Can my business be self-insured for workers’ compensation?
Colorado workers’ compensation statutes allow employers, meeting strict financial and loss control standards, to self-insure this risk. Authorized by special permit, such workers’ compensation obligations are paid directly from the earnings and assets of the employer. Permits to self-insure individual companies are obtained through the Division of Workers’ Compensation. Employers applying for self-insurance must regularly employ 300 or more employees in Colorado or be a division or subsidiary of a parent company that has a minimum of $100,000,000 in assets.
As an employer, how do I know whether I have to carry workers’ compensation insurance?
All public and private employers in Colorado, with limited exceptions, must provide workers’ compensation coverage for their employees if one or more full or part-time persons are employed. A person hired to perform services for pay is presumed by law to be an employee. This includes all persons elected or appointed to public sector service and all persons appointed or hired by private employers for remuneration. There are a few exemptions to this definition.
Are all employers required to carry workers’ compensation insurance?
All employers are required to carry workers’ compensation insurance except for the following employer/employee work situations: some employers of agricultural laborers, casual or domestic workers, real estate brokers, sole proprietors, and partners. Directors or officers of a corporation are considered employees and must exclude themselves from coverage through an insurance company.
If I have another insurance policy that is similar to workers’ compensation, am I still required to carry workers’ compensation insurance?
Yes, you are still required by state law to carry workers’ compensation insurance. Some insurance policies provide 24-hour medical coverage and a wage replacement in the event of an accident; however, the policies are limited and do not provide all the benefits as under workers’ compensation and do not provide the employer with the exclusive remedy provision. Contact the Division of Labor for more information.
How do I obtain workers’ compensation insurance?
Workers’ compensation insurance may be purchased from one of over two hundred private insurance companies authorized to conduct business in the State of Colorado. Coverage may be purchased from any authorized insurance company.
Am I exempt from carrying workers’ compensation coverage if I’m an independent contractor?
Generally, an independent contractor is a person who contracts to complete a specific project for another business for a set price. The independent contractor must be: (1) free from control and direction over the means and method of performing work; and (2) customarily engaged in an independent trade, occupation, profession or business related to the work being performed. While a business and an independent contractor may help establish independence in a written document, the actual facts will determine whether a particular worker qualifies as an independent contractor. If the independent contractor has employees, workers’ compensation insurance for the employees must be obtained.
If I have a partnership, corporation, or sole proprietorship, am I required to carry workers’ compensation insurance?
A sole proprietorship or partnership, with no employees other than the sole proprietor or partners, is not required to purchase workers’ compensation insurance. Corporate officers and directors are considered employees of the company and are required to have a workers’ compensation insurance policy; however, the corporate officers or directors may be excluded from coverage under the policy. If you are a sole proprietor or a partner and contracting for work through a general contractor, you or the general contractor will be required to provide a workers’ compensation insurance policy.
What are my responsibilities for workers’ compensation if I lease my employees?
The employee leasing company can take care of your company’s workers’ compensation insurance by adding your company as a separate endorsement to the leasing company’s policy or purchasing a separate policy for each client employer. Since the client employer is the employer under workers’ compensation law, you should ALWAYS have a current workers’ compensation policy from the insurance carrier. The employer is also responsible for reporting work-related injuries to the Labor Commission.
Payroll-only companies are not leasing companies and do not provide workers’ compensation insurance. Never assume that your workers’ compensation insurance is being taken care of by someone else!
What are the employer’s responsibilities under workers’ compensation?
- Posting Notice. Employers are required to post in conspicuous places typewritten or printed notices stating that they have complied with all the rules and regulations securing compensation to employees and their dependents (notices are available free of charge at the Labor Commission). The notices should state the name of the insurance carrier, the phone number, and steps to report an industrial claim.
- Reporting Industrial Accidents. A worker has up to 180 days to report an injury or worker-related illness. Once the injury/illness has been reported to the employer, the employer has seven days to file the “Employer’s First Report of Injury or Illness” with the Labor Commission and submit a copy of the report to their workers’ compensation insurance carrier and the injured worker.
Does the employer have to file a first report of injury for minor injuries that only require first aid?
The employer is required to file for any employee who has been treated by a physician regardless of the severity of injury. Once the physician has treated an industrially injured worker, the doctor is then required to file a Physician’s Report.
What if I question the validity of a claim or have evidence that the injury did not happen on the job?
If you dispute the validity of a claim, contact your insurance carrier with specific information as to why you do not feel this is a valid claim or attach a letter to the Employers’ Report and submit it to your insurance carrier; however, you are still required to submit the “Employer’s First Report of Injury.” All injuries or illnesses reported to the employer must be filed with the insurance company and the Labor Commission. Reporting an injury by filing an Employers’ Report (form 122) is not an admission of liability.
Can I bill my employees for workers’ compensation coverage?
No, you cannot bill your employees for their workers’ compensation coverage. An employer could be subjected to a wage claim if they deducted workers’ compensation from an employee’s wage. It is the responsibility of the employer to provide workers’ compensation benefits for their employees.
If I’m an employer that operates outside the state, do I need additional coverage for each state?
Typically, as an employer, if you hire your employees and they sustain an industrial accident/illness outside of the state, they would be covered under your workers’ compensation policy. However, to determine whether additional coverage is needed for other states, it would be advisable to contact the Labor Commission to determine whether a reciprocity agreement exists with the state you are doing business in. If there is a reciprocity agreement in place, the Labor Commission would issue an extraterritorial certificate to the employer extending coverage for that state. If there is no reciprocity agreement with the outside state, then the employer is obligated to purchase workers’ compensation coverage for that state.
How are workers’ compensation insurance premium rates determined?
Each employer’s rates are determined separately, although employers are grouped by occupation classification for basic rates. Typically, the Department of Insurance, which has statutory authority to set the basic rates charged each year, has designated the National Council of Compensation Insurance (NCCI) as its rate making entity. Each employer’s rate will differ from the basic rate, which is a dollar amount per hundred dollars of payroll based on the general hazards of the business. Each employer’s basic rate is then adjusted to account for their history of injuries.
When can the employee return to work?
An employee can return to work when a physician determines the employee has reached a point of medical stability. An employee may also be returned to a light duty position, if such a position is available. A light duty work release can be initiated by the physician, employee, or you, the employer. There are numerous advantages to initiating a light duty program:
- Lowers costs for your workers’ compensation insurance carrier, thus lowering costs to you.
- Saves time and dollars on recruitment and training of new employees by retaining experienced and proven employees.
- Lowers medical and legal costs. Studies have shown the quicker you get injured workers back to work, the quicker they are to rehabilitate and the less likely they are to consult an attorney or seek additional medical treatment.
- Maintains contact with the injured worker.
- Decreases recovery time.
If you as the employer do not offer light duty or a modified position to an injured worker, that worker will remain on temporary total compensation until s/he reaches a point of medical stability.
Is the employer required to provide light duty?
No, the employer is not required to provide light duty; however, as mentioned above, there are many advantages to the employer and employee by offering light duty.
If I bring an employee back on light duty, do I have to pay them the same rate of pay?
No, you do not have to pay the employee the same rate of pay; however, the insurance company would pay 66 2/3 percent of the difference between what the employee was earning at the time of the injury and what the employee is now earning on light duty.
Is the injured worker entitled to other benefits?
The employee may be entitled to a permanent partial impairment
rating if he or she sustained a permanent impairment due to a job related injury. It is a partial impairment if the employee is able to return to work. Impairment ratings are determined by a doctor.
The employee may be considered for permanent total disability compensation if he or she has sustained a permanent disability which is totally disabling and prevents the employee from returning to any type of work. Statutory permanent and total disabling conditions are: loss of two limbs such as legs or arms, loss of eyes, or a combination. Any other injury which results in a permanent impairment is potentially a permanent total disability if the injured worker is not returned to work.
- Artificial Prostheses and Appliances: The insurance carrier or self-insured employer shall pay a reasonable sum for artificial means, appliances, and prostheses necessary to treat the employee. Broken appliances such as eye glasses may be replaced if medical treatment is necessary.
- Death and Burial Benefits: When death of an employee is the result of a work related injury or illness, death benefits will be paid by the insurance carrier or self-insured employer to the spouse and/or dependents. There is also an allowance for burial costs.
Can the employer or insurance carrier designate where employees are treated for industrial accidents?
The insurance carrier or employer has the right to designate a preferred medical provider for the first visit and any hospital care. The injured worker must first seek medical treatment from the preferred provider, if one exists.
Do I have to give my employees time off to go to therapy or the doctor after they have been released to full duty?
You do not have to provide paid time off once a worker has reached Maximum Medical Improvement (MMI) and has been released to full duty.
What if the use of illegal drugs or alcohol causes an on-the-job injury? Is the employer still responsible?
Please contact your legal counsel for specific company policy. No disability compensation (wage replacement) is awarded, except in the event of death, when the major contributing cause of the injury is the employee’s:
- Use of illegal substances
- Intentional abuse of drugs in excess of prescribed therapeutic amounts
- Intoxication from alcohol with a blood alcohol concentration of .08 grams or greater as shown by a chemical test.
Only the medical costs for the injury will be paid.
How can an employer control or lower workers’ compensation costs?
There are several things an employer can do to reduce costs related to workers’ compensation, which are all related to active employer involvement:
- Implement a safety program. The best way for an employer to lower workers’ compensation costs is to prevent injuries. Serious injuries cost a lot of money and training employees in safety pays off in reduced costs. Involve your employees in identifying hazardous work practices or potential injurious situations, areas or machines.
- Each employer should actively become involved in each workers’ compensation case. Communicate on a regular basis with your employees who are out on a workers’ compensation claim. Research indicates that employers who routinely do only one thing – call the employee right away and say, “How are you doing? Hope you get back soon.” – reduce their disability claims by 21 percent.
- If your company conducts an accident investigation after an incident, make sure it is not designed to find fault or blame. The primary purpose of an investigation should be to develop information that leads to change and prevents similar accidents from occurring.
- Create an early-return-to-work program. The employer’s designated physician should be made aware of the work performed and the physical requirements of the job essentials. This will enhance the ability of the employer to bring employees back quicker to an appropriate job and lower the employer’s workers’ compensation costs and the cost for personnel replacement. Writing good job descriptions outlining the essential functions of each job can also assist in complying with the Americans with Disabilities Act.
- Review your quarterly workers’ compensation claims. Request a quarterly claims loss statement from your insurance carrier and carefully review all claims paid for the quarter by the insurance carrier. If you dispute any payments you need to contact your insurance carrier.
Learn more from the Colorado Department of Labor & Employment’s Division of Workers’ Compensation Employer’s Guide.