Worker Compensation Insurance

Worker's Compensation, or "Worker's Comp" is a government-mandated program providing benefits to workers injured or made ill due to their job.

Workers Compensation Insurance

What Is Workers’ Compensation?

Workers’ compensation, commonly referred to as “workers’ comp,” is a government-mandated program that provides benefits to workers who become injured or ill on the job or as a result of the job. It is effectively a disability insurance program for workers, providing cash benefits, healthcare benefits, or both to workers who suffer injury or illness as a direct result of their jobs.

In the United States, workers’ compensation is handled primarily by the individual states. The required benefits vary greatly state by state.

Texas is the only state that does not require employers to maintain workers’ compensation insurance.

Workers’ compensation is a form of employer insurance coverage that pays benefits to workers who are injured or become disabled as a result of their job.
By accepting workers’ compensation benefits, the employee waives the right to sue their employer for damages.
The compensation may include partial salary repayment and coverage of medical costs.
Workers’ comp is not the same as unemployment benefits or disability insurance.

Understanding Workers’ Compensation

Workers’ compensation benefits may include partial wage replacement for the period during which the employee cannot work. The benefits may also include reimbursement for healthcare services and occupational therapy.
Most workers’ compensation programs are paid for by private insurers, from premiums paid by the individual employers. Each state has a Workers’ Compensation Board, a state agency that oversees the program and intervenes in disputes.
There are federal workers’ compensation programs that cover federal employees, longshore and harbor workers, and energy employees. Another federal program, the Black Lung Program, handles death and disability benefits for coal miners and their dependents.

Workers’ Compensation Benefits

Requirements for workers’ compensation vary from state to state, and not all employees are covered in some states. Some states, for example, exclude small businesses from the mandate for coverage. Others have different requirements for various industries. The National Federation of Independent Business (NFIB) maintains a summary of each state’s worker compensation requirements.

Salary Replacement

The salary replacement paid to an employee under workers’ compensation is typically less than the person’s full salary. The most generous programs pay about two-thirds of the person’s gross salary.
Workers’ compensation benefits are not usually taxable at the state or federal level, compensating for much of the lost income. Taxes may be due to recipients who also have income from the Social Security Disability or Supplemental Security Income programs.

Healthcare Cost Reimbursement and Survivor Benefits

Most compensation plans offer coverage of medical expenses only related to injuries incurred as a direct result of employment. For example, a construction worker could claim compensation for an injury suffered in a fall from scaffolding, but not for an injury incurred while driving to the job site.
In other situations, workers can receive the equivalent of sick pay while they are on medical leave. If an employee dies as a result of a work-related incident, workers’ compensation makes payments to the worker’s dependents.

Types of Workers’ Compensation

In the U.S., workers’ compensation rules are handled by the individual states. The U.S. Department of Labor houses an Office of Workers’ Compensation Programs, but it is responsible only for coverage of federal employees, longshoremen and harbor workers, energy employees, and coal miners.
The lack of federal standards for workers’ compensation has resulted in extremely varied policies for the same kinds of injuries from state to state.
Identical injuries can receive radically different kinds of compensation depending on where a worker resides. A paper by the Occupational Safety and Health Administration (OSHA) flatly calls workers’ compensation a “broken system,” and estimates that 50% of the costs of workplace injury and illness are borne by the individuals who suffer them. Low-wage and immigrant workers often don’t even apply for benefits.

Workers’ Compensation: Coverage A vs. Coverage B

There are two types of workers’ compensation coverage: Coverage A and Coverage B.

Coverage A includes all of the state-mandated benefits that an injured or ill employee is entitled to receive from the employer’s insurance. It covers salary replacement payments as well as medical care, rehabilitation, and death benefits as necessary. All states except Texas have such benefits, although they vary widely from state to state, and many states exclude some employees from eligibility.
Coverage B pays benefits that exceed the minimums required by Coverage A. They usually are paid only as the result of a successful lawsuit brought by the employee for negligence or other misconduct by the employer.

Workers who accept workers’ compensation generally waive the right to sue their employers, agreeing to a no-fault contract in doing so. However, state legislation and court rulings in a number of states have restored the employees’ right to sue in various strictly defined circumstances. Thus, an employer may opt to purchase a policy that combines Coverage A and Coverage B.

Who Pays Workers’ Compensation Insurance Premiums?

The employer pays workers’ compensation insurance premiums.
There is no payroll deduction, as for Social Security benefits. The employer is required by law to pay workers’ compensation benefits as established by individual state laws.

How Much does Workers’ Compensation Cost?

The cost of workers’ compensation insurance varies by state, as do the mandated benefits. There also are different rates depending on whether the employees covered are performing low-risk or high-risk jobs.
The fees for the insurance are based on the company’s payroll numbers.

How do you Apply for Workers’ Compensation?

The rules for applying for workers’ compensation vary by state. In general, a worker with a job-related injury or illness should:

Write down the details of the injury or illness in detail, with photos and the names of witnesses when possible.
Report the injury or illness to your employer. The employer should take it from there, filing your claim with the insurer.

You can follow through with the employer’s insurance company to make sure that a claim was filed.
If your claim is denied, you can appeal the decision with your state’s Workers’ Compensation Board.

Who is Exempt from Workers’ Compensation?

Generally, only salaried employees are eligible for workers’ compensation; contractors and freelancers are not.

Disability Insurance

New York is one of a handful of states that require employers to provide disability benefits coverage to employees for an off-the-job injury or illness. The Disability and Paid Family Leave Benefits Law (Article 9 of the WCL) provides weekly cash benefits to replace, in part, wages lost due to injuries or illnesses that do not arise out of or in the course of employment (WCL §204). If you get injured or become disabled while you are eligible for or are collecting unemployment benefits, and if your injury or disablement results in you being ineligible for unemployment benefits, you are eligible for disability benefits.
Disability benefits are covered through your employer’s disability benefits insurance carrier or your employer may be self-insured.

Benefits
Disability benefits are cash-only benefits. The benefit:

is 50 percent of your average weekly wage for the last eight weeks worked
cannot be more than the maximum benefit allowed, currently $170 per week (WCL §204).
Is subject to Social Security and Medicare taxes.
is paid for a maximum of 26 weeks of disability during any 52 consecutive week period (WCL §205).

You cannot collect disability benefits and Paid Family Leave benefits at the same time. The total combined disability leave and Paid Family Leave in any 52-week period may not exceed 26 weeks.
Note that the PFL does not provide for the payment of medical expenses.

Who is Covered

The Coverage Requirements page provides information about who is considered an employee under the New York State Disability Benefits Law and information about who is and is not covered for disability benefits.

Cost

Your employer is allowed, but not required, to take a contribution from you to offset the cost of providing disability benefits. Your contribution is calculated at the rate of one half of one percent of your wages, but no more than 60 cents a week (WCL §209).
If you have more than one job at the same time, with combined wages of more than $120 per week, you may request each of your employers to adjust your contributions in proportion to the earnings of each employment. The combined contributions may not exceed 60 cents per week. Your request should be made as soon as you enter a second job.
There are some accepted disability benefits plans under which you are required to contribute more than 60 cents per week, but only by agreement and provided your contributions are reasonably related to the value of the benefits.

Eligibility

You must be under the care of a physician, chiropractor, podiatrist, psychologist, dentist, or certified nurse midwife in order to qualify for disability benefits.

If you become disabled while you are employed There is a seven day waiting period for which no benefits are paid. Benefits begin on the eighth consecutive day of disability (WCL §208). If you have been disabled more than seven days, your employer must give you a Statement of Rights under the Disability Benefits Law (Form DB-271S) within five days of learning that you are disabled (WCL §229[2]).

A “day of disability” is a day on which you were prevented from performing work because of disability and for which you have not received regular wages or remuneration. You are ineligible for disability benefits if you perform any type of work for which you receive wages or profit, even if performed at home.

If you become disabled while you are unemployed

If you have been unemployed for less than four weeks
- your disability benefits are provided by your last employer’s disability benefits insurance carrier, and
  the seven-day waiting period applies.
If you have been unemployed for more than four weeks and are collecting unemployment insurance benefits
- the Workers’ Compensation Board Special Fund for Disability will provide your disability benefits, and no waiting period is required.
You may not collect unemployment benefits and disability benefits for the same period of time.

Your disability is from an auto accident

You are entitled to disability benefits for an injury incurred in an auto accident. However, the amount of the disability benefit may reduce any no-fault insurance benefit you are eligible to receive.

You are collecting Social Security retirement benefits

You can receive disability benefits and Social Security retirement benefits at the same time.

You are still disabled, but your benefits have stopped

If you have received less than 26 weeks of benefits and you are still disabled and you have not received a Notice of Rejection you should submit further medical evidence to request additional benefits.

You quit your job

If you quit your job, it may affect your right to disability benefits.

Employer/Insurance Carrier requests examination by a health care provider

Your employer/insurance carrier may designate a health care provider to examine you. You must submit to requested examinations under the following conditions:
- Exams may occur at intervals, but not more than once a week.
- You do not pay for the exams.
- Exams occur at a reasonable time and place.
If you refuse to submit to an exam, you may jeopardize your benefits.

Pregnancy and Maternity Leave

If you are pregnant, you are eligible for disability benefits for four weeks before your due date and six weeks after giving birth (eight weeks if you delivered by Caesarian section).
You may be entitled to further disability benefits up to the maximum 26 weeks with documentation from your medical care provider. Either way, you will need to submit a medical report completed by a doctor or certified nurse midwife stating your disability is due to or related to pregnancy or recovery from delivery. Physical and mental health conditions due to or related to your pregnancy or post-partum recovery may be eligible for disability benefits.
Note: Benefits are not payable for any period you are unable to work due to elective surgery (such as an elective sterilization procedure).

Differences between Disability Benefits and Paid Family Leave

Only the birth mother is eligible for disability benefits for the period immediately after the birth of a child.
Paid Family Leave begins after the birth and is not available for prenatal conditions.
A parent may take Paid Family Leave during the first 12 months following the birth, adoption, or fostering of a child.
You cannot collect disability benefits and Paid Family Leave benefits at the same time.
- There is a limited exception to this for employees who may be eligible for both disability benefits and Paid Family Leave when subject to an order of quarantine due to COVID-19. See PaidFamilyLeave.ny.gov/COVID19 for details.
Your combined total disability leave and Paid Family Leave in any 52 week period may not exceed 26 weeks.

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