Though monopolistic workers’ compensation state funds used to be more popular, only four U.S. states—Ohio, North Dakota, Washington, and Wyoming—still have them today. While workers’ comp laws in these states don’t affect business owners all around the country, you do have to worry about them under the following circumstances:
- If you have a primary business location in one of these states
- If you decide to expand your franchise and open a location in one or more of these states
- If you employ workers who reside in any of these states
Workers’ Compensation Policy Basics
Workers’ compensation, more commonly known as workers’ comp, is an insurance policy that compensates your workers in case of a workplace injury or the development of an occupational illness.
Aside from Texas, all U.S. states require most businesses to have workers’ comp insurance, though there are exceptions for small companies and certain types of workers on a state-by-state basis.
When a workers’ comp insurance policy claim is accepted, your insurer covers the affected employee’s medical bills and replaces a portion of their missed wages.
This policy also protects employers from paying out of pocket for any associated expenses, regardless of who’s at fault for the injury.
Employer Liability Coverage
When businesses purchase workers’ compensation policies from a private insurance company, the plan typically includes employers’ liability coverage, also called workers’ compensation “Part B.”
However, if you use a state fund for workers’ compensation insurance in a monopolistic state, the policy will not include employers’ liability coverage. If you want that protection, you have to purchase this insurance separately.
Do you need employers’ liability insurance? It depends on how much risk you’re willing to bear. Should an employee sue their employer after an injury—for example, if they suspect negligence or foul play by the employer—employers’ liability insurance covers additional expenses like legal fees.
An employee can sue whether or not they received compensation from your workers’ comp insurance policy. While this is a rare occurrence after an employee accepts fair compensation, it’s still a possibility that you need to prepare for.
Workers’ Comp Costs in North Dakota
The North Dakota Workforce Safety and Insurance (WSI) is the sole provider of workers’ comp insurance policies in the state of North Dakota. State laws require business owners to purchase a workers’ comp policy from the WSI according to their employees’ classes and income.
The WSI calculates insurance premium rates using your business’s payroll reports. They charge you the sum-total of all employee classes by applying every employee’s rate to their taxable annual income. North Dakota’s system classifies workers according to their industry and level of risk, such as trade services, protective services, medical services, fiscal services, etc.
Workers’ Comp Costs in Ohio
In Ohio, the Ohio Bureau of Workers Compensation (BWC) is responsible for all workers’ comp insurance policies for businesses with one or more employees. Workers’ comp insurance rates in Ohio depend on your employees’ experience and work classification according to the NCCI classification system.
Ohio is the only one of the four monopolistic states that allow you to self-insure your workers as long as you can prove that you’re financially stable and have two years of experience with the state fund.
Workers Comp Costs in Washington
The Washington State Department of Labor and Industries (L&I) is the only agency that can provide a workers’ comp policy in Washington. Washington follows its own workers’ classification system with over 300 categories. The L&I calculates premium rates according to your industry’s risk classification, your experience modifier, and the number of workers you employ.
Workers’ Comp Costs in Wyoming
If you run business operations in Wyoming, you need to purchase your workers’ comp insurance from the Wyoming Department of Workforce Services (DWS).
Wyoming uses the North American Industry Classification System (NAICS) to classify workers according to industry and risk factors. The DWS accounts for industry classification, your company’s experience modified, and employee average annual income to calculate your insurance premium rates.
Running the Numbers
Whether you plan on starting a business in one of the four monopolistic states, open a new branch, or outsource your work there and employ locals, it’s best to run the numbers before committing. Every state has its own requirements and restrictions regarding workers’ compensation insurance, including these four states.