Lesson 18 - Workers' Compensation

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Workers Compensation (often called workers comp. or WC) is a state law that mandates employers provide a specific type of insurance (States approved insurance program) to cover medical care and lost wages for employees who get hurt or become ill because of their job. Employers are legally required to purchase this insurance to provide security benefits to their employees in all States except Texas. As it's regulated at the state level in U.S., so requirements vary by jurisdiction.

In return, employees usually give up the rights to sue their employers for negligence related to the injury.

In short, Workers Compensation provides financial support to employees facing work related injuries or illnesses including medical cost, wage loss, and job retraining.
Workers Compensation is a state level law makes WC coverage compulsory in every state however, rules and regulations are varies state to state except Texas.
Note the National Federation of Independent Business NFIB maintains a summary of each state's workers compensation requirements

Workers Compensation benefits

Here are the list of Main Benefits:

1. Medical Coverage

   Pays for doctor visits, hospital stays, medications, surgeries, and rehabilitation needed due to the workplace injury or illness.

2. Wage Replacement (Disability Benefits)

   If employee can’t work while recovering, workers’ comp. pays a percentage of your lost wages. This is usually about two-thirds of your average weekly wage, though it varies by state.

3. Permanent Disability Benefits

   If the injury leaves lasting effects, workers’ comp may pay long-term or lump-sum disability benefits according to state rules.

4. Death Benefits

   If a worker dies due to a job-related injury or illness, their dependents may receive financial support up to the state maximum benefits.

Who pays for Workers Compensation?

Employers are required to buy Workers Compensation insurance and pay premiums regularly.
Employees are not required to pay for Workers Compensation i.e. no payroll deductions nor other hidden charges and other expenses like patient responsibility. Only employers are responsible for all and any cost.

Workers Compensation Coverage Types

There are two main types:

1. Coverage A
2. Coverage B

Coverage A

Coverage A includes all of the state-mandated benefits that an injured or ill employee is entitled to receive from the employer’s insurance. It covers salary replacement payments as well as medical care, rehabilitation, and death benefits as describe above. All states except Texas have such benefits, although they vary widely from state to state, and some states exclude some employees from eligibility (discuss below).

Think of Coverage A as the basic, mandatory package of workers’ comp insurance.

Coverage B

Generally, workers under standard Worker Compensation (Coverage A) waive the right to sue their employer for negligence, as they agreeing to a no-fault contract. However, most states legislation and court rulings have restored the employees' right to sue their employers in various strictly defined circumstances such as unsafe working conditions, intentionally employer negligence, or misconduct. In these situations, Coverage B helps pay higher compensation to worker for covering maximum damage that go beyond the benefits provided by Coverage A. Essentially Coverage B acts as a safety net for employers, ensuring they are financially protected against lawsuits related to workplace injuries or illnesses. This Coverage only triggered if employer is successful lawsuit brought by the employee fir negligence or other misconduct.

So, in general, employers buy Worker Comp. combine coverage that includes both Coverage A and Coverage B for maximize workers' safety and guarantee benefits as well as their own protection against legal lawsuits.

Who is Exempt From Workers’ Compensation?

Generally, only employees are eligible for workers’ compensation but contractors and freelancers are not. Beyond that, every state writes its own rules for eligibility status. For example,

Arkansas specifically excludes farm laborers and real estate agents from eligibility. Idaho excludes domestic workers. Louisiana excludes musicians and crop-dusting airplane crew members.

Employers in every state except Texas must provide workers' compensation insurance for their employees, though coverage varies significantly due to state-specific rules and exemptions.

Typically, contractors and freelancers do not qualify for these benefits, and certain professions may also be excluded.

Workers' Compensation Benefits for Federal Employees

Federal workers compensation programs also exist, covering federal and energy employees, as well as long-shore, harbor workers. Another federal program called "The Black Lung Program", handles the death and disability benefits for coal miners and their dependents. Department of Labor (DOI) handles cases for federal employees.

Who provides coverage?

Employers can buy / provide Workers Compensation coverage in three ways:

1. Private Insurance Company:

   Most employers buy workers compensation policy from private insurance companies / carriers. However, every private insurance cannot provide worker compensation, only authorized insurance companies by the state can do so.
   Examples: The Travelers, Liberty Mutual, The Hartford, National wide, etc.

2. State-Run Insurance Fund:

   All States operates their own state program for sell & providing coverage for workers compensation.
   Example: California runs its own worker compensation program called a State Compensation Insurance Fund (SCIF). However, private insurance is also allowed. Similar to California, New York also has its own program called New York State Insurance fund (NYSIF). While Division of Workers Compensation (DCW) agency oversees the California Works Compensation and resolves disputes respectively.

   Monopolistic States

   Four States are monopolistic states where only the state can sell & provide a worker compensation coverage, no private insurance companies nor self-insured allowed. These states are Ohio, Washington, North Dakota, Wyoming.

3. Self-insured

   Large employers with strong finances can apply to be self-insured, mean they directly pay claims but must have to follow the state rules and usually security bond (give guarantee of payment)
   Example: Amazon, Walmart, and UPS are often self-insured.

   Note: except monopolistic states, all states allowed, self-insured and approved private insurance carriers with rules varying from state to state.

Workers’ Compensation Insurance Cost (Premiums rate)

Workers’ compensation insurance premiums are based mainly on three factors:

• Payroll size: more employees = higher payroll = higher total premium.
• Job risk level: dangerous jobs cost more to insure than safe office jobs.
• State laws: each state sets its own rates and rules.

Insurers express the rate as “X dollars (or cents) per $100 of payroll.”

Formula: Premium = (Payroll ÷ 100) × Rate × Experience Modifier
(The “experience modifier” adjusts costs based on the employer’s safety record.)

Low-Risk vs. High-Risk Jobs

• Low-risk jobs: office workers, sales staff, clerical roles.
• High-risk jobs: construction, roofing, logging, manufacturing.

The difference can be hundreds of times more expensive for high-risk industries.

State Examples

Here are some state's example to understand:

California
Low-risk: $0.40 per $100 payroll
Example: A $50,000 payroll for office workers → (50,000 ÷ 100) × 0.40 = $200 per year
High-risk: $33.57 per $100 payroll
Example: A $50,000 payroll for roofers → (50,000 ÷ 100) × 33.57 = $16,785 per year

Florida
Low-risk: $0.26 per $100 payroll
$50,000 payroll → (50,000 ÷ 100) × 0.26 = $130 per year
High-risk: $19.40 per $100 payroll
$50,000 payroll → (50,000 ÷ 100) × 19.40 = $9,700 per year

New York
Low-risk: $0.07 per $100 payroll
$50,000 payroll → (50,000 ÷ 100) × 0.07 = $35 per year
High-risk: $29.93 per $100 payroll
$50,000 payroll → (50,000 ÷ 100) × 29.93 = $14,965 per year

Why So Different by State?

Each state’s workers’ comp board sets base rates.
Differences depend on:

1. Local cost of healthcare.
2. Average wages (affects disability payments).
3. State insurance regulations.
4. Risk data from industries in that state.

Key Points to remember

• Workers’ comp cost = payroll × risk rate × safety history.
• Low-risk jobs cost just a few cents per $100 payroll.
• High-risk jobs (like roofing, logging, trucking) can cost $20–$30+ per $100 payroll.
• A company’s safety record (experience modifier) can reduce or increase premiums.

Insurance Fraud

It is possible for an employer or employee to submit a false claim — for example, claiming that an illness or injury is work-related when it is actually due to other causes. In such fraudulent cases, The National Insurance Crime Bureau (NICB) reports that organized criminal groups, including corrupt physicians, attorneys, and patients, may conspire to submit false claims to medical insurance for workers’ compensation and other benefits.

Workers' Compensation Policy ID & Case / Claim No.

Workers' Compensation Policy ID:

A Workers' Compensation Policy ID is a unique number assigned by an insurance company to an employer as a workers' compensation coverage. This policy ensures that employees are financially protected if they suffer a work-related injury or illness.

Purpose

• Identifies the employer and their specific insurance policy.
• Proves that the employer has legally required coverage.
• Authorizes payment for medical care, lost wages, and other benefits under the policy.

Format

There is no standard format for WC, each approved private insurance company or state fund agency assigns their own ID format. Normally, ID consist on 8-12 characters. It can alphanumeric or digits only. Some uses WC at the start of ID to show its workers' compensation policy.

Example

• 123456789
• WC-123456

Does each employee has his/her own policy ID for WC?

Workers' Compensation works in difference way, insurance carrier or state fund agency assign one unique ID to employer as coverage prove and all of his / her employees uses that one policy id for their medical coverage and other benefits.

Workers' Compensation Claim / Case Number:

A workers’ compensation claim number (often called a case ID) is a unique identifier assigned by the insurance company or state fund agency to each new injury or illness. When an employee files an initial claim for treatment, the insurer creates a new case number specifically for that incident. This case number is then used for all related medical treatments, follow-up visits, and benefits associated with that injury.

Purpose

• Tracking: Groups all information related to one incident.
• Access: Lets injured workers and providers check claim status and benefits.
• Administration: Used by insurers and state workers’ comp boards to manage claims.

Format

• Same like policy ID, it's also depends on insurer. However, some states assign their own case IDs in addition to the insurer’s claim number.

Examples

• Generic: CLM-2025-09-00123 (Claim-Year-Month-Sequence).
• California: ADJ1234567 (assigned by Division of Workers’ Compensation).
• New York: 8–9 digit WCB case number.

Let's take an example to understand case number process:

Example 1: One Injury, Multiple Visits
Scenario: John, a warehouse worker, injures his back while lifting a heavy box.
Claim: Employer files one workers’ comp claim with the insurer, insurer assign case number "CLM452397511"
Medical Visits:
ER visit on Day 1 → billed under CLM452397511.
Physical therapy (10 visits) → billed under CLM452397511.
Follow-up doctor visit after 3 months → still billed under CLM452397511.
Even though there are multiple treatments and visits, all tie back to the same accident, so John only has one claim number.

Example 2: One Accident, Multiple Injuries
Scenario: Maria, an employee, suffers two separate workplace accidents:
In March, she falls from a ladder and injures her left arm.
In April, she slips on a wet floor and injures her right knee.
Here, how the accidents are processed:
For the March accident, her employer files a workers’ compensation claim. The insurer assigns Case Number CLM-2025-00356 to track all medical treatments and benefits related to her left arm injury.
For the April accident, the employer files a separate claim. The insurer assigns Case Number CLM-2025-00456 for the right knee injury, which will cover all care and follow-up visits for that incident.
This shows how one employee can have multiple claim numbers if the injuries come from different accidents.

In short:

• Policy ID = Employer’s insurance contract number (same for all employees).
• Claim No./Case ID = Unique identifier for each individual employee’s injury (new number for each incident).

Workers' Compensation Claim Process (End-to-End):

1. Injury or Illness Occurs
   • Worker is injured or falls ill due to work-related activities.
2. Employee Reports the Incident
   • Must notify employer (often within 30 days or less depending on the state).
   • Late reporting can lead to denial of the claim.
3. Employer Files a Claim
   • Employer submits a First Report of Injury (FROI) to their workers’ compensation insurer and/or state agency.
4. Claim Is Reviewed
   • The insurer investigates and determines compensability.
   • They may request medical records or additional information.
5. Employee Seeks Treatment
   • Employee may be directed to specific providers within the insurer’s network.
   • Medical providers must indicate the services are related to the work injury.

From a Medical Billing and Coding Perspective:

1. Identify the Claim Type

   When a patient visits for a work-related injury, it's not billed to regular health insurance, instead payer is the Workers' Compensation Carriers.
   Must be obtain:

   • Carrier/Insurance name and claim number
   • Adjuster contact information
   • Employer details
   • Date of injury
2. Coding and Documentation

   Use ICD-10-CM for diagnoses (e.g., S93.401A), CPT/HCPCS for procedures, and "WC" modifiers if needed (e.g., -WC is used by clearing house to determine its worker comp. claim). Document cause/context (e.g., “slipped on wet floor at factory”). (we will learn about CPT, ICD & Modifiers in Phase II)

3. Billing the Carrier

   Send claim directly to Workers’ Comp insurer via CMS-1500. Never collect copays/coinsurance from patient. Attach medical reports, evaluation, treatment plan, and progress notes.

4. Payment and Follow-up

   Workers’ Comp may process slowly. Review Explanation of Review (EOR) or Remittance Advice, appeal denials/underpayments with documentation.

Conclusion:

Workers’ Compensation insurance is a critical safety net for injured employees and a legal requirement for employers. For healthcare providers and medical billing staff, handling Workers’ Comp claims requires careful attention to proper documentation, special billing practices, and strict adherence to carrier guidelines. Understanding the lifecycle of a Workers’ Comp claim is essential to ensure timely reimbursement and compliance.

Special State Level Cases

1. Texas Workers’ Compensation

   Not Mandatory: Texas is the only state where employers can choose whether or not to carry workers’ comp insurance.
   Employers who do not carry workers' comp. are called nonsubscribers. But if an employer is a nonsubscriber, employees can sue the employer directly in civil court for injuries.

   Employee Benefits (if covered):

   Medical care: All reasonable, necessary care covered.
   Income benefits: There are four types of income benefits:
   Temporary income benefits (TIBs) – paid if recovery keeps worker from work.
   Impairment income benefits (IIBs) – if worker have permanent impairment.
   Supplemental income benefits (SIBs) – if impairment is severe and worker can’t return to full work.
   Lifetime income benefits (LIBs) – for very severe injuries (e.g., loss of limbs, blindness).
   Death benefits: Weekly benefits to dependents and burial costs.

   Disputes: The Texas Department of Insurance handles claim disputes.

2. Other States (Employer Flexibility, but Not Total Opt-Out)

   While they don’t allow full opt-out like Texas, a few states give employers relief in different ways:

   1. Oklahoma

      Briefly allowed an “opt-out” system (2013–2016) where employers could use an alternative benefit plan. But The Oklahoma Supreme Court struck this down in 2016 as unconstitutional. Now, workers’ comp is mandatory again.

   2. New Jersey, South Carolina, Tennessee (and some others)

      Allow certain alternative dispute resolution programs (like arbitration agreements) for workers’ comp claims.
      Employers can’t opt out of coverage, but they can streamline or control how disputes get resolved.

   3. Some States (like Florida, Alabama, Georgia)

      Exempt very small employers (e.g., if you have fewer than 3–5 employees, you might not be required to buy workers’ comp).
      This gives relief to small businesses but not large employers.

   4. Mandatory States

      States like California, New York, Ohio, Washington, North Dakota, Wyoming, etc. mandatory to have Worker Comp for employers having even one employee.

Frequently Asked Questions:

Does Workers' Compensation be secondary insurance?

No, workers' compensation is primary for work-related injuries, not secondary insurance. It functions as the primary coverage for any injuries or illnesses that occur on the job, and it is the employer's responsibility to have this coverage in place for their employees.

What is the timeframe for WC claim processing?

The timeframe for processing workers' comp. claims varies significantly by jurisdiction, but generally includes: initial claim notification (days to weeks), employer/insurer investigation (weeks to months), and resolution/settlement, which can take several months to a year or more, depending on injury severity, medical treatment, and the complexity of the case. Delays can be caused by factors like injury reporting, complex evidence, disputes, or a worker not reaching maximum medical improvement.

What is the timely filling limit for Workers' Compensation?

The timely filing limit for a workers' compensation claim varies by state but is typically between one to three years from the date of injury or diagnosis. It is crucial to file your claim within your specific state's allotted timeframe, as you may lose your right to filling. However, if you miss the deadline. Some states allow for extensions in cases of severe injury, prolonged treatment, or a coma, but the initial notice period might still be 30 days. (first claim should be reported within first 30 days, if you fail to submit initial claim, your claim might be denied but can appeal).

Does Workers' Compensation make PR (patient responsibility)?

No, workers' compensation should not make any patient responsible for medical bills related to a work-related injury; by law, the workers' compensation insurer is responsible for paying 100% of the necessary medical treatment, and providers also are prohibited from balance billing. If you are asked to pay for these costs or are denied coverage for treatment, it may be a violation of workers' compensation laws, and you should seek advice from a workers' compensation attorney.

What if Workers' Compensation Coverage lost?

If your workers’ comp claim is denied or your coverage is cut off, contact your state’s Workers’ Compensation Board right away. They can help you appeal and make sure you’re getting the benefits you’re entitled to. If your employer didn’t carry required coverage, you may also be able to file a lawsuit. For Medical Billers, we request provider to ask worker to reach state workers' comp. agency for resolution and wait for response, we can't bill any charges to patient.

Key points to remember

• Workers’ comp is state law, not federal.
• Employers usually get coverage from private insurers, state funds, or self-insurance.
• Monopolistic states: Ohio, Washington, North Dakota, Wyoming (only state funds allowed).
• Texas is unique — employers can choose not to carry workers’ comp, but face lawsuits if they opt out.
• Timely Filling Limit: Initial Claim should be reported within 30 days of injury date, while upcoming claims has one to three years depending on state.
• Workers' Compensation does not make any PR nor give providers rights to bill any difference amount to patient.

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