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What is MA workers comp?
MA workers comp is a state-required insurance coverage that every business owner must carry. In Massachusetts, a workers compensation system exists to ensure that all workers are protected in case they are injured at their workplace or suffer a job-related illness. The Massachusetts Department of Industrial Accidents (DIA) oversees the entire system and related laws. The WCRIBMA (a private, nonprofit org) issues Massachusetts’ worker classification codes, associated rates, and experience modification factors for individual companies. WCRIBMA also administers the state’s assigned risk pool (a.k.a. “the pool”)—a residual market for businesses that cannot purchase workers comp from voluntary carriers.
Is workers comp insurance required in Massachusetts?
Yes! According to Massachusetts General Laws c. 152, § 25A, all MA employers are required to maintain this coverage for their employees and even for themselves, with a few exceptions to the rule. (Members of LLCs and sole proprietors may not be obligated to purchase coverage for themselves, but would still need coverage for employees.)
Keep in mind, workers comp is required even if your employees are:
- Part-time or Seasonal
- Relatives/Family Members
- Working “under the table”
What about workers comp for subcontractors or independent contractors?
If you hire subcontractors or independent contractors to complete some aspect of a project you are managing, you are not required to obtain coverage on their behalf. However, it is crucial to confirm and verify (in conjunction with your business insurance agent) they already have this coverage for themselves. Otherwise, uninsured subcontractors may be exposed at your next audit. If this occurs, the subcontractor’s employees will be added to your comp policy, for whatever stretch of payroll the exposure existed. This could create a dramatic increase in your annual premium and—if a loss occurs—significantly affect your rates going forward.
What if my business can’t get workers comp coverage?
Some companies are deemed too high a risk for voluntary, mainstream carriers. These companies may have an unfavorable loss history or they may operate in an inherently high-risk industry. In these cases, companies can obtain the required coverage via the state’s assigned risk pool, where rates are often much higher than voluntary market offerings.
Assigned risk status is another reason it makes sense to work with an insurance partner who specializes in Massachusetts workers comp. With expert oversight and comprehensive loss control services in place, you can prevent your business from landing in the residual market—or, get yourself out of this costly market that much quicker.
What does workers comp cover?
Workers comp insurance is designed to cover medical expenses and partial compensation for lost wages, for any employee who falls ill or suffers injuries as a direct result of job-related activities. In serious cases, when an employee is fatally injured or disabled, workers comp can also cover funeral expenses or disability payments for an extended period of time. The system in place for Massachusetts workers comp also limits an employer’s liability for workplace injuries, which means (in most cases) you cannot be sued by your employee for damages above and beyond what workers comp is already covering.
Workers comp insurance does NOT cover injuries or illnesses that can’t be tied directly to an employee’s job duties. Workers comp does NOT protect employers against lawsuits in cases where willful negligence was at play (for example, a knowing failure to provide safety equipment or maintain a secure work environment).
What is the cost of workers comp in MA?
This is the million-dollar question for most business owners. Something everyone wants to know off the top: how much does it cost? According to the National Academy of Social Insurance’s 2019 report, the average cost of MA workers comp is 73 cents for every $100 in payroll. So, if the average employee earns $50,000 per year, he might cost his company around $365 per year in workers’ comp. But, of course, not every business can go by averages. Think of roofers, arborists, commercial contractors, and a host of other folks who handle serious equipment or work in dangerous settings; their workers comp premiums tend to fall way outside general workplace averages.
So, here’s a better way to think about costs. In simplified terms, workers comp costs depend on three main factors:
1. Your employee class codes (ECC)
Every type of work is assigned a unique classification code (a three or four-digit number). These codes are then given a rate, based on how risky the specified work is. Some states share the same classification code system, defined by the NCCI. But in Massachusetts, class codes and rates are set by the WCRBMA. So, for example, the WCRIBMA says a Massachusetts clerical office worker should be given the class code, 8810 at a current rate (7/1/20) of $0.06 per $100 of payroll. Meanwhile, an electrician should be given the class code, 5190 at a current rate of $2.05 per $100 of payroll. Electrical work is more hazardous than desk work; hence the much higher rate.
2. Your payroll (P)
The list of your employees and how much you pay them/how often they work.
3. Your Experience Mod (EM)
Your company’s experience modification factor is calculated annually; it’s a ratio of actual-to-expected losses. In Massachusetts, the WCRIBMA gathers loss data from other companies in your space, then compares this data against your own loss experience in a given policy term. If you are exactly average within your industry class, your e-mod will be 1.00. If you report more frequent workers comp losses or more severe losses than other folks within your class, there’s a good chance your e-mod will climb above a 1.00… and result is a premium increase.
Here’s a closer look at how these three factors inform your annual premium:
ECC x P x EM = Workers Comp Premium
Does this formula mean your workers comp premium is beyond your control? Not at all. A crucial component of your insurance agent’s job is auditing and optimizing the variables that plug into this formula. While you can’t do much about altering your payroll (you need employees to be at work X number of hours per week), you can be strategic about your class codes and experience mod—especially with a knowledgeable insurance agent in your corner.
How can a good agent help lower workers comp costs?
MA workers comp is a complex science. There are numerous best practices (too numerous to unpack in one sitting) that should be implemented and revisited throughout your policy term. Common examples include: reviewing your employee class codes for accuracy; creating return-to-work programs for injured workers (using light-duty or modified-duty job descriptions) so overall claims aren’t as costly or protracted; managing and closing all outstanding claims in a timely manner; checking to ensure subrogated claims (where a third party ultimately pays the insurer for a significant portion of a claim) are correctly adjusted and reported to the bureau. For more information on how your workers comp premium and e-mod should be reviewed, contact our experts: 508.339.2951.
What happens if a business doesn’t carry workers comp in Massachusetts?
In the state of Massachusetts, failure to maintain required workers comp can result in:
- A stop work order
- Daily fines of $100, until proper coverage is secured
- Potential criminal charges (up to one year in prison and/or up to $1,500 in penalties, if convicted)
- Restriction from bidding on public projects for up to three years
- Potential lawsuits from injured employees
As noted above, MA workers comp is a highly complex discipline. This outline only begins to scratch the surface. But hopefully we’ve helped to provide a baseline understanding, and raise specific follow-up questions about how well your business is navigating the system. We truly enjoy answering questions like these, so don’t hesitate to reach out: 508.339.2951.