The trouble with opting out of workers’ compensation insurance

As some states across the country are allowing companies to opt out of workers’ compensation insurance, experts warn of the dangers.

In North Carolina, any business that has three or more employees is required to carry workers' compensation insurance, the North Carolina Industrial Commission notes. There are few exceptions to this rule, and even businesses that employ independent contractors may be liable for having a policy in place.

However, states elsewhere across the country have developed legislation that enables companies to opt out of insurance and instead implement their own plans regarding workplace injuries. As experts note, this could be a dangerous trend, especially for anyone who gets hurt or falls ill on the job.

What it looks like

There are three basic opt-out models already in place or under consideration in four states. Business Insurance magazine points out that those systems include the one in Texas, in which no company is mandated to carry insurance. Further, the companies that do have a policy will not have to face unlimited civil liability.

Proposed legislation in Tennessee would allow companies to opt out of workers' compensation but still require the businesses to offer employees benefits, though the limits can be lower than those in place in the government plan. South Carolina is considering a model similar to what Oklahoma has in place. Under those guidelines, any company that ops out of the policy will have to offer benefits that meet or exceed the government plan.

The issue

Advocates of the opt-out system boast that it allows for free-market competition and could lead to quicker reform. Additionally, the opt-out system removes the shield that blocked employees from suing their employer following an on-the-job accident.

However, opponents warn of the inherent dangers. A report from NPR points out that employer-led plans may do the following:

  • Control which doctors a patient can see
  • Require mandatory settlements
  • Stop benefit payments sooner than government plans

Additionally, NPR reports that generally, employer-developed systems cover fewer injuries. In Oklahoma, an NPR investigation uncovered many plans that violated state laws. Experts say that the opt-out system gives companies the ability to deny coverage to employees who have been injured and would have otherwise received benefits.

Workers' compensation in North Carolina

Currently, North Carolina is not considering an opt-out system. People who are injured and covered by a workers' compensation policy can file a claim to receive much-needed compensation for medical bills and missed wages. The NCIC advises injured workers to report the incident as soon as possible, preferably in writing within 30 days. When receiving treatment, patients should let their doctors know that the injury or illness is work-related.

Even seemingly simple claims can grow complicated. Anyone who has questions regarding this issue should consult with an attorney.