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Most states require employers to obtain workers compensation insurance coverage in order to provide their employees with medical benefits and compensation for lost wages due to injury or illness, occupation disease, or death arising while on the job. Typically, workers comp insurance coverage should be purchased from a voluntary market insurance carrier when available.
In some instances, employers are unable to find a voluntary market insurance company willing to quote their workers' comp coverage. Some common reasons for this include: 1) poor loss experience related to either the frequency of claims or the amount paid for claims versus the premium paid (also know as a high Experience Modifier), 2) the dangerous nature of the risk or industry NCCI classification codes, 3) prior bankruptcies or poor financial status of the business, and 4) prior cancellations due to nonpayment of workers' compensation premiums.
Employers are Typically Eligible for a State Fund Program Under the Following Conditions
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1.
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Received the required of declinations. from a private insurance company
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2.
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There are no pending offers of voluntary coverage
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3.
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There are no outstanding insurance premium obligations, non-compliance issues with audits, or reasonable safety recommendations
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4.
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Employer has not made material misrepresentations when applying for coverage
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Workers Compensation Insurance is Mandatory
Since workers compensation insurance is required throughout the United States, every state must provide access to work comp insurance so employers are able to purchase coverage in the state. State Fund programs are also referred to as the Residual Markets. They are more commonly known as State Insurance Funds, Assigned Risk Plans, or Workers' Compensation Pool Policies.
There are several ways in which a particular state may set up one of these residual markets. Some states establish their own State Fund to write coverage. Other states may create competitive State Funds which write both pool policies and voluntary market policies. States such as Florida establish a Joint Underwriting Association (JUA) to provide coverage. However, most NCCI states establish Workers' Compensation Insurance Plans (WCIP, or Assigned Risk Plans), which are administered through NCCI (National Council on Compensation Insurance).
Each WCIP State Fund provides a mechanism through which eligible employers who are unable to find workers compensation coverage in the voluntary market must use to purchase workers' compensation insurance. Some states require proof of declination from one or more private carriers in order to access the State Pool.
Insurance coverage through the State Fund often costs 15% - 40% more than it would through a standard voluntary market. Therefore, State Fund programs should usually be an Employers last resort. Even when State Insurance Fund rates are reasonable, the Funds are often more difficult to deal with and unable to provide out-of-state work comp coverage, if needed.
At Workers Compensation Shop.com, we work with State Funds and Residual Markets in most states; however, our goal is always to help our customers avoid these markets each year as their policies renew. Our Specialists are trained to help employers understand what it takes to lower their workers comp rates and find voluntary market coverage.
How to Avoid the State Workers Compensation Fund
If you are with Your State Fund for coverage, or have a workers comp Pool policy in your state, their is a good chance you can save money on coverage. Sometimes its simply a matter of shopping your policy with a national agency like Workers Compensation Shop.com. It often comes down to controlling your workers comp losses and claims over a period of time. We have carries and safety services designed to help with these issues.
Employers should always endeavor to prevent injuries from occurring with good training practices and safety initiatives. When injuries do occur, employers need to have a quick, caring, and responsive claims management program in place to help employees recover and return to work as quickly as possible. Employers should also communicate with employees frequently throughout the recovery process and provide a Return to Work Program when possible.
State Insurance Funds Managed by State Bureaus
» Indiana Assigned Risk Reinsurance Pool |
» Massachusetts Workers Compensation Assigned Risk Pool |
» Michigan Workers Compensation Placement Facility |
» Mississippi Workers Compensation Assigned Risk Pool |
» New York State Insurance Fund |
» Wisconsin Rating Bureau |
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