The Most Common Questions About Workers’ Compensation

The Most Common Questions About Workers’ Compensation

We get a lot of questions about Workers’ Compensation insurance for ABA agencies. How it works, what it costs, what it covers … and many more.

So what are the basics? We are here to help.

What is it and what does it cover?

Workers’ Compensation pays for an injured workers’ lost wages, medical expenses, and rehabilitation costs associated with an injury or illness that arises out of the scope of their employment. In general, the coverage itself is statutory – any benefits payable, medical expenses covered, or rehabilitation available is determined by legislature in your jurisdiction. The amount insurance coverage will provide is virtually uncapped.

How much does it cost?

In order to understand costs, you need to understand how premium is developed and charged.

Based on the specifics of your operation and the job functions of your various employees, one or more classification codes (class codes) will be assigned to your operation. Each class code will carry a rate and that rate is applied per $100 of your annual payroll.

For example:

Classification Code Rate (per $100 of payroll) Estimated Annual Payroll Estimated Annual Premium
8868 – Colleges or Schools $1.50* $200,000 $3,000 (($200,000 x 1.50)/100)

* Rate is not actual and is for display purposes only.

Who determines the classification code and rate?

Class codes can vary by state and by the scope of your specific operations. Each state has a regulatory authority that can, among other things, inspect your specific operations and assign a classification code to your various employee groups. In California, the regulatory body is the Workers’ Compensation Insurance Rating Bureau (WCIRB). Largely, WCIRB has held that agencies providing in-home services shall be governed by class code 8868 (colleges or schools – professors, teachers or academic professionals).

Outside of California, the National Council on Compensation Insurance (NCCI) controls statistics and rating in about 35 states. Largely, from our conversations with them, the NCCI has indicated that in-home ABA agencies should be using class code 8835 (home, public, and traveling healthcare).

Your broker can help navigate the appropriate classification code for your business.

The rate you may pay can vary significantly depending on a number of factors. It is almost impossible for you to compare rates between one ABA agency and another. Your location, payroll amount, prior loss history, years in business, and scope of services can all play a factor in rates and any credits/debits you may be charged.

Why am I being audited?

Each and every insurance carrier is required to audit the payroll of their insureds for Workers’ Compensation. Most policy premiums are based on estimated annual payroll amounts – you’ll pay an estimated annual premium based on information you provide during the underwriting process.

At the end of the policy term, the payroll and premium will have a true-up. The insurance company will contact you to collect payroll records of various sorts (payroll registers, quarterly wage statements, etc.). Once the figures are calculated, you’ll typically either owe an additional premium or be due a premium refund.

Some payroll companies that sell Work Comp negate the need for the audit process as they are providing current wages to the insurance company on a monthly basis. Many insurance companies also have pay-as-you-go options and can connect with your payroll company to collect real-time data. In these cases, many insurance companies still require documentation as proof of wages, they are just collecting from the vendor on your behalf, so the audit seems less painful.

Advice

Our advice is to work with someone who understands the role Workers’ Compensation plays in managing your business risk. They can help navigate the insurance company on your behalf, assist with claims, audits, and premium payment issues.

Due to the nature of ABA, you can expect Workers’ Compensation coverage to be a cost driver for you. You can also expect to have claims in the form of headbutts, bites, kicks, and soft tissue injuries – so working with someone who can assist when a claim arises is also a very important factor.

We see all too often that ABA agencies get their coverage cancelled or non-renewed because the insurance company didn’t have a clear understanding of the scope of your operations. Please let us know if you have any questions about Workers’ Compensation as it relates to your ABA agency!