What Is Workers’ Compensation Coverage A?
Workers’ compensation coverage A refers to an insurance policy that protects employees under state laws and provides medical care, death, disability, and rehabilitation benefits for workers who are injured or killed while on the job. The insurer agrees to pay all compensation and benefits related to the insured employer’s state’s workers’ compensation laws without any regard to liability. Workers’ compensation coverage premiums are based on the employer’s payroll and the type of duties its employees perform.
Key Benefits
- Workers’ compensation coverage A protects employees under state laws.
- It provides medical care, death, disability, and rehabilitation benefits for workers who are injured or killed while on the job.
- The benefits are generally awarded on a no-fault basis.
- Premiums are based on the employer’s payroll and the type of duties its employees perform.
- Workers’ Compensation Coverage B includes workers’ compensation A coverage but covers additional damages when the employer is liable.
Understanding Workers’ Compensation Coverage A
When an employee is injured, disabled, or dies while on the job, the employee or their survivors are entitled to workers’ compensation coverage A benefits. Under this type of insurance, the employer pays certain benefits such as medical care, lost wages, and rehabilitation costs.
The benefits are generally awarded on a no-fault basis, as long as the employee is not under the influence of drugs, including alcohol. Employees are usually required to submit to a drug test following an on-the-job accident. Many incidents provide partial reimbursement of lost wages and survivor benefits in the event the worker is killed while on the job.
Workers’ compensation Part A satisfies state insurance requirements. It funds employees’ medical bills, related expenses, and lost wages in the case of a covered workers’ compensation loss. Payments are normally based on predetermined schedules in the case of defined injuries. Expenses are paid as calculated by the adjuster.
If a company fails to carry workers’ compensation coverage, it can result in fines ranging from $1,000 to $10,000 or more, and even jail time, depending on the state or jurisdiction.
Employer Responsibilities
Workers’ compensation Part A has no policy limits, and the insurer instead pays all benefits required by the workers’ compensation law of any state listed in the declarations. However, the employer can be held responsible for payments made by the insurer that exceed regular workers’ compensation benefits. An employer would be responsible for such payments due to the following:
- Serious and willful misconduct
- Knowingly employing workers in violation of the law
- Failure to comply with health or safety regulations
- Discharge, coercion, or discrimination against any employee in violation of the workers’ compensation law
In these misconduct cases, the employer is responsible for reimbursing the insurer for any payments that exceed regular workers’ compensation benefits.
Special Considerations
Workers’ compensation Part A is legally mandated in nearly every state in the United States and is a significant expense for employers. Employers may pay more if the company has had a certain number of previous claims, or if its employees have certain occupations that are deemed dangerous.
According to the National Academy of Social Insurance, there was a 7.2% increase from 2014 to 2018 in covered jobs, bringing the number to just over 142.6 million for 2018. During the same period, covered wages rose 8.7%. However, employer costs rose by 3.5% and benefits paid fell by 1.7%.
Workers’ Compensation Part A vs. Part B
Workers’ compensation Part B also covers medical care, lost wages, and rehab costs for employees injured on the job. But unlike Part A, Part B coverage covers employees when the employer is liable through negligence or otherwise, which is also why it’s called employers’ liability coverage.
While Part A covers state requirements, Part B pays additional damages up to certain limits. Payments for Part B are determined based on the type of injury, policy terms, and the insurer. Example Part B limits may be:
- Bodily injury by accident: $100,000 each accident.
- Bodily injury by disease: $500,000 policy limit.
- Bodily injury by disease: $100,000 for each employee.
Part B is not commonly used but there can be circumstances in which having this policy benefits the company, such as when the company is sued by a family member of the injured party or by a third party.
Example of Workers’ Compensation Coverage A in Action
John works at Factory ABC, a company that manufactures steel pipes. The company is serious about safety and has implemented many safety standards that employees must follow, including wearing gloves when working with hot steel and boots that cover the entire foot and have grips to prevent slipping.
One day, John is moving steel pipes down a ramp when he slips on a puddle of water that has accumulated from a leaky pipe. Despite wearing boots with grips, he falls, breaks his leg, and damages nerves in the process. He requires surgery and needs to be out of work for six months.
John’s health insurance pays for his broken leg and a portion of the surgery, but not all of the surgery. Fortunately, Factory ABC has workers’ compensation coverage A as mandated by the state, and the compensation coverage pays for the remainder of John’s medical bill as well as his salary while he is recovering for six months. The coverage also includes rehabilitation costs.
What Does Workers’ Comp Cover?
Workers’ comp covers employees that get sick or injured while on the job. It includes death benefits, disability benefits, compensation for lost wages, medical expenses, and lawsuits.
Who Is Covered by Workers’ Comp Coverage?
Generally, all employees are covered by workers’ compensation. All non-military, federal employees are covered by the Federal Employment Compensation Act (FECA). Employees working for private companies are generally covered as most states require coverage. It is important to check with your employer and state to determine what kind of coverage you have.
How Is Workers’ Comp Calculated?
Compensation is commonly based on the average weekly wage. The calculation involves multiplying the daily wage of the employee by the number of days worked in a full calendar year. The resulting number is then divided by 52 (weeks) to arrive at the average weekly wage.
How Much Does Workers’ Comp Cost?
The cost of workers’ compensation varies based on factors such as the state of employment, a company’s annual total payroll, the industry, the type of work done, the insurer, and the company’s claims history. The average cost across the nation is $936 per employee per year, or $78 a month.
Is Workers’ Comp Taxable?
No, the benefits that employees receive as part of workers’ compensation are not taxable. The only time that workers’ compensation benefits might be taxable is if you are also receiving Social Security Disability Insurance (SSDI) and a portion of those benefits has been offset by the benefits from workers’ compensation coverage.
The Bottom Line
Workers’ compensation coverage A protects employees under state law and provides medical care, death, disability, and rehabilitation benefits for workers who are injured or killed while on the job. Companies are required to carry workers’ compensation coverage A, and claims are paid without any regard to liability. Workers’ compensation coverage protects employees, but it also protects employers from incurring significant legal and medical costs if they were sued by an injured employee.
References
- Cornell University, Legal Information Institute. “48 CFR § 970.2803-1 - Workers’ Compensation Insurance”.
- Insurance Information Institute. “Insuring Your Business: Small Business Owners’ Guide to Insurance”.
- U.S. Department of Labor. “Workers’ Compensation”.
- National Academy of Social Insurance. “Workers’ Compensation Benefits, Coverage, and Costs”, Page 2.
- Insurance Information Institute. “Insuring Your Business: Small Business Owners’ Guide to Insurance: Liability Insurance”.
- Benefits.gov. “Federal Employees’ Compensation Act (FECA) Program”.
- U.S. Department of Labor. “Section 10–Determination of Pay Average Weekly Wage in General”.
- Intuit. “Is Workers’ Compensation Taxable? Everything You Need to Know”.
