Workers’ Compensation
WC is a system of benefits mandated by law for most workers who suffer job-related injuries or diseases. These benefits are paid regardless of fault, and the amount of benefits is limited by law. WC laws eliminated the common law defenses of contributory negligence, fellow-servant rule, and assumption of risk. Almost every employee hired and injured in a particular state is covered by that state’s WC laws. A WC policy is one means an employer can use to meet the requirements of WC laws. However, the employer’s obligation and the limits of compensation differ in each state. A number of states have WC laws that allow WC insurance to be purchased from a state-run insurer only. With few exceptions, WC insurance limits the employer’s liability for the work-related injury or death sustained by the worker.
WC is an exclusive remedy insurance program, meaning that an injured employee can seek remedy for his loss only from the WC policy. He may not file suit against the employer even if the employer was negligent in causing the loss. However, if the employer fails to carry WC, the employee may seek restitution through the courts, and the employer has no insurable protection.
The policy provides a combination of two coverages:
WC coverage, a type of no-fault insurance for employee injuries, and employers liability coverage, which covers an employer’s liability for common lawsuits brought by employees to recover damages for job-related injuries. Each state has enacted a WC law that eliminates an employee’s common law right to sue the employer for damages resulting from work related injuries. These WC laws also impose on an employer the duty to provide cash and medical benefits for inured employee (or survivor) in addition to, or in lieu of, compensation benefits.
Texas employers except for public entities, can choose whether or not to provide WC insurance coverage for their employees. WC provides covered employees with income and medical benefits if they are injured on the job or have a work related injury or illness. WC is regulated by the Texas Dept of Ins, Division of WC.
Participation in the WC system in Texas is voluntary for most employers.
Employers who choose to have WC insurance may:
- purchase a WC insurance policy from a private insurance company;
- self-insure, if the employer can meet the requirements to self-insure under the texas WC act and is certified through the Division; or
- Self0insure through the Tx Dept of Ins with a group of same or similar private employers.
Covered Employers
Employer responsibilities
An employer must report the following to its insurance carrier within either 8 days of the date:
a. an employee misses more than 1 day of work because of a work-related injury;
b. an employer knows about an occupational disease or illness even if the employee has not missed any work; or
c. an employee dies because of a work-related injury or illness.
An employer may report the injury or illness to its insurance carrier by mail, fax, telephone, or electronic transmission and should keep a record of the date each injury is reported to its carrier.
Employee rights in the Texas WC System:
- The employee has the right to receive benefits.
You may receive benefits regardless of who was at fault for your injury with certain exceptions, such as:
a. You were intoxicated at the time of injury;
b. You injured yourself on purpose while trying to injure someone else;
c. you were injured by another person for personal reasons;
d. you were injured by an act of God;
e. your injury occurred during horseplay;
f. Your injury occurred while voluntarily participating in an off-work activity.
- The employee has the right to receive medical care to treat their workplace injury or illness. There is no time limit for this medical care.
- The employee has the right to choose their treating doctor. If they are in a WC Health Care Network, they can choose their doctor from the network’s treating doctor list. If they are not in a network, they can choose a doctor from the Approved Doctor List kept by the Division of WC.
It is important to follow all the rules in the WC system. If the employee doesn’t follow these rules, they can be held responsible for payment of medical bills.
- The employee has the right to hire an attorney at any time to help with their claim.
- The employee has the right to receive information and assistance from the office of Injured Employee Counsel at no cost.
- The employee has the right to receive ombudsman assistance if they do not have an attorney and a dispute resolution proceeding about their claim has been scheduled.
An Ombudsman is an employee of the Office of Injured Employee Counsel. Ombudsmen are trained in the field of WC and provide free assistance to injured employees without attorneys. They can not sign documents for the employee, make decisions for the employee, or give legal advice. Proceedings about the employee’s claim may include benefit review conferences or contested hearings. Proceedings are held at local field offices. At least one Ombudsman is located in each office.
- The employee has the right for their claim information to be kept confidential. In most cases, the contents of their claim file cannot be obtained by others. Some parties have a right to know what is in their claim file, such as their employer or their employer’s insurance carrier.
Employee Responsibilities in the Texas WC System
- The employee has the responsibility to tell their employers if they have been injured at work or in the scope of their employment. They must tell their employer within 30 days of the date they were injured or first knew their injury or illness might be work related.
- The employee has the responsibility to know if they are in a WC Health Care Network. If they do not know whether they are in a network, they should ask their employer at the time of their injury. If they are in a network, they have the responsibility to follow the network rules. Their employer must give them a copy of the Tx Dept of Insurance Network rules.
- The employee has the responsibility to tell their doctor how they were injured and whether the injury is work-related.
- The employee has the responsibility to send a completed claim form to the division of WC. They have one year to send the form after they were injured or first knew that their illness might be work related. The employee may lose their right to benefits if they do not send the completed form to the division of WC.
- The employee has the responsibility to provide their current address, telephone number, and employer information to the division of WC and the insurance carrier.
- The employee has the responsibility to tell the division of WC and the insurance carrier anytime there is a change in their employment status or wages. i.e.
- The employee stops working because of their injury;
- they start working; or
- they are offered a job.
Types of disability
Under WC law, there are 4 types of disability: permanent total, permanent partial, temporary total, and temporary partial.
- A permanent total dis ability usually results in a complete and permanent loss of earning power, with no ability to perform any type of gainful employment.
Many state compensation laws specify that certain injuries, such as the total loss of sight or loss of both hands or feet, constitute permanent total disability regardless of the insured’s capacity to do some form of work.
- A permanent partial disability generally refers to a permanent physical impairment that leaves the individual incapable of performing his or her original job, but results in only partial loss of earning ability since other jobs can still be performed.
- A temporary total disability usually refers to a total disability that lasts for a short period, after which the employee is fully able to return to work. For example, an individual strains his back while lifting a heavy box at work. After undergoing treatment for 2 months, he’s able to resume his former job.
- A temporary partial disability usually refers to a temporary disablement that allows the the employee to continue in the same job, but with reduced capability. If the worker in the above example had only twisted his ankle, he would likely still be able to perform some of his regular duties at work.
Benefits
WC laws incorporate 4 categories of benefits: disability benefits, medical benefits, survivor (or death) benefits, and rehabilitation benefits.
- Disability benefits provide compensation for the loss of income or earning capacity suffered by an individual who’s injured in his or her occupation. How and in what amounts benefits are paid depend on the severity and permanency of the injury. Payments can be made on a weekly- or lump-sum basis, or some combination of the two.
- Medical benefits compensate for the cost of medical treatment resulting from a job related injury. In most cases, WC pays the full cost of the treatment.
- Survivor benefits attempt to recompense the widowed spouse or other survivor of an employee whose death results from a work related injury. The amount of the benefit would depend on the deceased employee’s earnings (subject to fixed minimum and maximum amounts,) and the number of surviving dependents. A fixed amount is also available for burial expenses. Benefits would normally continue until the surviving spouse remarries or until the children reach adulthood.
- Rehab benefits are not specifically named in some State WC laws. Nevertheless, rehab is provided in every state since all accept the provisions of the federal Vocational Rehabilitation Act, which provides federal aid toward the benefit costs incurred.
Laws
State WC laws are either compulsory or elective, with most being compulsory. This means that the employer must accept and comply with all the provisions of the law.
Conversely, if the state law is elective, then both the employer and employee have the option of either accepting or rejecting the law.
Some state WC laws are deemed compulsory for some specific types of work and elective for others. However, if an employer chooses to reject an elective WC law, the employer is denied any rights provided under the law, and loses use of most pro-employer law defenses as well. Certain workers fall under federal jurisdiction no matter where they work. Endorsements are available so the policy will pay the benefits required by federal law.
the US Longshoremen’s and Harbor WC Act is a federal law protecting workers in occupations related to the maritime industry. People typically associate this protection with longshoreman and ship builders, but the people and occupations covered are quite broad and extend to those who support those operations.
The Federal Black Lung Benefits Act provides compensation to coal miners who are totally disabled by pneumoconiosis arising out of coal mine employment, and to survivors of coal miners whose deaths are attributable to the disease.
The federal employees compensation act provides federal employees injured in the performance of duty with WC benefits, which include wage-loss benefits for total or partial disability, monetary benefits for permanent loss of use of a schedule member, medical benefits, and vocational rehabilitation. This act also provides survivor benefits to eligible dependents if the injury was fatal.
The Federal Employers Liability Act is a US Federal law that was enacted in 1908 to protect a d compensate railroad workers injured on the job, if the worker can prove that the railroad was at least partly negligent in causing the injury. It is based upon the federal government’s power to interstate commerce, granted by the commerce clause in the Constitution. Prior to its inception, there was no remedy for injured railroad workers.
Although the protection FELA offers for railroad workers is similar to the WC insurance provided in other industries, unlike WC, FELA is a fault based system. To receive benefits under FELA, the injured railroad worker must prove negligence on the part of the railroad, its agent or contractor, or from a faulty piece of equipment.
Premium
Premiums are based on the type of business involved (work or job classification,) t he number of employees, and the total payroll. Rates are developed for each work classification that describes the activities of the insured. Rates also reflect the relative value of pure WC loss amounts expected to be paid out per $100 unit of payroll. These determinations are based on statistical analysis of past loss experience.
- Rates for each work classification are developed & administered by the National Council on Compensation Insurance.
- Total remuneration (payroll or bonuses) is used for premium determination because it is considered the best measure of exposure to the risks of employee injury. The more payroll developed, the most employees exposed and the greater the risk of injury.
- Premium for each work classification is determined by multiplying the rate by the premium basis (total remuneration.) Premium discounts that reflect the lower expense in the handling of larger risks are applied if the premium exceeds a stipulated amount. An experience modification factor is applied as a method of rewarding those with poorer experience. An insured with a good loss record pays a lower premium than an insured with a bad record.
- The premium charged at policy inception is an estimate. The final premium is determined at the end of the policy period using actual remuneration and proper work classifications that applied during the policy term. All payroll records and other relevant documents must be made available to the insurer for audit.
- Retrospective rating – this rating plan is available only to operations with a large premium volume. It is used in conjunction with experience rating and adjusts the insured’s premium after expiration of the policy to reflect the loss experience during the policy term. It attempts to charge a premium that reflects the actual cost of risk and the costs of insuring it.
- Participation (dividend) plans – these plans are used to provide dividends to insureds whose loss results, even after application fo experience modifications, are lower than anticipated by manual rates. As loss ratios decline and premiums increase, dividend amounts increase.
Conditions
- The insurer retains the right to inspect the insured’s workplace for insurability at any time. The insurer is looking for existing or potential hazards.
- The insured’s rights and duties under the policy may not be transferred without the insurer’s written consent.
- The insured may cancel the policy at any time by providing written notice to the insurer; the insurer may cancel by providing written notice to the insured 10 days in advance.
- The first-named insured acts on behalf of all insureds to change the policy, receive return premium, and give or receive notice of cancellation.
Types of employment covered by WC laws.
- Covered employment – the majority of WC laws cover most employment situations.
- Employment exemptions
a. The following employment situations are exempt: - Farms;
- Casual employment (part-time;) and
- Domestic servants
b. In some states, WC laws exempts employers with fewer than a specified number of employees. For instance, a specific state may indicate it is compulsory for all employers with three or more employees to carry WC insurance. Therefore, an employer with one or two employees would be exempt from law.
