California workers compensation insurance is an important factor for employers in the state. Coverage is a cost of doing business for every employer. The government vigorously enforces the workers comp insurance laws and violations both for uninsured employers and under-insured companies carry stiff financial and personal penalties.
California workers ‘compensation law requires every employer to get and keep qualified coverage or self-insurance. The requirement applies to every employer in the state with one or more employees. Sole proprietors can either claim an exemption or cover themselves with insurance.
One should note that with the Affordable Care Act and California health insurance exchange, it may be more advantageous for sole proprietors to insure health and casualty directly. Officers and directors of corporations owned by those officers and directors have the same option. They can cover themselves as employees or as owners.
California worker’s compensation law provides harsh penalties and fines for non-compliance. The state can charge an employer with a basic offense of failure to insure and impose up to $10,000 in fines and up to a year in jail. The state can also issue penalties of up to $100,000 against illegally uninsured employers. In the event that an injured employee files for compensation, the Board may find the employer uninsured. The board can fine the employer up to $10,000 per employee if the injured claimant succeeds, or up to $2,000 per employee if the injured claimant does not qualify for compensation.
Where to Buy Insurance?
Employers must buy insurance on the open market from private insurance providers. Many companies take advantage of the experienced group of brokers and agents to search for the best coverage, prices, and benefits for which they qualify. Those that do not qualify for private coverage must use the State Fund, it is the insurer of last resort.
Buying Workers’ Compensation in California
There are four ways to get and keep qualified workers’ compensation coverage in California. Private insurance, the State Fund, self-insurance, and self-insured pools.
Private insurance- Employers can purchase insurance coverage from any of the licensed insurance providers in California. Companies set the Rates and fees, and employers may wish to comparison shop or use a licensed broker to find the best price and coverage.
State Compensation Insurance Fund- The State Fund is a non-profit insurance organization that competes with private insurers. They also provide coverage for employers that do not qualify for private insurance because of risk.
Self-insurance- The state of California must approve self-insurance applications from employers before initiating a program. The employer must meet or exceed the below-listed minimum requirements.
- Self-insurance requires state approval
- a net worth of at least $5 million
- net income of $500,000 per year
- posting of a security deposit.
Self-Insured Group Employer Pools- California permits small and medium-sized employers to join together for costs savings and form insurance pools. The state permits employers of similar size, business activity, and workforce classifications to for self-insured pools. The Self Insured Groups (SIGs) must get state approval, post a security deposit that covers their liabilities.
California has a strong set of regulations that govern self-insured workers’ comp pools.The State lists the mandatory elements in detail in an OSIP publication on self-insured group (SIG)requirements.
Factors for California Coverage?
The rate information used by California insurers and the State Fund come from a common source. The State licensed the WRCIB to issue standards for liability and risk. The Workers Compensation Insurance Rating Bureau is the organization that analyzes information and produces statistics on risk. The WRCIB issues recommendations for rates which the State of California Department of Insurance uses when reviewing insurance provider applications for rates.
Factors that impact coverage include legal, liability, and employer-specific factors. Insurers set the rates for coverage and use underwriting to determine whether they will cover an employer and the price of premiums. The factors that affect the price of coverage in California include the below described criteria.
- The employer’s industry classification or SIC code.
- Payroll level of the employer on an annual basis.
- Discounts that may come from the use of health care organization for health and safety, and group or association discounts.
- Employer’s experience modification or history of work-related diseases, accidents, and injuries.
How much does worker’s comp insurance cost?
Based on a standard set of SIC codes, one recent comparison had California at $3.48 per $100 in payroll. This was the highest rate in the US. More typical studies simply add the average across all classifications in use, and on that scale, California was the highest rate in the nation but at $2.74 per $100. The occupational classifications used by an employer determine the actual rate. The NCIC or state-based agency sets rates based on occupational ratings for hazards, illness, and injury.
What is the cost of not getting worker’s comp insurance?
The costs of not getting insurance or adequate insurance are steep. Uninsured employers face fines more than $10,000, and up to as much as $100,000. Uninsured employers face the risk of criminal prosecution and incarceration for gross violations. Under-insured employers must reimburse any lapse in coverage and benefits needed to cover an injured worker. Underinsured employers risk all their assets until they cover their deficiency
Places to get workers comp insurance information?
The private insurance industry is a prime source of information on commercial insurance coverage.
Brokers and agents have extensive knowledge and experience in handling worker’s comp insurance.
The California government has resources that help guide the process of understanding the law and compliance. The resources include the State Fund and the Office of Self Insured Programs. The Department of Information and Assistance staff is a valuable source of assistance for employers seeking information on requirements and compliance.
The California Department of Insurance can provide information on insurance carriers and licensed agents and brokers.
Helpful Tips
Employers should remember that workers’ comp insurance is just that- an insurance service for employee health benefits. Employers should look at the insurance provider like any other health network with claims adjusters, offices, facilities, and medical personnel. Employers should assess the readiness of the network to handle any ideas they have about incidents or volume of cases. Speed and accuracy mean a lot to injured employees and their dependents. Processing time for claims can be a legal issue for the employer if not performed in a prompt manner.
Conclusion
California has a high rate of workers compensation participation. It has the largest pool of self-insured coverage in the US including more than 7,100 employers, and more than 4.6 million employees.
Using strict enforcement and stiff penalties, the government places a heavy emphasis on meeting California workers compensation insurance requirements. It is important to have insurance and to have enough insurance, as under-insured employers also face fines and penalties.
Sources:
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Office of Self-Insurance Plans ( OSIP)
http://www.dir.ca.gov/OSIP/SI-groups/index.html -
Division of Workers Compensation
http://www.dir.ca.gov/dwc/ -
California Department of Industrial Relations
https://www.dir.ca.gov/dwc/injuredworker.htm -
Office of Information and Assistance
http://www.dir.ca.gov/dwc/IandA.html