How Workers Comp Works

When workers suffer injuries or illnesses in the workplace, they can turn to workers compensation to pay for medical treatment and lost wages. It's a type of insurance purchased by employers to cover the cost of workplace injuries.

Workers compensation has been in the United States for just over 100 years as a way to help employers and employees deal with the cost of injuries and illnesses that happen in a workplace.

Workers comp is called a “no-fault” system because employees that receive benefits do not have to prove responsibility for the workplace accidents that caused their injuries. They will have their medical treatment paid and typically receive two-thirds of their weekly wages while recuperating.

In return, the employer can’t be sued for injuries related to workplace accidents, unless there is provable negligence, which is rare.

The agreement that created workers compensation was dubbed the “grand bargain” when it gained acceptance in the U.S. early in the 1900s. Prior to that, employees who wanted compensation for injuries suffered on the job, had to sue business owners. The legal battles that resulted took months, sometimes years to resolve.

The laws, at that time, heavily favored employers and so did outcomes. For example, the lawsuit could be dismissed if an employee – or anyone else working on the job – contributed in any way to causing the accident. The same result was true if the worker knew the hazards of the workplace and accepted those hazards to keep their job.

Workers compensation lawyers like to say that the laws haven’t changed much, but the fact is that 95% of cases are resolved without having to go to trial.

Nonetheless, there are still many aspects of workers compensation cases that are debatable. Even workers compensation judges and the attorneys who represent the insurance industry agree that if a worker has a dispute with the medical treatment being provided or the wage compensation being offered, they are best served by hiring an attorney to handle their case.

What Is Workers Compensation?

Workers compensation is an insurance that provides medical and wage compensation benefits to workers who suffer injuries or illnesses in the workplace.

The laws governing workers compensation vary from state-to-state, but generally provide:

  • Payment for medical expenses to treat injuries or illnesses that an employee may suffer on the job
  • Wage compensation (usually two-thirds of your weekly pay) while an employee misses work to recover from an injury
  • Payment for vocational rehabilitation should an employee need ongoing care or training for a new job when they return to work
  • Death benefits for families, including funeral costs, if a worker dies as the result of a work-related accident

Workers compensation is mandatory in every state but Texas, where it is optional. Though there are exceptions for a limited number of jobs, if you have even one employee, state laws require your business to have workers compensation.

In most states, businesses buy workers compensation from an insurance carrier and pay premiums based on state laws and the number of claims a business makes each year.

There are four states – Ohio, North Dakota, Wyoming and Washington – that operate state-funded programs for workers compensation. All claims go through this state agency.

More than 6,000 companies nationwide – mostly large companies like Walmart, Disney and Microsoft – are self-insured for workers compensation.

Workers compensation is meant to cover any injury or illness that happens in the workplace. The key words in that sentence are the last three – in the workplace.—because those are three most disputed.

Did the back injury a worker filed a workers compensation claim for actually happen while he was on the construction site where he typically is asked to carry loads of 25-50 pounds? Or did it happen last week at the bowling alley when he reached too far back with his takeaway and felt something pop in his back?

That is one example of hundreds of cases where it’s sometimes difficult to prove that an injury – and extraordinarily difficult to prove that an illness such as COVID-19  – was caused in the workplace.

Filing a Workers Comp Claim

Filing a workers compensation claim is easy – tell someone on the job site you are hurt or ill – but gathering the evidence and paperwork that supports your claim, is what could decide whether your claim will be accepted or denied.

The first step in any claim is obvious: Tell someone, preferably your supervisor or employer, that you have suffered an injury. If neither one is available, tell a co-worker or some witness to the accident. There are deadlines for reporting the injury that vary from state-to-state, but from a common-sense perspective, the sooner you report an injury, the better the chances your claim will be approved.

If necessary, seek medical attention immediately. Go to the nearest emergency room, urgent care center or doctor’s office where you can be examined and treated. Describe your injury or symptoms in detail to the doctor. Make sure you tell them this is a work injury and will be covered by workers compensation insurance.

If you don’t need immediate medical care, use the time to gather evidence. Take photos, make notes of the time and location of the accident, gets witnesses names and contact information Write down notes of how the accident occurred, who else was involved and what injuries you suffered.

You may need none of this, or you may need all of this to get the benefits you are eligible for when you meet with a claims adjuster.

Your employer is required by law to advise his insurance carrier and the state workers compensation office about the injury. Again, the deadline for that varies by state, but if your employer hasn’t filed the paperwork within 5-7 days of your injury, you might want to contact an attorney.

Bottom line is that the sooner you report and document a workplace injury, the better your chances are that it will be approved.

Appealing a Workers Comp Denial

If you haven’t done so already, the first step for appealing a workers comp claim denial, should be to hire an attorney.

The appeals process, like most of workers compensation issues, varies from state-to-state and can be a very complicated process for anyone not working in the legal system. In most states, the first step is to file the necessary paperwork for an appeal with the administrative law judges, magistrates or state board who oversee workers compensation hearings.

Then, there are deadlines that must be met and, in all probability, interviews and research that must be done to collect the information needed for a successful appeal. Every state has appeal procedures and timelines that must be met.

The first question you should get answered is: What was the reason or reasons your claim was denied in the first place?

  • Were there no witnesses to the injury?
  • Did their stories not corroborate your version?
  • Were witnesses intimidated by the employer and recount their version of the accident?
  • Was there medical evidence that argued against your account of the accident?
  • Would finding a second medical opinion change the outcome?

These are just a few of the answers you’ll need. The average person has neither the experience, nor the know how to get them without legal help.

There is some good news, however. A study done in 2020 showed that 67% of denied claims became approved claims within 12 months and workers received 55% more in benefits than they would have if the original claim had been approved.

Workers Comp Benefits

The primary benefits of workers compensation are having all your medical bills paid and receiving compensation for wages lost while you recover from your injuries or illnesses.

However, there are other benefits that aren’t listed on the state-mandated workers compensation poster hanging in your company lunchroom, and probably aren’t part of the talk during lunch but should be.

Workers also are entitled to disability benefits, vocational benefits and death benefits under workers compensation.

The medical benefits are the most well-known benefit from workers compensation and with the soaring price of healthcare, that’s probably a good thing. Any medical expenses you incur due to a work-related injury should be covered. That includes visits to a doctor’s office, emergency rooms or specialists, medications, x-rays, MRIs and medical supplies.

Workers comp also pays mileage for driving to and from appointments and pays for assisted devices like wheelchairs, scooters or modifications needed in your home.

Wage compensation is another variable based on the state you live in, but most states require the insurance company to pay workers two-thirds (66.7%) of their average weekly wage until they return to work.

If the injury or illness you suffer is severe, you may be entitled to temporary or permanent disability payments.

If the disability won’t allow you to perform your old job – for example, a leg injury prevents you from standing up – workers comp benefits would provide money for you to go to enroll in a vocational rehabilitation program to learn a new job.

Finally, there are death benefits that go to the spouse and children of workers killed by an accident or illness that occurred at work.

There are degrees of compensation and time constraints for all these benefits. That’s another reason it is a good idea to go through this process with a workers compensation attorney, who knows what it takes to qualify for each benefit and how much those benefits should pay.

Workers Comp Settlements

Workers compensation settlements happen when the insurance company and worker agree it’s time to wrap up the business of paying for this claim and either the employee returns to work, or separates from the company.

The settlement process can happen at any time from the day of the injury to minutes before a judge approves or denies a claim

It usually gets going in earnest when the doctors involved in treatment say the worker has reached Maximum Medical Improvement or MMI. That means that doctors have determined that the worker’s condition has stabilized, and no further improvement is expected, no matter how much rehabilitation, surgery, medication or other form of medical intervention is offered.

That doesn’t necessarily mean the patient is 100% healed – they could have partial or permanent disability that prevents them from returning to work – it just means the doctors think this is as far as they can go.

So, now it’s time reach a settlement to compensate the worker, not just for now, but for how the injury will affect their earning potential in the future. Things like unpaid medical bills, likelihood of future medical treatments, lost wages and disability payments all figure in the sometimes frustrating and aggravating process of settlement negotiations.

Claims adjusters or attorneys for insurance companies go through the settlement process every day and assign a dollar amount for what they will pay in settlements. Their job is to keep the number as low as possible.

The injured worker’s attorney, assuming one was hired, also has been involved in settlement negotiations and should be familiar with the dollar limitations. The attorney’s job is to make the number as high as possible.

In most states, settlements must be approved by judges. The settlement most often comes in the form of a lump-sum payment, but could be a structured payment over a specified period of time.

Having a qualified, experienced workers compensation attorney on your side is a huge advantage when the process reaches this stage.

Bents Dulcio

Bents Dulcio writes about car accident claims and workers compensation claims for Bents got his professional start as an intern on Andrew Gillum's breakthrough gubernatorial campaign, while pursuing a a degree in Political Science from Florida State University. He went on to pursue a career in writing covering a wide range of topics including personal finance, personal injury and fashion.

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