Small Business Workers’ Compensation Challenges and How to Overcome Them

Workers’ compensation benefits are paid to employees who suffer work-related injuries or illnesses. The benefits paid are medical and wage-related so that the employee still earns income and doesn’t have to pay for out-of-pocket medical costs.

The requirements for workers’ compensation benefits vary by state, but most employers with at least one full-time, non-family employee must have this insurance for their employees. 

Today, let’s explore some common small business workers’ compensation challenges and how to overcome them.

Paying the Premium for the Workers’ Compensation Policy

A large number of workers’ compensation insurance carriers require a large deposit at the beginning of the policy from the insured. The balance of the policy must then be paid in increments throughout the remainder of the policy period, most often monthly. This can create additional pressure on cashflow for the business.

NCCI Classifications

Employees must be classified correctly by employers or else the employer can face penalties and increased premiums, according to the National Council on Compensation Insurance (NCCI)

For example, an employer who misclassifies what should be a full-time W2 employee as a contractor can face stiff penalties if the worker files a complaint. Similarly, employers may be paying unnecessary, excess premiums for employees who are classified in a higher-risk job code than is representative of their typical job duties. 

Workers’ Compensation Audits

An audit is required by the insurance carrier following every policy period. The audit helps determine how much insurance is needed in the next policy period based on the company’s payroll volume. 

Companies can experience an unexpected hit to their cashflow if they’ve underestimated their payroll projection, which can lead to an audit premium. Small businesses can also incur additional audit-related costs if they need help from their CPA or bookkeeper in completing the audit process. 

Managing Workers’ Compensation Claims

Small business owners often find it difficult to manage workers’ compensation claims. Filing all the necessary paperwork for the claim, dealing with continuous back-and-forth issues relating to medical treatments, and trying to get the employee back to work as soon as possible to keep claim costs down are just a few of the many hassles that arise during the claims process. 

Finding Affordable Coverage

Depending on your company’s line of business or payroll volume, you might find it challenging to acquire affordable coverage. Sometimes, companies are added to the Assigned Risk Pool because of their inability to find appropriate coverage with insurance carriers.

Although carriers within the Assigned Risk Pool are required to offer coverage, premium costs are much higher than in the normal commercial market. Companies that have a history of multiple (or large) claims also stand a strong probability of winding up in the Assigned Risk Pool.

How Focus HR Can Help

Our deep experience in helping clients secure workers’ compensation policies helps us advocate on their behalf to ensure they get the best coverage for the lowest premium. Our team will evaluate your situation and make sure your employees are properly classified based on the NCCI codes, saving you costs in annual premiums.

Focus HR will conduct an audit of your staff, payroll, and current insurance needs. Our knowledge of the Workers’ Compensation market and working with various carriers offers our clients great advantages that they may not see in working with lesser experienced brokers.

Our team will also handle disputes that arise between your company and the insurance carrier so you can focus on the daily operations of your company.

With a Focus HR workers’ compensation plan, we can also assist with the following: 

Claims Management

Focus HR can manage all of your Workers’ Compensation claims so you don’t struggle with the burden of filing and managing the claim, including all of the phone calls, emails, form completion, and other correspondence you’ll need to manage throughout the process. We actively work to liberate our clients of this responsibility, while mitigating their costs and risks associated with the claim.

Reduce Your EMOD

Each company with a Workers’ Compensation policy is assigned an EMOD (experience modifier) based on previous claims history. The Focus HR team can help implement strategies to reduce your EMOD rating through better education and worksite safety programs.

Provide a Certificate of Insurance

Companies with Workers’ Compensation often require a Certificate of Insurance for various contracts, business partnerships or when providing services to various government entities. A COI ensures adequate coverage in lieu of potential losses and provides reassurance that you are in compliance. At Focus HR, we understand that timely and accurate COIs are important to keep your business competitive and moving forward.  

Pay-as-You-Go with Focus HR

Adequate and timely cashflow is important for any small business. At Focus HR, we help even out your cashflow with pay-as-you-go Workers’ Compensation, eliminating the unexpected surprises of large deposits or audit premiums.

Request a consultation today by filling out the form below if you need HR advice for your small business.

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