At its best, workers’ compensation is a mutually beneficial arrangement for employers and employees alike. The former receive protection from lawsuits and the latter do not have to prove that their employers were at fault to receive benefits. However, if you are an injured worker, you may wonder exactly where the benefits that you receive come from.
The most simple answer is to say that workers’ comp benefits come from your employer, but that is not always entirely accurate. Some companies pay workers’ compensation benefits directly to their employees, but that is the exception rather than the rule. It is more common for business owners to obtain a workers’ compensation insurance policy that pays benefits to injured workers on the employer’s behalf.
Some states allow an employer to “self-insure” rather than purchasing workers’ compensation coverage from an external organization. However, even where it is allowed, state governments will only allow an employer to self-insure under certain circumstances. Specifically, only large employers that can demonstrate sufficient assets to cover whatever liabilities may arise can self-insure. An employer that does self-insure will usually hire a third-party administrator to handle the paperwork. The price of self-insurance is often increased oversight by the state government to ensure that workers are receiving the benefits they are supposed to.
Employers who are not able to self-insure must find another way to provide workers’ compensation benefits to employees. For many businesses, the answer is to obtain coverage through a private insurance company. However, it is not an option for all employers because some states expressly prohibit workers’ comp insurance from private companies. When your employer has workers’ comp coverage through a private insurer, you make a claim similar to the way you would for an auto accident or premises liability, and the insurance company pays your benefits.
The third option for employers who must carry workers’ compensation coverage is participation in a program run by the state government. It is often to a company’s advantage to participate in a state-run program if it is part of an industry in which workplace injuries are rare or if the company is relatively small. When your employer receives workers’ compensation coverage from a state-run company, your benefits usually come from an agency of the state government, such as the commerce or labor departments.
Regardless of where your employer’s workers’ compensation coverage comes from, it is important for you to know your rights and be ready to stand up for yourself to ensure you receive the benefits that you deserve. Experienced attorneys can assist you in this regard.