Workers’ compensation coverage pays benefits to workers injured on the job, including medical care, part of lost wages, and permanent disability. It also provides death benefits to dependents of employees killed in a work-related accident. Workers’ compensation systems are different in every state, as individual statutes and court decisions have shaped the way they handle claims, evaluate impairments, settle disputes, provide benefits, and control costs.
Background of Workers’ Compensation Insurance
During the 19th century, the number of individuals joining the workforce grew exponentially. As a result, the number of workplace accidents grew as well. At that time, the only way injured workers could obtain compensation for their injuries was to sue the employer. Many legislative proposals emerged early in the 20th century, focusing on compensating injured workers for their
medical care and lost wages.
By 1949, all states had a system in place to provide compensation for injured employees. Under these systems, the employer was responsible for providing compensation for the cost of medical care and wages lost, and consequently, the employee gave up his or her right to sue the employer for injuries. Currently, Texas is the only state where workers’ compensation is not mandated for all employers.
As part of the insurance package, the injured worker’s medical, rehabilitation, and lost wages are paid for by the state or insurance carrier. If the injury leaves the employee disabled, the insurance carrier will pay the claim based on the extent of the injuries and based on its permanence. The disability will fall into one of the following categories: temporary total, temporary partial, permanent partial, or permanent total disability.
Workers’ compensation rates and programs are managed by private insurers, state funds, or the National Council on Compensation Insurance (NCCI). We can provide more information about how your specific state handles these programs.
The Employer’s Responsibilities
Employers are required to do the following to comply with workers’ compensation insurance laws:
- Provide coverage for their employees and are held liable for all injuries suffered by employees while they are on the job (with the exception of employers residing in the state of Texas)
- Pay premiums and provide the carrier with audit payroll numbers
- Provide a safe environment
- Notify the carrier as soon as possible after an injury
- Investigate injuries
If you'd like to learn more about workers' compensation insurance, watch our on-demand webinar: Workers' Compensation 101.
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