WORKERS’ COMPENSATION
o WHAT DOES WORKERS’ COMPENSATION DO?
o WHERE CAN EMPLOYEE BUY WORKERS’ COMPENSATION
INSURANCE?
• THE POLICY
o WORKERS’ COMPENSATION


What Does Workers’ Compensation Do?

The following benefits are provided for under the Workers’ Compensation laws:
􀂃 Medical Benefits
􀂃 Death Benefits
􀂃 Rehabilitation Benefits
􀂃 Income Benefits
Medical benefits are generally unlimited in the sense that an employee has the right to
receive all necessary treatment to cure the disease, or to provide relief from it. The
benefits may in some cases be restricted to a specific number of visits, as in the case of
psychological therapy, but the benefits will still be unlimited.
Perhaps the most significant of all these benefits is the rehabilitation aspect. This covers
physical therapy, alternative medicine treatment and other services that may not strictly
fall within the gambit of medical treatment. These benefits may also include vocational
training for the employee, the cost of wheelchairs etc. and in some cases, even
traveling and living expenses during the recuperation stage.
While the amount of benefits offered varies from state to state, they are often low except
in cases where extensive follow-up care is required.
Where Can an Employer Buy Workers’ Compensation Insurance?
Many property and casualty insurance companies offer Workers’ Compensation
insurance, while some specialize in this business alone. There are some states that
have set up a fund for Workers’ Compensation and employers can only buy
compensation insurance from these funds. In other states, private insurance companies
offer these facilities, or there may be state insurance companies, which compete for
Workers’ Compensation insurance business with private insurance companies.
The Policy
The policy has two coverage parts:

1. Workers’ Compensation

2. Employer’s Liability

1. Workers’ Compensation

Under the Workers’ Compensation coverage, the policyholder is covered against
statutory claims. As mentioned earlier, the bodily injury or disease has to be workrelated.
The basic policy features are:
􀂃 No deductibles, or co-insurance
􀂃 Supplementary coverage is provided including claim expenses and litigation
costs charged against the employer.
􀂃 Employer subrogation rights: This applies in cases where another insurance is
applicable, in which case the insurance company will only cover its share of
claims and costs. This is designed to prevent a company from collecting twice on
the same loss.
􀂃 The employer and insurance company are deemed to be one and the same
entity with regard to injury notification. For example, the bankruptcy of the
employer will not absolve the insurance company of its obligation to settle a
claim.
Important Point
o The policy must conform to the state laws regarding Workers’
Compensation. In case there is a conflict in any clause, it automatically
changes to reflect the legal position.

THE POLICY CON’T
o EMPLOYER’S LIABILITY
• OCCUPATIONAL VS. NON-OCCUPATIONAL COVERAGE
• THE 24-HOUR COVERAGE
• SUMMARY

Employer’s Liability

Employers’ Liability covers bodily injury and disease. It protects the company
against several general law exposures and is required to supplement compensation
coverage and also to cater to claims that are outside of the legal parameters of
compensation laws.
The insurance company agrees to pay all sums, falling within policy limits, that
become the obligation of the company by way of damages/injuries sustained in the
course of, and arising out of, the employment. Coverages offered are:
• Damages claimed by a third party
• Injury and loss of service
• Consequential injury to a spouse or relative of the worker
• Suits against the insured outside the capacity of an employer.
Important Point
o Fines, penalties and damages for violations of law are excluded because
the policy is designed to cover only the actual exposures of employers.
Occupational Vs. Non-occupational Coverage
Traditionally, most forms of health insurance have provided non-occupational coverage
only, i.e. for injuries and diseases which are not work-related. Under these policies,
coverage is excluded for losses which are covered by Workers’ Compensation laws.
Workers’ Compensation provides coverage for on-the-job hazards; it does not cover
after work hours, on weekends or holidays/vacations. Because of this, most people
have both occupational and non-occupational coverage (which is usually provided by
employers in the form of health insurance). Given the different needs for coverage,
there may be more than one insurer in a particular case; thus, there is a need to
determine whether each claim is work-related or not, and if there are any gaps in
coverage.
There are many proponents of the 24-hour coverage. This is basically an attempt to
combine both occupational and non-occupational coverages under a single head. It
offers 24-hour disability coverage in a single policy and includes limited medical
benefits. Some of the possible advantages of this coverage are:
• A more encompassing coverage
• Reduced duplications in coverage
• Cost saving and efficiencies
A 24-hour system provides disability benefits for an employee’s injury or disease,
whether work related or not. Medical benefits are provided only for work-related injuries
and diseases.
Accident Coverage
Another variant of the 24-hour coverage policy is the accident coverage policy
where all accidents, whether work-related or not, are covered. Medical benefits
are provided only for work-related diseases. Conversely, 24-hour medical and
disability coverage would be provided for all diseases whether work related or
not, but only injuries sustained during an accident arising out of employment
would be covered.
Universal 24-Hour Coverage
This is the most comprehensive 24-hour coverage available and provides a
complete occupational and non-occupational coverage of both accidents and
disease. However, there are still several legal, institutional and regulatory
barriers due to the inherent nature of non-occupational and occupational
coverage.
SUMMARY
In this lesson, we discussed what health insurance is and how the different types of
health insurance are determined. The Fee-for-service coverage is explained in detail,
along with its limitations such as deductible, co-insurance and limited coverage.
This was followed by a discussion of Managed Care Plans and how they work. We
covered, in detail, the range of basic health care services provided by HMOs and the
benefits of HMOs along with exclusions and limitations. A list of reasons whereby HMOs
can terminate coverage is also provided.
We then proceeded to discuss Preferred Provider Organizations (PPOs) and their
mechanics and the reasons that make PPOs a better choice for certain people than
HMOs. We also compared managed care with traditional insurance.
The next section dealt with a detailed explanation of Medicare and Medicaid and their
coverages. This was followed by a discussion of who Medicare deals with and how
Medicare coverage amounts are determined by federal health care experts. Also
covered was Medigap coverage which consists of supplemental policies by insurance
companies to fill the gaps in the insurance needs of citizens.
We also explained in detail the two aspects of a policy: Worker’s Compensation and Employer’s
Liability.
The lesson is concluded with a discussion of the 24-hour coverage policy and its variants, including
Accident Coverage and Universal 24-Hour Coverage.