Managing Workers’ Compensation Across Multiple States
Workers’ compensation is vital protection
Employers with operations in multiple states or employees who temporarily work in another state often have questions about the workers’ compensation insurance they need to buy, how coverage works in different states, and how to manage multi-state workers’ compensation programs.
Let’s start with the basics of why workers’ compensation insurance exists and why it’s important to ensure your entire workforce is covered. Workers’ compensation insurance protects employees and employers alike from being financially devastated by the costs of a work injury. This includes medical expenses, lost wages, and long-term care. Without workers’ compensation insurance, the employer would likely have to pay all these costs “out of pocket,” in addition to any litigation costs that might occur.1 The impact would be massive, considering that, in 2019, about 2.8 million employees in private industry were injured at work, resulting in 888,000 lost work days.2
So, workers compensation insurance is desirable. It is also a necessary cost of doing business. All states except Texas3 require businesses with as few as just one employee to purchase workers’ compensation insurance or potentially face severe fines, a heavy lawsuit, or even criminal charges, according to the National Federation of Independent Business.4
Selecting workers’ compensation insurance
Workers’ compensation insurance can be purchased online from a carrier or through an agent or broker. The latter option provides an opportunity to discuss specific questions with someone who is knowledgeable about a host of workers’ compensation issues, including multi-state workers’ compensation insurance and how it works. Employers may also purchase workers’ compensation insurance from a state insurance fund, either competitive or monopolistic.
Insurance premiums are based on a calculated risk level that takes into consideration such factors as company or industry classification, annual payroll/workforce size, and safety history using a three-year experience modifier (up or down). Another consideration is any risk-mitigation actions the company has taken.5
A workplace health and safety program, employee training, and working with an occupational health provider that offers a variety of injury prevention programs and services can assist in keeping your workers’ compensation costs low.
Coverage of employees temporarily working out-of-state
If an employee has a work-related injury while traveling on business or doing any other occasional work in a state where the employer does not have workers’ compensation insurance, the employee is permitted to file a workers’ compensation claim in the state where the injury occurs. Not having insurance in this other state can subject the employer to fines or penalties, including the actual cost of the claim. An option is for the employer to purchase extraterritorial insurance, which covers temporary out-of-state work, or an “other states coverage” policy.6
There also are reciprocity agreements between states. These agreements may allow the injured employee to receive the same benefits as if the injury had occurred in the employer’s home state. Sometimes, reciprocity agreements provide benefits that are not identical. These are called “limited reciprocity” agreements and may be used for certain business or industry classifications, employee counts, or length of time in the state. When there is no reciprocity agreement, the employer may obtain workers’ compensation coverage for the employee before the out-of-state work assignment occurs.7
If a company has one or more employees who live or work outside the company’s home state on a regular basis, the employer has three options: (1) add the state of residence of those employees to Section 3A under Part One (Information Page) of the employer’s existing workers’ compensation insurance.8 Section 3A lists states covered as primary states. The carrier reports such coverage to that state on behalf of the employer, (2) buy a separate policy to cover them, or (3) buy an “all-states” workers’ compensation policy from an insurance carrier that offers such coverage.9
Align business policies with state workers’ compensation laws
Because all states have their own rules regarding workers’ compensation, an employer needs to understand those differences. Some examples where states may differ include:
- Minimum number of employees at a location that triggers the requirement for workers’ compensation insurance
- Whether coverage is required for independent contractors or casual employees
- Any exemptions or exclusions to workers’ compensation coverage
- Requirements or restrictions on whether the employer or the employee selects the health provider for work-related injury or illness care
- Drug laws and drug testing
Employers with employees in multiple states need to understand workers’ compensation laws in all states of business operations. Moreover, staff members who will administer your workers’ compensation program in different states need to be thoroughly familiar with the laws and reporting requirements of each state.
In addition, this information needs to be incorporated into company policies and procedures at each workplace location and communicated to supervisors and employees through training programs and refresher courses.
How to convey the occupational health care optionMany states now give employees the ability to choose a physician for injury care after the first visit. In states where this is the law, the employer may not instruct an employee where to go for care. However, an employer may make employees aware that occupational health care is an option. Frequently, an employee may not know about the occupational health care specialty and how these clinicians are specifically trained in the treatment of work injuries. An occupational health provider like Concentra® that uses an early intervention philosophy to accelerate care may expedite recovery and return to work, which are important values for both the injured employee and the employer.
Recipe for success: A well-done workers’ compensation program
Chick-fil-A’s approach to workers compensation was showcased in a virtual National Workers Compensation and Disability conference presentation in early 2021.10,11,12 “More than 95 percent of Chick-fil-A’s 2,723 restaurants nationwide are locally owned and operated,” said Steve Figliuolo, Chick-fil-A principal program lead.
Local operators administer workers’ compensation in their state with national guidance and consultation from corporate and a third-party administrator to manage care providers. Most of their workforce is comprised of either 16-to-20-year-olds or employees over age 60. They mostly encounter low-severity claims, such as cuts and burns, he said. Chick-fil-A’s presentation featured ideas that may be helpful to other employers with multi-state business operations.
- Keep the focus on the employee and provide a free flow of communication. “Most employees don’t even know what workers’ compensation is,” said Figliuolo. This claim may be the only one they have ever had.
- Allow employees to self-report their injuries to a triage nurse. The nurse can determine the appropriate level of care. Quick processing of the injury report, without guesswork, helps ensure the employee gets the right care, he said. Employees know more about how the injury occurred and can report the injury faster than a supervisor. Figliuolo says self-reporting has not increased claims.
- Use a rating system to rank care providers. Figliuolo says Chick-fil-A uses only those providers (including telemedicine providers) who have a four-star or five-star ranking.
- Encourage operators to bring injured employees back to work as soon as possible. Make sure they have achieved functional recovery, however. For example, if their job requires them to use both hands in conducting required duties that they are, in fact, able to use both hands.
- Educate local operators about claims disposition. Every case is different and appropriate job accommodations may also be different. Have conversations with the local operators and educate them about appropriate responses and the importance of preserving evidence. Chick-fil-A investigates cases with integrity, Figliuolo said. “We are not just an advocate for the injured worker but for the operator, as well.”
Internal and external risk control teams are always busy, seeking to achieve Figliuolo’s idyllic result: “The best claim is one that never occurs.”
An example, he said, is if a lot of accidents involve ladders, how can the restaurants get rid of ladders? Lower shelves? Anything else?
Even though claims volume may go up as more restaurants are added each year, Chick-fil-A strives to keep claims’ averages the same or lower than the year before.
Throughout the presentation, Figliuolo emphasized the importance of free-flowing communication and an advocacy-based approach. “The workers’ compensation claims process is (a matter of) keeping the promise of the workers’ compensation insurance policy,” he said.
As a leading occupational health provider, Concentra works with all major workers’ compensation insurance carriers and TPAs and is well-versed in state workers’ compensation laws and industry regulations. Additionally, Concentra provides a wide spectrum of physical exams and screenings to support injury prevention to hold down claims and health care costs.
- “How Does Workers’ Compensation Work?” Insureon Small Business Blog.
- “Best Workers’ Compensation Insurance Companies,” Investopedia. October 14, 2021.
- “Penalties for Noncompliance,” Embroker.
- “Workers’ Compensation Laws – State-by-State Comparison,” National Federation of Independent Business. June 7, 2017.
- “21 Workers’ Compensation Insurance Facts to Know Before Buying Coverage,” Risk&Insurance. April 23, 2019.
- “Filing for Workers’ Compensation When Your Injury Happened in Another State,” Nager, Romaine & Schneiberg Co., LPA.
- “Workers’ Compensation: Extraterritorial Considerations,” Old Republic Risk Management Blog. July 22, 2019.
- “Do All States Require Workers’ Compensation Insurance?” WorkersCompensationShop.com.
- “Workers Compensation Across State Lines,” WorkersCompensationShop.com.
- “Recipe for success: A workers’ compensation program that is well done.” Presentation deck. National Workers Compensation and Disability Conference. Scott Westman, Sedgwick Casualty Operations, and Steve Figliuolo, Chick-fil-A Principal Program Lead.
- “Recipe for success: A workers’ compensation program that is well done.” Presentation. National Workers Compensation and Disability Conference. Scott Westman, Sedgwick Casualty Operations, and Steve Figliuolo, Chick-fil-A Principal Program Lead.
- “Why Chick-fil-A’s Workers Compensation Recipe Shouldn’t Be a Secret,” Risk&Insurance. February 8, 2021.