Every business owner wants to ensure a safe working environment for their employees. But still, in 2019, industry employers reported 2.8 million non-fatal workplace injuries and illnesses, according to the U.S. Bureau of Labor Statistics.
Fortunately, workers’ compensation insurance provides financial compensation to employees that experience work-related injuries or contract an occupational illness. The responsibility to maintain a policy and educate employees about their rights and benefits falls on you—the employer.
To help educate your employees about this issue (and help you understand what you’re paying for in a policy), you should get to know how insurers calculate workers’ compensation payments.
Coverage and Qualifying Injuries and Illnesses
Workers’ compensation insurance covers health care and rehabilitation costs for workers injured in accidents at work, as well as benefits for dependents in cases of fatality. It also covers occupational illnesses or injuries that develop over time during work. In general, the following conditions qualify an employee for workers’ compensation benefits:
- Work Accidents– Injuries directly related to the work environment, such as falling and fracturing a bone, losing a finger because of defective equipment, or suffering burns when operating a machine
- Repetitive Injury or Cumulative Trauma– Hearing loss, carpal tunnel syndrome, back strain from carrying weight, and other injuries caused by repetitive long-term actions in the workplace
- Occupational Diseases– Exposure to certain chemicals or substances in the workplace can cause severe conditions, such as lung diseases related to workers in the coal industry or mesothelioma, caused by exposure to asbestos
- Pre-existing Conditions– Pre-existing condition aggravated by work—for example, an employee with a tendonitis problem aggravated by heavy lifting at work
How Do Insurers Calculate Compensation Packages?
After a workers’ compensation claim is submitted, the insurance company reviews all the information and comes up with a compensation package to offer the employee. Insurance companies calculate benefits based on the severity of the injury and cost of treatment and the employee’s average weekly wage. Compensation packages can include:
- Weekly Compensation– These benefits are paid weekly for a duration that differs from state to state. The employee will receive different benefits if the disability is temporary or permanent and total or partial. For example, in the case of total disability, insurers usually pay out 60 percent of the employee’s average weekly wage before the injury. In the case of partial disability, the compensation amount depends on how many hours a week the employee can work after their treatment.
- Permanent Impairment Benefits– Permanent impairment benefits are granted if an employee is diagnosed with a permanent physical disability, such as a restriction of movement.
- Payment of Medical Treatment– The injured or ill employee is entitled to payment for all necessary medical treatment. Several states also allow employees to be reimbursed for transportation costs to and from medical appointments.
- Vocational Rehabilitation– If an employee cannot return to their former position, they can receive vocational rehabilitation training for a new occupation or duties covered by workers’ compensation.
The Alternative: A Workers’ Compensation Settlement
If an employee is unsatisfied with the compensation offered by the insurance company, they can reject the package and pursue a workers’ comp settlement. When an employee chooses this option, they can then work with a legal representative to calculate the amount that they see fit and present the counteroffer to the insurer.
The two parties (the employee’s representative and the insurance company) then negotiate until they reach a workers compensation settlement amount. If the two parties cannot agree on an amount, a judge can make the final ruling. The insurer then pays the settlement to the employee in a lump sum or as a scheduled payment plan.
The Employer’s Role
Aside from choosing a trusted insurer to handle claims, the employer plays a limited role in the workers’ compensation or settlement process. The important thing is that they work on prevention first and fulfill these duties:
- Purchasing and renew their workers’ compensation policy
- Maintaining a safe workplace and taking precaution to prevent accidents
- Educating their employees about the benefits of workers’ compensation and how to file a workers’ comp claim
- Providing any necessary information or paperwork to the employee, their legal representative, and the insurance company
- Reporting a fatality or severe injury to the Occupational Safety and Health Administration (OSHA), if requird
Fair Financial Resolutions
Workers’ compensation claims, though avoidable, can never be entirely prevented. Fortunately, workers’ compensation coverage at least offers a financial resolution to these occurrences. By working with a reputable insurance provider, employers can ensure that their employees receive fair and timely compensation for their injury or illness.