In California, all employers are required to provide workers' compensation benefits to their employees under California Labor Code Section 3700. Employers assume the cost of occupational and/or work related accidents and diseases incurred in the course of or arising out of the execution of normal employment functions without regard to negligence. This important coverage provides five basic types of benefits: A. medical care; B. temporary disability benefits; C. permanent disability benefits; D. vocational rehabilitation services; E. death benefits.

Employers who fail to obtain workers' compensation insurance are operating unlawfully and subject to the department of industrial relations authority to levy heavy fines as well as issued a stop order to close down operations until workers’ compensation is secured.
 

Our admitted carriers not only provide competitive rates and financial stability needed to protect organizations from work related liabilities.  But also the specialization and a clear understanding of the operation and needs of the educational industry is vital to achieving competitive pricing, claims processing and payroll reporting at time of audit.

Workers' compensation annual premiums are calculated based on three factors: A. how employees are classified (Classifications are developed and assigned by the workers' compensation Insurance Rating Bureau (WCIRB) in most cases) according to their specific work duties; B. the rate (Currently, insurers operate under an "open" rating system. Open rating requires that all insurers file their rates and applicable information with the Ca. Dept. of Insurance. The rate itself is expressed in dollars and cents and is multiplied by each $100 of payroll per classification.) assigned by the insurance carrier to the classification(s); C. the total estimated annual payroll for organization employees which are divided by classification(s).

What is an Audit:  At the end of each twelve month policy term the insurance company performs the “Audit”.  It is important to both the carrier as well as the policy-holder.  It ensures the organization was not overcharged any premium as well as making sure the carrier collected the entire premium that was due.

The carrier can perform the audit by using either method:

A. Voluntary: The carrier sends out a payroll report for the policy-holder to complete via mail.  The employer completes the forms by reporting the gross payroll for each classification(s).  The employer must also send copies of its quarterly payroll report and W2 forms to document its figures.     

B. Physical: The carrier sends out an auditor in person to complete the payroll reports and collect copies of the quarterly payroll reports and W-2 statements. The auditor also inspects the operations to ensure the correct classification and rates are being used by the carrier in addition to determining your final premium.

It is important to request a copy of the audit work papers so you can review them carefully and make sure payroll computation adjusts overtime properly and allocates payroll of different employees correctly.

What is an Experience Modification:  California’s workers' compensation experience rating system is a merit rating system intended to provide employers a direct financial incentive to reduce work-related accidents.  The experience rating system objectively distributes the cost of workers' compensation insurance more equitably among employers assigned to particular industry classifications.

For those employers who qualify, experience rating is mandatory.  Today, more than 120,000 California employers are experience rated, representing approximately 80% of all the workers' compensation insurance premiums paid. Using information submitted by insurers, the Workers’ Compensation Insurance Rating Bureau (WCRIB) calculates and publishes experience modifications for each qualified employer.  If a company is provided an experience modification, an insurer is required to apply the experience modification to the organizations policy.

A policyholder’s experience modification is calculated by comparing the actual losses to the expected losses.  Actual losses are the claims, both medical and indemnity, that an insurance company must pay on behalf of the policyholder as a result of a work-related injury. The organizations expected losses represent the policyholders share of the annualized cost of projected losses for the industry in which you operate.

Example: Two businesses within the same industry, the larger the business, in terms of payroll, the more losses that business is expected to sustain.

TIPS

Safety Meetings:  Make safety an important part of every meeting.  Make sure the organization communicates to employees why safety is so vital, and how it affects the cost of workers' compensation coverage and thus the bottom-line of the company.  Employees don't really understand how expensive workers' compensation coverage is for the company-or even that it's a cost for the company at all.  Some employees think it's just some kind of government program that doesn't really translate back to direct costs for the company.   Have an open door policy, where employees can provide suggestions or report safety concerns.  Finally, create a set of safety goals for the organization, and how well the business is doing in regard to meeting those goals.

Keep Tabs:  You can't rely solely on your insurance company to analyze this data and alert you to trends you need to address.  Look for information about what kinds of claims are occurring within the industry.  Only by understanding what's causing claims can businesses begin to address the causes. It's a terribly overworked cliché, but it's also very true: Safety is no accident. It takes planning, effort and thought.

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