How Does Workers’ Comp Work? A Complete Guide

Workers’ compensation insurance covers an employee’s medical care costs and wage replacement for work-related injuries or illnesses. Nearly every state requires businesses with employees to have workers’ comp coverage.

Since it’s required by law, many business owners sign up for workers’ compensation coverage without actually understanding what it does or how it works. This inevitably leads to a lot of confusion as soon as an employee makes a claim.

If you want to be prepared for a claim, you need to know what to expect. Here’s a run-down on who, what, why, and how of workers’ comp.

Workers’ compensation is insurance that provides cash benefits and/or medical care for workers who are injured or become ill as a direct result of their job. Employers pay for this insurance, and shall not require the employee to contribute to the cost of compensation.

HR Basics: Workers Compensation

How does workers’ comp benefit employers?

Since employers are responsible for injuries and illnesses at their company, workers compensation insurance reduces their financial liability, regardless of who is at fault for the injury or illness. Employers rely on their workers comp insurance to pay for medical, legal and other related costs if an employee is injured or sick from a work-related cause. Without workers’ comp coverage, the company could be financially responsible for the employee’s health care, rehabilitation and lost wages.

Workers comp also holds employers accountable for their employees’ safety and can encourage a safer work environment with awareness and procedures to avoid common workplace injuries. Some insurance programs include liability coverage, in case an employee sues the company over their injuries.

What is workers’ compensation?

Most states require employers have workers compensation insurance coverage for employees who experience work-related injuries or illnesses. The requirements vary by state but they all aim to provide support when a person’s job impacts their health. Workers compensation contributes to medical bills, treatment and lost wages when someone is unable to work due to their condition.

What situations qualify for workers’ comp?

If your employer has workers comp insurance, any work-related injury or illness can qualify for benefits and reimbursement. Most policies allow for compensation regardless of who was at fault.

Employees may receive workers compensation for chronic injuries and illnesses and those that happen suddenly. For example, an employee may be compensated for a repetitive use injury like carpal tunnel.

Workers comp also covers situations that occur in work-related contexts, such as during business travel or company events. If you are not sure if your illness or injury qualifies as work-related, ask your employer or contact a workers compensation representative.

How does workers’ comp benefit employees?

Workers’ comp pays out benefits to employees with work-related injuries or illnesses. It allows them to receive care and treatment and then return to work without significant financial strain. The coverage typically provides access to vocation rehabilitation, compensation for permanent injuries and survivors’ benefits.

Workers comp promotes prompt reporting when an employee gets sick or injured, encouraging people to get medical attention immediately instead of waiting. Some policies offer additional benefits like rehabilitation services, compensation for permanent injuries and free health and safety training. Keep in mind, though, that actual benefits depend on the nature of the injury or illness, state requirements and the specific policy.

Who can receive workers’ comp?

While all states have some form of workers compensation programs, not all employers are required to offer workers comp insurance. The coverage cost is paid by the employer. Not all employees are covered by workers’ comp depending on state regulations. These employees may include:

Again, depending on state rules, certain situations may not be covered such as:

Most employers post information about workers compensation in the workplace. Employees can learn more from Human Resources or the employer. To learn more about state requirements, contact your state, and you can learn more about whether you qualify for workers comp by asking your employer directly. To learn the requirements for workers comp in your state, reach out to the state your local workers compensation office.

How to make a workers’ comp claim?

Workers compensation works by allowing employees to access benefits from their employers insurance provider. Some states have a complex process but most employers will help guide you through the claims process if you suffer from a work-related illness or injury.

1. Alert your company

If it’s an emergency, seek help or care immediately.

The window for reporting and initiating a claim varies by state. Some states require you to inform your employers within three days while others offer up to a year for occupational illnesses and injuries.

Knowing your company’s processes and your state’s requirements will help you understand the procedure and meet any claim timelines.

2. Visit a doctor

Some policies may only cover visits with certain approved health care providers, so check your companys requirements before going to the doctor. If the doctor is aware that it’s a work-related cause, a medical report will be provided or sent directly to the employer’s insurance company.

If it’s an emergency, seek care immediately.

You will likely pay for your medical expenses upfront, and then, be reimbursed by the insurance company. Your employers insurance company may pay your health care provider directly in some circumstances but you should still be prepared to pay for your initial doctors visit.

3. File a claim

Once you seek treatment, you can begin the claims process. Your employer will provide you with the necessary forms and information. They will let you know to contact their workers comp insurance carrier.

You will be required to fill out state-mandated forms and possibly provide medical history and treatment. After a processing period, you will begin receiving payments for your medical expenses and other benefits. For example, you might receive, two-thirds of lost weekly wages for being out of work. Receiving long-term disability benefits may require additional forms.

Claims can be disputed if your employer feels that your injury or illness was not work-related. The dispute process varies by state. It may require that you appear before a panel or workers’ comp agency that will make the final decision.

Once a claim is settled, you have no rights to coverage for future medical bills.

4. Return to work

If an employee needs to take time off to care for their health after a work-related illness or injury, they will be able to return to their job or a comparable position after a certain amount of time.

Depending on the suggestion of your health care provider, you may be able to work part time while still receiving partial wages as you transition back into the workplace. Employers are responsible for changing workplace procedures to prevent similar illnesses and injuries in addition to accommodating employee needs when they return to work.

FAQ

How is workers compensation pay calculated?

After a workers’ comp claim is filed and processed, an injured or sick employee can be paid if the employer and insurance carrier agrees the injuries or illness is work-related. Claims can be disputed if an employer does not believe the injury or illness was caused by their work.

How much does workers comp pay California?

To calculate your regular weekly wage, you divide your annual salary by 52. If someone makes $52,000 a year, this would amount to $1,000 weekly. The maximum benefit would be $666.66 in this case as state law stipulates the maximum benefit is 2/3 of your pretax gross wage.

How long does it take to get a proposed decision in a workers comp case in NY State?

Typically, the process from hearing to approved payment takes approximately 3 weeks. The employer’s insurance company or third party administrator must then make Section 32 settlement payments within 10 days of the Workers’ Compensation Board’s decision.

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