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What is Workers’ Compensation Insurance? 

What is Workers Compensation Insurance? 

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In any business, employees can get hurt. Thankfully, workers compensation insurance, also known as workers comp can give benefits to employees who suffer from a worker-related injury or illness. There are many beneficial ways in which workers comp can protect your business and employees. Worker’s comp will help cover missed wages, medical expenses, vocational rehabilitation, or in extreme cases death benefits.  

Each state has its own workers’ compensation program. This means that laws for workers comp can be different depending on the location of your business. Under the Massachusetts workers’ compensation system, the Massachusetts General Laws require employers to provide workers’ compensation (WC) insurance coverage for all of their employees. This insurance pays for necessary and reasonable medical treatment related to illness or injury while also covering partial compensation for lost wages after the first 5 calendar days of total or partial disability.  

How to Secure Workers’ Compensation Insurance  

Under the Massachusetts Workers’ Compensation Act, all employers in Massachusetts must secure workers’ compensation insurance coverage through an insurance policy, a self-insurance group, or self-insurance. This requirement applies regardless of the number of hours worked in any given week, except for domestic service employees who must work a minimum of 16 hours per week to obtain coverage. Employers must also provide notice to its employees that the employer has obtained coverage either through an insurance policy, a self-insurance group, or self- insurance. A NOTICE TO EMPLOYEES poster must be posted to a common area of the workplace in English and other necessary languages. This poster can be found by calling the DIA or from your insurance company. Failure to post this notice will result in a fine of $100.  

Who is covered?  

Members of a Limited Liability Company (LLC), partners of a Limited Liability Partnership (LLP), and partnerships or sole proprietors of unincorporated businesses are not required to carry workers’ compensation. However, they have the option to purchase workers’ compensation coverage for themselves. Note that optional coverage only applies to certain members, partners, or sole proprietors. Any employee of such an entity must be covered by workers’ compensation insurance if he or she is not a member or partner in the business. Non-profit organizations that are exclusively staffed by volunteers are excluded from workers’ compensation coverage under the act.  

The definition of an employee is someone who is in the service of another under any contract of hire. Exceptions of coverage include but are not limited to:  

  • Real Estate salespersons affiliated with a broker and paid only commissions  
  • Certain salespersons.  
  • Independent contractors  
  • Employments in interstate or foreign commerce that are covered by federal law for compensation insurance for injury or death.  
  • Seamen on vessels engaged in interstate or foreign commerce.  
  • Professional athletes, if their contract pays them wages during the period of work-related disability  
  • Students working in a school-to-work program.  

Additionally,  

  • Officers or directors that own at least 25 percent of interest to the corporation can elect to not to be covered as an employee by filing a waiver of compensation rights.  
  • A partnership or sole proprietor may choose to be an employee for workers’ compensation insurance. 

Limits and Restrictions for Covered Employers  

An employer is allowed to fire an employee while receiving workers’ compensation benefits if they are unable to work due to illness or injury. Instead, employees must give preference in rehiring injured employees if there is a suitable job available within the worker’s capabilities. Also, employers must provide reasonable accommodations for any injured employee that is deemed a qualified handicapped person. An injured employee that has a settled worker’s compensation case under the lump-sum settlement is presumed to be unable to return to work where the incident occurred. The presumption of physical incapacity lasts for one month for each $1,500 included in benefits for the weekly future. 

How to Obtain Coverage  

  • Massachusetts employees do not have to opt-out of coverage. Instead, corporate officers or directors that owe at least 25 percent interest in the corporation may opt-out of coverage for themselves by filing an Affidavit of Exemption for Certain Corporate Officers or Directors.  
  • To obtain workers’ compensation coverage, private employers are allowed to purchase insurance from a workers’ compensation carrier through  
  • Standard commercial coverage and target programs or  
  • A risk pool governed by Workers’ Compensation Rating and Inspection of the Bureau of Massachusetts  
  • Individually self-insure  
  • Provide coverage through membership in self-insured groups. 

Private Right of Action  

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Workers’ compensation benefits are exclusively for those who are injured or killed while on the job. Employees cannot sue employers for damages other than work-related injuries. The employee needs to give written notice to the employer to show him or her claims right of action under common law either at hire or within 30 days of the time the employer obtains insurance or becomes a self-insurerThe employee may sue in court if the employer does not have any workers’ compensation insurance.  

Requirements for Self-Insurance  

The Massachusetts Department of Industrial Accidents (DIA) issues self-insurance to business employers. Self-insurance is available for qualified employers that:  

  • Have been in business for at least five years with more than 300 employees.  
  • Have an unmodified premium of $750,000 or more  
  • Have not been declared insolvent or discharged from federal bankruptcy proceedings in the past five years.  

To self-insure, employers must:  

  • File an application to the DIA, which must include documents and financial statements including:  
  • A sworn itemized statement of employers assets and liabilities 
  • A payroll report for the preceding fiscal year; and  
  •  Description of the employer’s business.  
  • Post either a bond or deposit of at least $20,000 to cover the future liability for compensation benefits payments out to be made 
  • Purchase catastrophe reinsurance of more than $500,000.  

The Claims Reporting Process   

Injury or Work-Related Illness

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An injured employee becomes eligible for weekly compensation benefits when they are physically unable to earn wages for 5 full calendar days due to work-related injury or illness. The five days do not need to be consecutive. After missing workdays, the employer is required to electronically fill out the Employer’s First Report of Injury/ Fatality. If the injury or illness results in missing less than 5 full calendar days, then it is considered a “medical only” claim and does not have to be reported to the DIA.  

Payment or Denial of Claim  

After the insurer receives the form, they have 14 days to pay benefits on an Insurer’s Notification of Payment Form or notify the employee and the DIA that they are denying the claim through an Insurer’s Notification of Denial Form. For the first 180 days following the illness or injury, the insurance company can pay on a claim without accepting a form. During this period, an insurer can modify or stop the payments after a 7-day calendar notice to the injured worker and the DIA. The insurer can extend the initial 180 period for another 180 days on an Agreement Form. After the 180 day period, the insurer can stop and reduce payment for reasons specified from the Workers’ Compensation Act.  

Conciliation  

Conciliation is a quick meeting between the insurance company and your employee or employee’s attorney. These meetings are held within 12 days of the DIA receiving the Employees Claim Form. Employers do not attend Conciliation only if the situation involves misconduct by them. If an agreement cannot be made then the claim is then referred to a Conference, the second step in the Dispute Resolution process.  

Conference  

The Conference is a proceeding before an Administrative Judge. The employee and the insurer must be present at the Conference. The employer is notified of the date of the Conference but is only allowed to attend if the situation involves him. The employee needs to show that he or she is disabled, the injury or illness happened at work, and any medical bills were for necessary treatment. Following, the judge will issue a payment or denial and either side can appeal this in 14 days.  

Hearing  

If the Conference order is appealed, a hearing with the same administrative judge will hold a formal proceeding where all evidence of the incident is considered. A notification will be sent to the employer and they must attend if the claim involves them. However, the employee and the insurance company must be present. After reviewing all information the judge will present a written decision. If either side believes the judge made an error of law than the party has 30 days to file an appeal to the Reviewing Board.  

Reviewing Board 

This board is made up of 6 Administrative Law Judges, who examine the Hearing transcripts. The will ask for written or oral arguments from either side of the claim. The Reviewing Board may reverse the decision of the Judge or can remand a case back to the Hearing. The Reviewing Board can also uphold the Administrative Judge’s decision if they find no errors in the law made. Decisions can be appealed within 30 days to the Massachusetts Appeals Court.  

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