(December 2020)
Monopolistic workers compensation states do not permit open competition between their state funds and private insurance companies. Each state has only one fund available, and most employers must purchase coverage from it. Private companies may be permitted to provide workers compensation coverage on a limited basis. Self-insurance is permitted in some cases, but the requirements and financial considerations are beyond the reach of most employers. However, these are the exceptions to the rule and are usually done under only unique or special circumstances.
A major challenge in monopolistic state is with multi-state exposures. The non-monopolistic states’ exposures may be combined under a single policy, but the exposures in each monopolistic state must be written separately and directly with that particular state. This can lead to audit challenges with respect to assigning payroll for employees who work in more than one state. It can also lead to benefits and claim handling issues.
A secondary concern is the lack of employers liability coverage in conjunction with workers compensation coverage in monopolistic states. This coverage must be purchased elsewhere.
Related Article:
Stop-Gap–Employers Liability Coverage
There are also concerns over classifications and rating
because monopolistic states may classify a risk differently than
non-monopolistic states.
There are currently four monopolistic states. They are North Dakota, Ohio, Washington, and Wyoming. The following brief recap lists some of the important highlights of these individual state funds.
The North Dakota Workforce Safety & Insurance (WSI) administers the workers compensation insurance facility for North Dakota employers. It requires that all employers cover all employees, with limited exceptions. Sole proprietors, officers of corporations, partners, and members of Limited Liability Companies are excluded from coverage, but any of them can opt to be covered if they decide to do so. North Dakota does not allow either private insurance or self-insurance.
As in all states, independent contractors present special challenges as to whether they really are independent contractors or are actually employees. North Dakota law is very specific in the way it addresses this issue, and WSI must approve independent contractor status. Newspaper delivery persons and certain licensed real estate agents and brokers may be considered independent contractors, but only if WSI approves it.
Related Article: Workers Compensation Independent Contractor Status
As in many states, household domestic workers, employees of farm and ranch operations, children under 22 years of age, and federal and railroad employees are exempt from mandated coverage.
North Dakota also has specific procedures with respect to employees who work in other states, workers from other states who work in North Dakota, reciprocal agreements, extraterritorial considerations, and compliance with workers compensation requirements. Employers domiciled in other states that have workers in North Dakota must usually secure workers compensation insurance on them through WSI.
Additional information and details are available at http://www.workforcesafety.com/.
Ohio has two separate and distinct operations that handle and administer its workers compensation insurance system:
Every employee must be insured, regardless of whether he or she is employed on a full time, part time, or seasonal basis. This includes farms’ family members and farms that have one or more employees. It also includes state, municipal, and school district officials. Sole proprietors and members of partnerships may opt to be covered, subject to executing certain forms that specifically name the individuals to be covered. Domestic employees who make less than $160 every three months are the only exception to mandatory coverage.
As in all states, Ohio specifically addresses independent contractors because they present their own unique set of challenges. Ohio requires that all independent contractors carry workers compensation insurance on themselves and that they provide specific proof of insurance to prospective employers.
Related Article: Workers Compensation Independent Contractor Status
Private workers compensation insurance companies are not permitted to operate or compete in the state. Employers that must provide workers compensation coverage may select from one of two available options. The first option is to simply purchase workers compensation insurance from the State Fund. The second is to self-insure within the state's rules and guidelines. Ohio permits employers to establish self-insurance programs to handle their own workers compensation claims. However, the restrictions and requirements are such that only large and financially strong companies are likely to do so.
Additional information and details are available at https://www.bwc.ohio.com/.
The Washington State Department of Labor and
Industries administers the state's workers compensation system. It manages claims
and pays benefits from the Washington State’s Industrial Insurance Fund.
While most employees are eligible for coverage and must be covered, there are certain exceptions. Sole proprietors, members and managers, and corporate officers, certain domestic and casual workers, and employees subject to a number of federal and state Acts are exempt from the Act. In addition, several other categories are exempt. Some examples are minor children under 18 years of age who work on their family’s farm, certain musicians and other entertainers, and insurance salespersons and brokers. The complete list and details are in publication RCW 51.12.020. However, many of these may opt to be covered if the employer agrees to do it and the department approves doing so.
Washington
also has specific procedures with respect to employees who work in other
states, workers from other states who work in Washington, and reciprocal
agreements with specific other states.
Private workers compensation insurance companies are not permitted to operate or compete in the state. Washington has somewhat loosened its monopolistic approach to workers compensation by permitting employers to establish self-insurance programs to handle their own workers compensation claims. However, the employer must have been in business for at least three years and have a formal written loss prevention program. There are also many financial restrictions and requirements such that only large and financially strong companies are likely to attempt to self-insure.
Additional information and details are available at http://www.Ini.wa.gov/.
The Wyoming Workers' Safety and Compensation Division of the Wyoming Department of Employment administers the state fund. Workers compensation coverage is mandatory in the state program for only certain defined hazardous operations as well as for other specific and defined operations. Employers that engage in operations other than these have the option to not provide workers compensation coverage at all or to purchase coverage through either the state fund or from a private insurance company.
Coverage through the state fund is not available to certain specific industries unless the employer elects to provide coverage for all employees. Such coverage must then be provided for at least three years after which the employer may withdraw coverage if it is current on its payments that the Act requires.
Non-resident employers and their employees that temporarily work in Wyoming are exempt from the Act. Wyoming residents employed in required occupations or industries by a non-resident employer in Wyoming must provide coverage under the Act. The Act covers Wyoming employers and employees covered by the Act, who temporarily work outside the state. However, resident employers that hire employees in other states to work in those other states must arrange coverage for such employees under the laws of those other states.
Employers must comply with certain requirements when their employees work in other states. There are specific arrangements in place for states with which Wyoming has reciprocal agreements.
Contractors must obtain a Certificate (Letter) of Good Standing from their subcontractors as evidence that they comply with Wyoming’s workers compensation requirements before the contractor makes the final payment on the contract to the subcontractor.
Related Article: Workers Compensation Independent Contractor Status
Additional information and details are available by calling (307) 777-5476 or by email at DWS-AskMeWC@wyo.gov
The insured employer may have operations or conduct business in states that are not listed as a covered location on WC 00 00 01 A–Workers Compensation and Employers Liability Insurance Policy Information Page. In this case, coverage is usually arranged by listing those “other” states under Item 3. C. on the Information Page. It specifies coverage for other states, but coverage cannot be provided this way if a monopolistic state is one of those "other" states.
Each monopolistic state has its own way to combine coverage with non-monopolistic states' coverage. The way a given state does this must be reviewed thoroughly in order to determine the procedure and the best way to handle such cases.
The number of monopolistic state funds has dropped over the years. Nevada left the ranks in 1999, and West Virginia did so in two steps in 2006 and 2008. How long the four remaining states will continue to operate that way is unknown.