Obtaining Workers’ Compensation Insurance

Workers’ compensation is the oldest social insurance program in the United States; programs vary from state to state. Workers’ compensation insurance became mandatory for California employers in 1913.

California Labor Code requires all employers (with at least one employee) to carry workers’ compensation insurance. It is a no-fault system, meaning that injured employees need not prove the injury was someone else’s fault in order to receive workers’ compensation benefits for an on-the-job injury.

The workers’ compensation system is premised on a trade-off between employees and employers – employees are supposed to promptly receive the limited statutory workers’ compensation benefits for on-the-job injuries, and in return, the limited workers’ compensation benefits are the exclusive remedy for injured employees against their employer, even when the employer negligently caused the injury. This no-fault structure was designed to – and in fact did – eliminate the then-prevalent litigation over whether employers were negligent in causing workers’ injuries.

To learn more about the program please go to: http://www.insurance.ca.gov/0100-consumers/0060-information-guides/0030-business/

There are three basic parts to the workers’ compensation system:

The Benefit Structure

The benefit structure defines what injured workers are entitled to receive when they sustain an injury “arising out of” and in the course of their employment. There are five basic types of workers’ compensation benefits available, depending on the nature and severity of the worker’s injury: (1) medical care; (2) temporary disability benefits; (3) permanent disability benefits; (4) vocational rehabilitation services; and, (5) death benefits.

The Benefit Delivery System

Unlike most social insurance programs (e.g., social security and unemployment compensation), workers’ compensation in California, as well as in most other states, is not administered by a government agency. Workers’ compensation benefits are administered primarily by private parties – insurance companies authorized to transact workers’ compensation and those employers secure enough to be permitted to self-insure their workers’ compensation liability.

When an employer becomes aware of an on-the-job injury, the employer is expected to begin the process of providing the injured worker the benefits to which he or she is entitled under the law. Either the employer (if the employer is authorized to self-insure) or the employer’s insurer pays the benefits.
The state’s role in benefit delivery is to oversee the provision of workers’ compensation benefits, provide information and assistance to employees, employers, and others involved in the system, and to resolve disputes that arise in the process.

The Benefit Financing System

Employers may finance their liability for workers’ compensation benefits by one of three methods: (1) self-insurance; (2) private insurance; or, (3) state insurance.

Private Insurance

Employers may purchase insurance from any of the approximately 300 private insurance companies which are licensed by the Department of Insurance to transact workers’ compensation insurance in California. Insurance companies are free to price this insurance at a level they deem appropriate for the insurance and services provided.