Obtaining Workers' Compensation Insurance Coverage
What Does Workers' Compensation Insurance Buy?
When purchasing workers' compensation insurance, an employer is buying the following protections:
- Medical services needed to treat the job injury or illness Temporary disability payments to the employee to help replace lost wages Permanent disability payments to the employee to compensate for permanent effects of the injury A death benefit for the employee's survivors in the event of a fatal injury Legal representation for the employer by the insurance carrier Protection for the employer against most lawsuits for on-the-job injuries/illnesses
The employer must pay for the cost of insurance coverage; it is illegal to require employees to pay any of the costs associated with workers' compensation premiums or injuries.
Ways to Obtain Workers' Compensation Insurance
Employers may obtain workers' compensation insurance coverage in the following manner:
- purchasing a workers' compensation insurance policy from one of the more than 200 private insurance carriers authorized by the New York State Insurance Department to provide workers' compensation insurance to employers and are currently writing such insurance. (It may be appropriate to check the yellow pages, contact your insurance broker, carrier or agent, check with your trade association, or conduct additional research to find the most appropriate insurance coverage for your company.); purchasing a workers' compensation insurance policy from the State Insurance Fund, a public insurance carrier in New York State by calling 1-888-875-5790.; becoming authorized by the Board to be self-insured for workers' compensation, typically reserved for larger employers who can demonstrate the financial strength to self-insure; or becoming a member of a group self-insurer authorized by the Board.
Your firm's Federal Employer Tax Identification Number (FEIN) is the Workers' Compensation Board's primary identification for your business. Please note that each business that is a legal entity (i.e. Sole proprietorship, partnership, corporation, etc.) has its own, unique FEIN assigned to it. Sole proprietors may report their Social Security Number or obtain a FEIN for reporting purposes
- If you need a FEIN, you can download an application (Form SS4 ) or apply on-line at the I.R.S. website. You can also obtain an application by calling the I.R.S. at 1-800-829-3676. For general information about the Internal Revenue Service, visit www.irs.gov .
PLEASE give your FEIN # to your insurance carrier when obtaining or modifying your workers' compensation coverage.
If you change your legal entity type (i.e. Change from a sole proprietorship to a corporation), you will need a new FEIN for the new legal entity. Please let your insurance carrier know as soon as you change your legal entity type or add new legal entities to your business operations. Please also provide your insurance carrier with the new or additional FEIN(s).
Once your firm has obtained a workers' compensation insurance policy, it is your workers' compensation insurance carrier's responsibility to electronically notify the Board of that coverage using your firm's FEIN number.
Generally, private insurance is purchased through a broker or agent. Different insurance carriers cater to different markets and offer different incentives to policy holders. It is important for an employer to "shop around" to make sure that they are buying the coverage that is best for them. Some insurance carriers may choose to not write insurance for a particular industry or size of employer. If an employer finds themselves in this situation, they should contact their agent and ask them to look around for other coverage. The costs can and do vary between insurance carriers due to discounts, dividends and incentive programs.
The State Insurance Fund is a not-for-profit agency of the State of New York that was established in 1914 to provide a guaranteed source of workers' compensation insurance coverage at the lowest possible cost to employers within New York State. Despite its State agency status, SIF acts as a self-supporting insurance carrier that competes with private insurers. Just like any insurance carrier, SIF collects premiums from employers to pay for the claims and related medical expenses of employees who are injured on the job. The premiums are required by law to be fixed at the lowest possible rates, since SIF must provide coverage to any employer who seeks it, regardless of type of business, safety record or size. However, if an employer owes SIF money from a previous bill or account, coverage can be denied.
Note: SIF is a separate and distinct entity from the New York State Workers' Compensation Board.
The State Insurance Fund offers an alternative called Safety Groups, which are available to certain industries. These are plans designed for employers in the same trade or industry who, by cooperative effort, seek to curtail accidental injuries or occupational disease, thereby reducing their insurance costs. Qualified participants receive an advance discount. Based upon the safety performance of the members of the group, each group member receives a proportionate share of any dividend earned.
An employer qualifies as a self-insurer by furnishing to the Chair of the Board satisfactory proof of its financial ability to pay compensation. Employers who wish to self-insure may do so in one of three ways:
- by becoming an individual self-insurer or by becoming a member of a self-insured group or by being a local government entity that has not obtained
a workers' compensation insurance policy.
Private employers who wish to self-insure for either workers' compensation or disability benefits must apply to and be approved by the Board's Office of Self-Insurance.
Individual self-insurance is primarily used by larger employers who can meet the significant financial standards to self-insure in their own right. Every private individual self-insurer must post with the Board a security deposit which is based upon their outstanding indemnity and medical obligations. These deposits can take the form of a surety bond, letter of credit, cash and/or certain types of securities. The amounts posted are updated every year. In the event that the employer defaults on its obligations the deposit will be used by the Board to ensure claimants receive the benefits to which they are entitled. (WCL §50 )
Joining a group is an alternative that allows smaller employers who may not meet the criteria for individual self-insurance to enjoy the privilege of self-insurance. Group self-insurers consist of employers performing related activities in a given industry that contractually agree to assume the workers' compensation liabilities of each associated member. Each group is controlled by a board of trustees, at least two-thirds of which must be representatives of employer members. In addition, most trustees will hire a group administrator and a licensed third party administrator to handle many of the day to day functions of running the group. Groups must maintain a trust fund dedicated to the payment of the workers' compensation obligations of the employer members. (WCL §50 [3-a.]) Members of a group self-insured trust must also file an application for participation in the group as well as an indemnity agreement acknowledging their joint and several liability to the trust and the other trust members. Joint and several liability means that each member is liable not only for those benefits, losses and assessments associated with its own employees but also for those of the other members.
Local Government Self-Insurance
A county, city, village, town, school district, fire district or other political subdivision of the State is automatically considered self-insured unless it purchases a workers' compensation insurance policy. Nevertheless, it is required to file with the Board a notice of election to self-insure along with a resolution from its governing body, which states that they have elected to provide workers' compensation benefits through self-insurance. Political subdivisions that elect to self-insure for workers' compensation are exempt from posting security deposit or maintaining dedicated trust funds. The basis for this exemption is that political subdivisions have the ability to utilize their taxing authority to guarantee the payment of their claims. (WCL §50 [4-a.])
Getting the Right Coverage
Workers' Compensation insurance can be an expensive cost of doing business. However employers can take responsibility for those costs by following some of the tips below:
- Start getting quotes from a variety of insurance carriers through your agent. Do this several months before you need the policy. Make sure that the underwriter is using the proper classification of employees. If you misclassify your employees to get an initial lower rate, an audit will catch this and you will be charged retroactively. You may also be subject to penalties and/or felony prosecution for misclassification of employees. Discuss what types of alternative plans are available (deductibles, premium credits, safety programs) Research the insurer's claims handling practices. A carrier that either automatically pays every claim or controverts many claims can directly affect your premium in the future. Collect certificates of New York State workers' compensation insurance from all subcontractors that are providing services to your business. Insurance carriers routinely charge general contractors workers' compensation insurance premiums for all subcontractors not covered by their own New York State workers' compensation insurance policies. (Independent Contractors and Subcontractors )
It is important to note that WCL Section 31 specifically states that it is a misdemeanor for employers to make deductions from the salary or wages of an employee to offset the costs of workers' compensation insurance coverage. Employers may also be subject to penalties and fraud prosecution for misclassifying a direct employee as a subcontractor (Employees ). Further, Section 32 of the WCL specifically states that NO agreement by an employee to waive his/her right to workers' compensation benefits shall be valid if it does not relate to a specific claim and has not been approved by the Board.
Coverage Search Application
The Workers' Compensation Board has developed a coverage search application for public usage. This web-based application allows interested parties to search employers' workers' compensation policy and coverage information free of charge. The policy and coverage information listed displays submissions from insurance carriers from 2001 to date. This information is updated daily by Proof of Coverage filings from carriers.
To use this application, go to www.wcb.ny.gov and select Does Employer Have Coverage? . Selecting the 'Employer Coverage Search' button on the overview page takes you to the disclaimer. Please read the disclaimer carefully and follow the search instructions.
To report an employer that you suspect is violating the workers' compensation coverage requirements, please complete the Employer Referral Form found on the overview page of this web application.
If you have any questions, please call the Bureau of Compliance at (866) 298-7830 or the Self Insurance Office at (518) 402-0247.