wyoming, there is no defined 90-day threshold. Instead, coverage requirements are dictated by the type of work and the duration of time the employee will be in the state.

Insurance companies use a standard called the Experience Modification Rating (EMR) to set workers' compensation premiums.

Each state has different EMR laws, but it usually involves analyzing factors such as your payroll data, class codes, and claims history to determine rates.

Class codes are typically based on the National Council on Compensation Insurance (NCCI) classification codes or the North American Industry Classification System (NAICS).

High-risk industries or businesses with many prior claims often pay higher workers' comp premiums than lower-risk businesses or companies with fewer prior claims.

All four monopolistic states reward employers for engaging in safety programs and keeping workers' comp claims as low as possible. This can look like partial refunds and reduced premiums during annual reviews.

To keep your insurance costs down and save money on your workers' compensation policy, consider the following techniques:

Enrolling your employees in regular training and safety programs can help lower your premium rates and prevent workers' compensation claims.

Safety training ensures your employees operate with compliance and risk in mind, helping reduce injuries.

Good risk management protocols can prevent injured worker claims and the medical expenses that come with accidents and injuries for you or your employees.

Some safety procedures you can engage in include:

• Performing regular safety audits and walkthroughs
• Providing ergonomic equipment for staff
• Stocking safety gear and PPI
• Properly storing and labeling hazards and dangerous chemicals
• Regularly maintaining machines and equipment

TechInsurance is a trusted insurance expert for all small business owners. Fill out our application today to get free quotes and find the right policy for your business.

Our licensed insurance agents are available to answer your questions and help you find the coverage that's right for your business needs.

With TechInsurance, you can easily download a certificate of insurance for your small business, often on the same day you buy workers' compensation insurance coverage or other types of insurance products.

This comes in handy for companies that need proof of insurance to sign a contract or a lease and don’t have time to call an insurance company for documentation.

Clients may ask for a certificate of workers' compensation insurance or other types of business insurance to show you’re insured.