Workers compensation is an insurance program in which employers pay premiums to cover the health care costs and lost wages of their employees who have suffered injuries during the course of their employment. The system came about early in the 20th Century to resolve problems encountered by both employers and employees when injured workers had to sue their employers before recovering the costs and financial losses from work-related injuries.
Under the system that existed before workers’ compensation, workers had to prove that their employers were negligent in order to get compensation for work-related injuries. If workers could not prove negligence, they received no compensation. If workers did prove negligence successfully, the high value of the damages awarded by courts could force employers out of business. An insurance program allows employers to spread the risk of injuries over time and provides an incentive for employers to implement safety programs in order to pay lower premiums. Employers with fewer workplace injuries pay lower premiums than employers which have records of more frequent injuries.
Workers can still sue an employer for negligence if an employer violates the safety laws and standards set forth by the federal Occupational Health and Safety Administration (OSHA) or by state regulatory agencies. In all 50 states, employers are required by law to carry insurance and must display certificates of coverage in the workplace.
In the history of workers compensation laws, state governments administered the programs and established state agencies which functioned as insurance carriers. Today, two states still have state-funded programs. In the other states, regulatory agencies may become involved by conducting administrative hearings for contested claims. Parties must generally exhaust their options through these administrative proceedings the courts can hear disputed claims.
Employers may contest claims in which they believe the worker did not sustain the injuries in the course of employment or in which they believe the claimant has exaggerated the severity of the injuries. However, workers compensation is a no-fault program, so employers cannot refuse to pay for injuries caused by carelessness of the claimant or his or her coworkers. In addition, employers cannot discriminate against workers who have filed claims for workplace injuries by retaliating against those individuals during the hiring process or in consideration for promotion opportunities.
The insurance company usually pays the health care costs associated with workplace injuries directly to the health care provider. Amounts received by injured workers depend on the extent or severity of the injuries. Doctors make determinations as to whether an injured worker is temporarily disabled or permanently disabled. If a worker is permanently disabled, a doctor needs to determine if the worker is totally or partially disabled. If a worker is totally and permanently disabled, he or she will receive payments to compensate for lost income, which generally depends on a calculation of the worker’s past income. If a worker is determined to be permanently and partially disabled, doctors and insurance companies use formulas and tables to determine the amount of compensation. For example, if the injured worker is right-handed and loses his or her left thumb, the amount of compensation will be less than if the worker had suffered an injury to the preferred hand.