4 Workers Compensation Benefits for Employees get from the Workers Compensation System

Workers Compensation Benefits for Employees when they are injured on the job are determined by each individual state government. The industries in each state can be drastically different from state to state and region to region. For this reason, the responsibility of administering a system of workers compensation is left up to the state governments in the United States. Each state has their own way of administering the system and their own individual types of benefits that are required for policies bought by businesses operating within the particular state. Here are the 4 types of benefits most all states require the policies sold within their state to provide within their workers compensation system.

Medical Benefits

Workers Compensation Coverage pays for necessary medical care to treat injuries or illness that occur because of an injury on the job. Most workers’ compensation insurance policies pay for 100 percent of all reasonable and necessary medical treatment for injuries that occur as a part of normal business operations.  Now there are frequently disagreements over what is “reasonable and necessary” treatment. This is especially true  when doctors and patients disagree on the extent of the injury. It can also become a problem when the doctor and patient disagree on the proper course of treatment.

In most states, Workers Compensation Benefits for Employees have medical benefits are unlimited and occur with no deductible. The payments are made to the facility where the injured employee is cured or given maximum relief. Bills for service go out directly to the insurance carrier where payment is made directly to the healthcare provider.  The only responsibility of the employee is to follow the doctor’s orders.

Income Benefits

Income benefits replace some of the money an injured employee lost during a time in which they lose work because of an injury or illness. In most cases it replaces a portion of any wages lost because of work-related injury or illness. This is the case if the injured employee is not able to work at all or if they are not able to garner the same wages as was earned prior to the injury.

Lost wages benefits are subject to minimum and maximum weekly payments. These amounts are determined by the state governing body within the state that has jurisdiction over the injured employee. Typically this is the state department of insurance. In most states, these defined limits are dependent upon the severity of the injury sustained and the expected term of the resulting condition. Injury severity is most commonly classified as either partial or total. Depending upon this classification the injured employee is placed into either a temporary or permanent status. benefit amounts are based on a combination of all of these factors.

Typically the amount of benefits an injured employee is paid amounts to two thirds of their average weekly wages. This is if they are not able to resume their previous position or some other light duty work, even if it is at a lower wage. If the injured worker does return to work at a lower wage, workers comp will make to make up the difference between the two positions. In cases where an injured employee receives a permanent loss of function or the loss of a body part, workers compensation may pay additional compensation.

Workers Compensation Systems are governed by the state governments. Each situation is dependent upon the laws and regulations of each individual state. Checking with the state governing body is the best place to receive the most accurate information.

Death Benefits

Death Benefits are an additional Workers Compensation Benefits for Employees who have been killed because of an accident that occurs on the job. This benefit will replace a portion of the lost income a family will face because of the deceased family member. In order to collect death benefits the family member must be an eligible dependent. To be an eligible dependent who can collect death benefits within the workers comp system the death must occur within a certain period of time following a work-related injury and a request for death benefits must be made within a specified period of time following the death of the family member. In many states, a surviving spouse can collect death benefits for the rest of their life in many instances. This lasts until the spouse remarries. If there are dependent children when the employee dies, the children get half the benefits and the additional half goes to the spouse.

Burial Benefits

One often forgotten Workers Compensation Benefits for Employees is that most workers compensation policies will pay for some of a deceased employee’s funeral expenses. In some states it is a requirement to include burial benefits in all workers comp policies. Now the requirement is only up to a certain amount. If the family decides for an expensive casket, the additional cost is the responsibility of the family, but the work comp policy will cover some of the expenses during this difficult time.

https://www.insureon.com/blog/post/2016/04/20/does-workers-compensation-pay-for-bike-to-work-injuries.aspx

4 Important Things Most Small Businesses Forget When Training Employees

https://www.insureon.com/blog/post/2016/05/19/4-important-things-most-small-businesses-forget-when-training-employees.aspx

https://www.workerscompensationshop.com/workers-comp-information/employers-liability.html

The Workers Compensation System in the United States

The Workers Compensation System in the United States of America was formed in the state governments over the course of the first half of the 20th century.  Wisconsin was the first state to enact legislation in 1911 and Mississippi was the last state to enact workers comp laws in 1948. The systems were developed in reaction to the robber baron and depression era of the 1920’s and 1930’s. During this time period big businesses became extremely powerful, especially in the northeast and across the industrial rust belt of the midwest. The power of many businesses kept wages low and working conditions poor.  As a reaction to these conditions many groups of employees began to organize and form unions. Out of this movement came the workers compensation system we have today.  According to historians and most within the industry, the workers compensation system is the ‘Exclusive Remedy’. Here are four aspects all business owners should know about how the workers compensation system was developed, how it benefits their business, and how to best control your business to manage the workers compensation system effectively.

How did the Workers Compensation System Develop?

Shortly after his term in office (1909), President Theodore Roosevelt wrote an article that included a part about a female factory worker named Sarah Kinsley. Sarah lost her hand after it was crashed in a cogwheel accident. She suffered this injury while working in a factory. Sarah actually sued the company for negligence in order to recover medical bills and lost wages. Sarah had brought the lack of safety features to the attention of the foreman of the factory where she worked.  Even though she brought this to their attention and the business did nothing about the hazard, the courts still ruled in favor of the employer under the ‘assumption of the risk’ defense. This left Sarah and her family with nothing.  Roosevelt used the article to bring awareness to the need for an effective workers compensation system in the United States. Not long after this article Many states began to enact legislation that became the workers compensation system we have today.

In 1908 President Taft signed the first legislation requiring mandatory employer coverage for employees working in multi-state commerce.  In addition to this federal law, over the next 40 years states enacted specific programs and laws to deal with injured employees. This is where the evolution of the workers compensation system took place. Wisconsin was the first state to establish a formal workers comp program in 1911 and Mississippi was the last state to enact workers compensation legislation in 1949.

Prior to the implementation of the workers compensation system within the United States, employees who were injured on the job had very few places for recourse when their employer acts in a negligent way.  Prior to the ‘Exclusive Remedy’ the only recourse an employee had was to sue the employer for damages under civil or tort law. In addition to having to sue their employer, the burden of proof was on the employee to show malice or neglect.  Most courts ruled in favor of the employer and left employees on their own to cover lost wages and medical costs.

How does the Workers Compensation System benefit a business?

A business benefits from the workers compensation system by not having to face legal recourse for injuries that occur as a part of normal business operations. The business is reimbursed for the medical costs and some lost wages to be paid to the injured employee. The policy will also pay some legal costs up to the limits of the policy for lawsuits filed by injured workers. The claims by the injured worker do not have to be just and they do not have to result in a guilty plea against the business to rack up an enormous cost to the business.  Costs may include hiring a lawyer and all court costs. It may also include the costs to hire a public relations company to help repair the businesses damaged image. In addition the owners and leaders of the business may have to spend time in court defending the business. That is time not spent working on the profitablility of the business.

Now the key part of the ‘Exclusive Remedy’ is normal business operations. If a business is found to be negligent, the workers compensation policy will not protect the business. Especially if the actions the leaders of the business took are against the law. What determines normal business operations. In a court of law there are typically industry experts that have an appropriate level of experience and education within the industry you operate in. If they determine the actions of your business were reasonable to keep the employee the business will more than likely not be held liable. Even if you are not held liable, it may cost the business an enormous sum to prove this to be fact.

How does the Workers Compensation System benefit Employees?

Employees Benefit from the Workers Compensation system, because they can go to work confidently knowing that if they are injured on the job they will be compensated in the form of some lost wages (usually 60%), and most medical costs while they are hurt and not able to work. One great aspect of the workers compensation system is that benefits are provided for the employee regardless of who was at fault for the injury. Many injuries occur simply as a realistic fact of doing the work that is required for businesses to operate. In this case, it is not important the fault of the injury. The employee is able to recoup some lost wages and all medical costs while they are out of work because of an injury that occurred on the job.

How can a Business manage the Workers Compensation System?  

Hire Selectively

Preventing injuries should start during the hiring process. No matter what industry a business operates in, there should be some questions during the hiring and on-boarding process that should help the hiring manager determine if an employee is at risk for injuring themselves on the job. If the employee is at risk the company should determine if hiring the employee is appropriate.  If the leadership of the business does decide to hire the employee, the business should do everything it can to help the employee address the issue in a safe work environment.

Safety Programs

Safety programs are a crucial part of any business. Many businesses work in an industry that contains an enormous amount of pressure to operate on a time table. No timetable is more important than the safety of the workforce.  One injured worker can have an enormous impact on the experience modification rating of the business.  No matter what type of deadline a business is working on, preventing injured workers is always more important than meeting a deadline.

Return to Work Program

Included in a safety program should also be a return to work program. An effective return to work program should help your injured worker get back on the job, even in a limited capacity, faster than a business without a return to work program. Humans are creatures of habit and when an employee is hurt and not able to work they have time to create new habits that are not a part of their normal work life. The quicker a business can get the injured back on the job, the more likely that employee is to not develop new habits and the more likely the injured employee is to return to full-time permanent work.

Pay as You Go

Small Business Pay as You Go Workers Compensation Insurance is an immensely beneficial alternative payment program most insurance carriers offer. This alternative payment option allows businesses to get coverage in place at much less up front cost than a traditional workers comp policy. This frees up cash flow for more immediate business needs.

According to statistics from 2014, there are just under 400,000 beauty shop, barber shops, nail salons, and spas in the United States. This is a huge industry that has business that are similar, yet significantly different depending upon the services and products sold. The amount a business pays for commercial insurance may vary dramatically depending upon a number of factors relating to the beauty shop and the appetite of the carrier to quote this industry. Here are four things to consider when looking to purchase insurance for a beauty shop.

5 things to consider when purchasing Commercial Insurance for a Beauty Shop

Contractor vs. W-2

One of the first decisions a business owner in the Beauty Shop Industry has to make is whether to hire their employees as W-2 employees or independent contractors. There are benefits and disadvantages to both types of employees. Consulting with a legal professional and having a mentor who has owned a business before is the best way to determine which type of employee is best for your individual business. There is one common misconception about this designation. The misconception is that if a business hires the employees as independent contractors, they do not have to purchase workers compensation insurance to cover those employees. In some states that is true, but the employer is taking a huge risk if they do not purchase coverage. The business is still liable for injuries that occur as part of normal business operations. In most cases it is a wise move to still purchase coverage in order to protect the investment in the business.

Safety Programs for a Beauty Shop

Most people do not feel that a beauty shop is a business with an elevated amount of risk. In most cases that is true. The primary risk is from common slips, trips, and falls resulting from having the business open to the public. Implementing a safety program, documenting it, and making it a regular part of the business operations is the best way to ensure safety is a priority throughout your staff. Cleanliness is important in all aspects of the business. This is true whether you are cleaning loose hairs after each customer, shoveling ice in the parking lot during the Winter, or making sure employees are using proper safety techniques when working with certain chemicals.  Repeated exposure to chemicals can cause workers comp exposure as well as general liability risk because customers and other third parties are exposed to potentially dangerous chemicals.

Does your Beauty Shop Sell Products vs. Offer Services

The decision to sell products related to hair care or not will impact your general liability risk. If the products are misused and cause injury to customers, the business may be liable. Depending upon what types of products and how much inventory you keep on hand, selling products can significantly increase insurance premium.

Special Events for a Beauty Shop

Anyone can tell that cutting a middle-aged balding man carries less risk than giving a child their first hair cut. There is even more importance put on the services of a beauty shop when a child is hair their first sweet sixteen birthday or even a wedding. If a mistake is made on the wrong client, it can result in a lawsuit. If your business is going to offer specialized services for special events, you need to speak with your independent insurance agent and make sure your business is protected for the unfortunate event of something going wrong.

Beauty Shop Chemicals

Depending upon what types of services are offered within an individual Beauty Shop, chemicals are a part of the services being offered. It is important to require extensive training and even certifications for any employees who are using certain chemicals. You as a business owner should ensure a work environment that keeps them safe. This includes an environment that is clean, with adequate ventilation, and provide them with proper safety equipment including gloves, masks and eye protection.

4 Policies every Beauty Shop should secure

Workers Compensation for a Beauty Shop

Workers’ Compensation Insurance is required by law in 48 out of 50 states. Depending upon the laws within the state you operate, your business may or may not be required to  secure Workers Comp Coverage.  How your business is structured and whether or not your employees are W-2 or 1099 employees also impact the requirement for this coverage. It is important to check with the state governing body within your state to determine if you are required for to carry this coverage. Even if you are not legally required to carry coverage, in most cases it is important to carry coverage. Workers compensation is referred to as the ‘exclusive remedy’. The term ‘exclusive remedy’ came about because the workers compensation system provides benefits to both employees and employers. Employees benefit by gaining some lost wages and medical costs when they are hurt and not able to work. Employers gain the piece of mind that they will be covered if sued for injuries that occur as a normal part of business operations.

Beauty Shop General Liability

For most people who own a beauty shop, general liability exposure is moderate. Most exposure results from the fact the facility is open to the public in order to provide services to them. Additional exposure can result from contractors coming in to the location to perform services like after hours cleaning companies, companies that stock the shelves, or customers of a neighboring business you share a parking lot with. For this reason, the entire facility should be cleaned periodically throughout the day.  Parking lots and sidewalks need to be in good repair no matter the time of year. Snow and ice need to be removed when possible.  Anything that can cause slips, trips, and falls needs to be dealt with promptly.

Professional Liability for a Beauty Shop

Professional liability exposure depends completely on the services offered at each individual beauty shop. If you are offering simple cuts and shaves for men at a barber shop, the risk is fairly low. If you offer services for special occasions like birthdays, anniversaries, or weddings’ you can be sued if the client is not satisfied with the work done by your employees. For this reason, it is important to consider professional liability coverage if you offer more specialized services.

Beauty Shop Hired and Non-owned Auto

If a beauty salon owns motor vehicles and uses them as part of they daily operations, commercial auto insurance is a must. This is not an issue for most businesses in this industry, but most businesses within the beauty shop industry do have employees that use their personal car for business purposes on occasion.  If this is the case for your business than the business is liable for damage caused by accidents caused by your employees while they are using their car for work purposes. Hired and Non-Owned Auto Liability can cover your business for just this situation. This type of insurance policy covers bodily injury and property damage caused by a vehicle you hire (including rented or borrowed vehicles) or caused by non-owned vehicles of your employees (personal vehicles). In most cases it does not pay for the physical damage to the vehicle itself; that’s covered by the owner’s insurance.

3 Tips for Beauty Shop Owners

Gather Documents Early

There are a lot of documents that need to be given to both your agent and carrier in order to make the quoting process run smoothly.  Here is just a small list of things your agent may need in order to get you an accurate quote on coverage:

• Business contact information
• Building lease, if applicable
• Number of employees
• Inventory of all assets, such as chairs, equipment, products and inventory
• Type of potentially hazardous services you offer, such as chemical treatments on hair
• Type and amount of your customers’ personal data you store
• Years the business owner has worked in the industry
• Years the business has been incorporated
• Claims history (at least the past three years)

This list is not exhaustive. There may be additional information needed depending upon the specifics of your business. If you call a new agent 10 days before your policy effective date without much of this information, the agent will have a hard time getting you comprehensive coverage or the best rates possible in that amount of time.

Choose a Carrier who Specializes in the Beauty Shop Industry

Partnering with an independent agent is the best way to find out who specializes in your industry and which carriers have a healthy appetite for the beauty shop industry. Independent agents can shop you policy so you don’t have to. They are truly a middle man who works for you (At least they should). If you try to shop your policy around yourself, every carrier will tell you they have years of experience and interest in your industry. An independent agent knows who is actively looking to quote the beauty shop industry and they can make those carriers compete for your coverage. This can help your business get more comprehensive coverage and deeper discounts.

Consider Umbrella Coverage

Most Beauty Shop Owners are small business owners. Because of the small business nature of this industry, many business owners do not think an insurance claim will go beyond the limits of their policy. In many cases this is true, but when the claim is large enough to go beyond the limits of the policy, it many times will cause the business to close its doors permanently. An umbrella policy can sit on top of all existing policies and protect your business when the limits of your existing policies are met.

Common Workers Comp Class Codes:

9586     Hair Styling, Barber Shop, Beauty Parlor. This is a vary broad classification and applies to most types of personal grooming services for men or women involving all parts of the body. Typical business under this code include beauty parlors, barber shops, tanning salons, day spas, tattoo parlors, make-over salons, etc.

9063     Clubs and Salons- Health and Exercise. This NCCI class code covers many types of spa and club businesses including massage salons, fitness clubs, health clubs, gym’s, and exercise clubs. Also includes YMCA and related organizations.

8018     Beauty Supply Store- Wholesale. Barber and beauty supply houses and wholesale beauty supply sales.

8044     Spa and Hot Tub Dealers. The standard classification for spa, sauna, or hot tub dealers. Includes delivery and installation

9053     State Special Code for CA and NJ. CA- Applies to fitness clubs, swimming clubs, and tennis clubs. NJ- Applies to fitness clubs and health spas.

9055     New York State Code. Applies to most exercise or health clubs in NY.

An important aspect of reducing what a business pays for workers compensation insurance is understanding what exactly is your businesses experience modification rating. There are several terms that people within the insurance industry will use to refer to this rating. Some of those terms include experience mod, experience rating, e-mod, EMR, and in some cases just the mod. This rating is a factor that compares the losses of your business to other businesses in the same industry and the same classification code. Depending upon the strength of this rating, an insurance carrier may lower or raise the amount a business pays for insurance premium.  Here we discuss all that goes in to this rating in order to give a business owner a clear understanding of what makes up the experience modification rating and control what they pay for workers compensation insurance premium.

The reason the experience modification rating is so influential in what a business pays for workers comp premium is designed to predict the future claims of a business. The insurance carrier only makes money if enough of their customers during a given period of time do not have to use their insurance policies. For this reason, insurance companies try to reward businesses who take the proper actions to prevent work comp claims.

There is a form called the Experience Modification Rating Worksheet that a business receives each year before the businesses policy effective date.  An experience rating of 1 is considered a unity mod, and does not change the cost of premium.  A rating that is >1 is called a debit mod, and would increase the cost of premium.  On the contrary, a mod that is <1 is referred to as a credit mod. Businesses with a credit mod typically reduce the cost of insurance to the employer.  So if an employer has a mod of 0.80, their premium would be 20% cheaper.  The idea being that an insured with a mod that is >1 is riskier than the average business within this classification code. These types of businesses should therefore have to pay more.  While an insured with a mod that is <1 is less risky than the average and should be rewarded by paying less. 

Who Determines the Experience Modification Rating?

The Experience Modification Rating is generated by the National Council on Compensation Insurance (NCCI).  The mod is typically given to a business around 60 to 90 days before the rating effective date.  It does not include claims from the current year.   NCCI uses a period of three years of losses not including the most recent year and compares it to the average losses in the class.  The time period that is used for data is determined by the risk’s rating effective date.  The data that is used in the experience mod rating calculation includes the policies that have an effective date no less than 21 months prior, and no more than 57 months before the rating effective date.  For example, a policy that renews on 1/1/18 would include policies with effective dates that fall between 4/1/13 and 4/1/16.  Therefore, the policies included in the data for this particular experience modification rating are 1/1/14-1/1/15, 1/1/15-1/1/16, and 1/1/16-1/1/17 policies.

How is the Experience Modification Rating Calculated?

The experience modification rating is calculated by taking the total adjusted actual claims divided by the total adjusted expected claims of your class (Experience Modification Rating = Total Adjusted Actual Losses ÷ Total Adjusted Expected Losses).  If a business has more claims than expected, the mod will be >1 and the business will receive a debit mod.  While this may seem simple, there are many complicated steps that must be taken before the final mod is produced.

The first step is that NCCI collects and records the payroll and loss information of your company and applies it to the experience rating worksheet.  Using this information, NCCI can calculate the expected losses for each classification using its Expected Loss Rate (ELR).  The ELR is the amount of expected losses for the classification per $100 of payroll [ELR x (Payroll/100)]. Next NCCI splits the expected losses into primary and excess losses.

The difference between Severity and Frequency of claims

When an underwriter within an insurance carrier begins to analyze a particular business they start with a businesses loss history. The terms severity and frequency are important because they tell the true story of what is happening at a  particular business. They can show patterns and help the underwriter predict future losses. Severity refers to how severe the claims were for a business during a given amount of time. Frequency refers to how often claims occur.  When calculating an experience mod, NCCI assigns more weight to high frequency of claims than it does to high severity claims. This is because if a business has a history with a high frequency of claims, there is a good chance the business will continue to have losses.  Also, having a high frequency of claims increases the chance that the insured will experience a larger loss in the future.  In other words, frequency leads to severity.  On the contrary, if a business has a year in which they have one claim with a high severity, there is a good chance this incident was more of an outlier and not a sign of how the business operates. Businesses like this are less likely to have an accident or injury occur again.

How can Businesses Improve the Experience Modification Rating?

Safety Programs

Developing and implementing a safety program can go a long way towards keeping your business safe and limiting the amount of claims on your workers compensation insurance policy. This program should be well-documented. If it is documented, it can be used by your independent insurance agent to negotiate for lower rates on premium and to prevent an increase in premium after a year in which you have several claims.

Return to Work Programs

Implementing a Return to Work Program can help tremendously with the severity of claims. Humans are creatures of habit and the longer an injured worker spends away from their work environment after an injury, the more likely they are to develop new habits away from their work community. When they develop these new habits, the more likely they are to not return to work. This is when the severity of a claim can have damaging impacts on a businesses experience modification rating.

Choose an Independent Agent

Choosing an independent insurance agent can take a lot of the hassle out of the insurance buying process. Choosing an independent agent allows you to solicit advice from them about the pros and cons of each carrier. Like most things in life, when an insurance policy is dramatically cheaper than its competitors there is usually a reason for the lower price. That reason is not because they provide better service. An independent agent can give you this advice where as an agent who sells only the insurance of one carrier is not able to tell you the ugly truth of the insurance business.

Speak Long and Honestly with your Insurance Agent

Taking some additional time to speak with your agent about the daily ins and outs of your business will help them place your business in the proper classification code and prevent cracks in your coverage. The more information you give your insurance agent the more likely you are to get what you are looking for from them. This is very true when it comes to what you value as a business owner. If price is your main determining factor than it is important to express this to them. If there is one area of your business that is extremely valuable, you should tell your agent this and they can discuss with you all the options they have to protect that aspect of your business. Remember, in the end, your insurance agent works for you (or at least they should). If you are not getting out of your experience what you expect, you should tell them and if they do not correct the problem it may be a time for you to find a new agent who can meet your priorities.