HNI Senior Claims Consultant
The Affordable Care Act raises new questions and challenges for employers in many areas of benefits, with some re-examining whether they should make health insurance available to all their employees. Recently, one employer asked HNI the following question:
“If I have to offer all of my employees a health plan, why do I have to pay for workers' compensation insurance, too?”
There are three big reasons why employers need work comp.
1.) Work Comp is the Law
Most states require employers to have workers' compensation insurance. In some states, whether work comp is required depends on the number of employees. The U.S. Department of Labor provides a listing of links to states' work comp divisions. To avoid legal action, employers must obey work comp regs.
2.) Work Comp Protects Employers From Being Sued
Here's an [abbreviated] history of workers' compensation:
About 100 years ago, the first law was put into place to protect injured employees. Today it is commonly referred to as workers' compensation. Before this law, employees who were hurt on the job needed to file tort actions against (in other words, sue) their employers. It was the employee’s responsibility to prove the employer’s negligence or liability. Damages were not statutory and punitive damages could be awarded.
The modern system of workers' compensation is no-fault and provides injured workers with medical treatment to regain pre-injury condition and indemnity benefits to cover both lost wages and permanent impairment. Work comp is the sole remedy for employees and limits them to statutory benefits and does not provide for punitive damages. In other words, because of work comp, employees can't sue employers for workplace injuries.
3.) Work Comp Covers More than Medical Expenses
Workers' compensation is designed to cover costs associated with workplace injuries, including medical expenses and lost wages. Health insurance covers more medical expenses, including those that don't have anything to do with employment, but it does not cover lost wages due to mishaps.
From a health insurance perspective, an employer's policy includes the right to subrogate. When a work-related injury occurs, the health insurer subrogates a third party (workers' compensation insurance) for the medical expense paid out on the employer's behalf. The employer is not held liable or negligent because workers' compensation is no-fault. (Remember the No. 2 reason above?)
Because workers' compensation exists, the employer's personal health insurance is not responsible for paying for work-related injuries. Subrogation allows this system to work.
Bottom line, workers' compensation never will be abolished. This being the case, employers need both health insurance and workers' compensation.
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