Michigan Workers Compensation - Employers Responsibilities
Workers’ compensation is a system of no-fault insurance that provides wage-loss and medical benefits to employees for compensable injuries they receive in the scope and course of employment. Workers’ compensation is governed by state law.
Michigan’s Worker’s Disability Compensation Act (WDCA) defines employer responsibilities under the workers’ compensation program. The Michigan Workers’ Compensation Agency (WCA), part of the Michigan Department of Licensing and Regulatory Affairs (LARA), monitors compliance with WDCA requirements.
Coverage Requirements
Employers in Michigan must have workers’ compensation coverage for their employees. Employers must bear this expense and may not request or encourage their employees to waive their right to compensation under the WDCA or to pay for their coverage in the workers’ compensation system. However, the WDCA may permit an employee to waive his or her compensation rights if the employee reaches a compensation settlement with the employer.
To meet coverage requirements, employers can secure workers’ compensation insurance:
· With a policy from a private insurance company licensed to do business in the state; or
· Through self-insurance.
Self-Insurance
A self-insured employer uses its assets, rather than an insurance policy, to insure against its obligations under the WDCA. The WCA will allow an employer to self-insure only if the employer has been in business for at least five years and can prove that it has sufficient financial stability to pay all the benefits its employees are entitled to receive under the WDCA.
Generally, the WCA also requires a self-insured employer to:
· Post a bond or letter of credit with a minimum amount of $100,000;
· Maintain specific and aggregate excess insurance policies; and
· Contract with an approved claim servicing company or prove that it has competent staff to handle claim administrative and reporting duties in-house.
Self-insurance eligibility is reviewed annually. Employers must submit a renewal application 30 days before the renewal date.
The WCA can terminate an employer’s authorization to self-insure if the employer fails to comply with any of the eligibility requirements. After receiving notice of a possible revocation of self-insurance authority, an employer can correct any non-complying issue and contest the revocation in an administrative hearing.
Group Self-Insurance
Multiple employers can create self-insurance groups by combining their assets to insure against their individual liabilities. The WCA allows employers to self-insure as a group
if the group, and each individual member of the group, has sufficient financial stability to meet its obligations under the WDCA. After a group is authorized to self-insure, additional members can join only after receiving the approval of the group and the WCA.
Private employers that participate in group self-insurance are collectively and individually responsible for the payment of any contributions the WCA may require of any member of the group. Public employers are only collectively liable for required contributions.
To receive WCA authority to participate in or create a self-insurance group, employers must submit Form WC-402G to the WCA and:
· Have combined assets of at least $1 million;
· Be in the same industry as other group members (as defined by the WDCA or approved by the WCA);
· Provide an indemnity agreement;
· Provide a draft of the self-insured group’s by-laws (a sample document is available with the self-insured group application form);
· Obtain a blanket fidelity bond of at least $1 million (to insure the staff that will be handling the monies for the group); and
· Obtain a surety bond or financial security endorsement (the WCA will determine the amount of this instrument after reviewing the group’s financial condition).
Group self-insurance must be renewed annually, using the application form (Form WC-402G).
NOTICE REQUIREMENTS
Within 30 days of obtaining workers’ compensation coverage, employers are required to file with the WCA a notice of the issuance of the insurance policy and its effective date. This notice and other coverage maintenance forms, such as notification of insurance termination and employer name changes, can be filed electronically using the instructions provided in the WCA website.
Recording and Reporting Requirements
Employers are required to keep a record of all employee injuries resulting in death or disability. The record must indicate:
· The employee’s name, address, age and wages at the time of injury;
· The time and cause of the injury;
· The nature and extent of the injury and its accompanying disability; and
· Any other information that the WCA may reasonably require.
Employers must only report an injury to the WCA if the injury caused: (1) disability extending seven days beyond the date of injury, (2) death or (3) specific loss. In the case of death, the report must be immediate.
REDUCING THE COST OF WORKERS’ COMPENSATION INSURANCE
Workers’ compensation insurance premiums are determined primarily by the employer’s industry. For example, workers’ compensation insurance premiums are generally more expensive for a construction or manufacturing company than for a professional services firm. However, employers across all industries can take steps to reduce the cost of maintaining workers’ compensation insurance.
Safety Programs
The easiest, and often most effective, way to reduce frequent workers’ compensation claims is implementing a quality safety program. Safety programs can help employers identify safety issues that employees face on a daily basis. Safety programs should also establish safe work practices and educate employees on how to reduce risk. When creating a safety plan, employers should analyze the factors that cause frequent claims.
Return-to-Work Programs
Implementing programs to put injured employees back to work, even in a temporary role, can help reduce workers’ compensation premiums, increase the employer’s overall output and raise the injured employee’s morale.
Reporting Fraud
Fraud is expensive and can drastically raise premiums. If an employer suspects that an employee has submitted a fraudulent workers’ compensation claim, the matter should be promptly reported to the WCA for an investigation.
MORE INFORMATION
Contact Macomb Benefits or visit the Workers’ Compensation Agency website for more information on workers’ compensation laws in Michigan.