People Operations | Management

Workers’ Compensation Insurance

Every California employer (except the state) that uses employee labor, including family members, must purchase   workers’ compensation insurance   to cover   work-related   injuries or illnesses, even if they have only one employee.   Out-of-state   employers may also need workers’ compensation coverage if they have any employees regularly working in California or if they enter into a contract of employment in the state of California.


However, there are some exceptions for partnerships (if the only persons performing labor are the partners) and corporations (where the corporate officers are the sole shareholders). For such corporations, the corporation, officers and directors come under the workers’ compensation provisions only by election.


If an employer fails to have workers’ compensation insurance for its employees, it can be expensive. The   Department of Labor Standards Enforcement (DLSE)   is required to issue and serve a stop order and penalty assessment prohibiting further use of employee labor until the employer purchases workers’ compensation insurance. Effective Jan. 1, 2011, the penalty assessed for failure to have workers’ compensation insurance is based on the greater of the following:


Twice the amount the employer would have paid in workers’ compensation insurance premiums during the period the employer was uninsured.

$1,500 per employee.


Workers’ compensation insurance provides six basic benefits: medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits or vocational rehabilitation, and death benefits.


Employers in California may obtain worker’s compensation insurance coverage by the following means:


Purchase a policy through an agent or broker from any licensed insurer that is authorized to write policies in California.

Become   self-insured   by qualifying through an application process, meeting specific financial requirements and being approved by the director of the Department of Industrial Relations. Group   self-insurance   provides a way for smaller employers to become self-insured   by pooling resources to meet financial requirements.


When a   work-related   injury occurs as a result of an occupational accident or illness, employers must do the following:


Provide a claim form within one working day of finding out about an injury or illness. Complete the employer portion of the returned claim form and give a copy to the employee.

Complete form   DLSR 5020   and send it to the claims administrator within five days of knowing about the injury or illness.

Stay involved and maintain an open dialogue with the employee. Do not assume the claims administrator is taking care of everything.


An employee who suffers a work-related injury or illness that requires medical treatment beyond first aid must notify his or her employer in writing within 30 days of the injury or illness. An employer must provide a claim form to an employee within 24 hours of the reported work-related injury or illness.


Medical treatment.   Doctors in the California workers’ compensation system are required to provide   evidence-based   medical treatment. That means they must choose treatments that are scientifically proven to cure or relieve   work-related   injuries and illnesses. Those treatments are laid out in a set of guidelines that provide details on which treatments are effective for certain injuries and how often the treatment should be given (frequency), the extent of the treatment (intensity) and for how long (duration), among other things.


To comply with the evidence-based   medical treatment requirement, the state of California has adopted a   medical treatment utilization schedule (MTUS) .   The MTUS includes guidelines for specific body regions adopted from the American College of Occupational and Environmental Medicine’s (ACOEM)

Occupational Medicine Practice Guidelines,  plus guidelines for acupuncture, chronic pain and therapy after surgery. The Division of Workers’ Compensation also has a committee that continuously evaluates new medical evidence about treatments and incorporates that evidence into its guidelines.


Additionally, employers, or the claims administrator representing the employer, are required to have a program called   utilization review (UR) ,   which basically provides a way to double check that the doctor’s treatment plan for the organization’s employees is sound.

If the claims administrator has established a   medical provider network (MPN)   or a   health care organization (HCO) ,   the employees’ work injuries and illnesses will be treated by a doctor within a network (similar to an HMO). If employees are qualified to predesignate a personal physician and did so prior to being injured, they can go to their regular doctor for their workers’ compensation care.


Disability ratings.   Permanent disability is any lasting disability that results in reduced earning capacity after maximum medical improvement is reached. If an employee’s injury or illness results in permanent disability, he or she is entitled to permanent disability (PD) benefits.


Retraining and return to work information.   Getting employees back to work after an injury is one of the most important things an employer can do for the health of their employees and the health of the business. The   Division of Workers’ Compensation   has an incentive for employers with 50 or more employees to bring injured workers back to the job. Employers with 50 or more workers who offer injured employees regular, modified or alternative work will pay 15 percent lower weekly PD benefits after the offer is made. Conversely, employers with 50 or more workers who do not make a return to work offer will pay 15 percent more in weekly PD benefits.


Death benefits.   Death benefits are payments to a spouse, children or other dependents if an employee dies from a   work-related   injury or illness. This includes reasonable burial expenses, not exceeding $5,000. The amount of the death benefit depends on the number of total or partial dependents. In the case of one or more totally dependent minors, death benefits will continue until the youngest minor’s 18th birthday (disabled minors receive benefits for life). Death benefits are paid at the total temporary disability rate, but not less than $224.00 per week. The period within which to commence proceedings for the collection of death benefits is one year from death where death occurs within one year of date of injury; or one year from date of last furnishing of any benefits or one year from death where death occurs more than one year from the date of injury. No such proceedings may be commenced more than 240 weeks from the date of injury.


Mileage rates.   An injured worker is entitled to reimbursement of reasonable expenses of transportation if he or she has to travel to get treatment for a work injury. Reasonable expenses of transportation include the following:

Mileage for reasonable travel to and from doctors, hospitals, therapy or a pharmacy.

Parking.

Bridge tolls.

Statewide average weekly wage.   Permanent total disability benefits (based on permanent disability of 100 percent) are paid for life at the temporary disability rate. For injuries that occur on or after Jan. 1, 2003, the benefit rate will be adjusted each year based on any increase in the state average weekly wage (SAWW).