Feb, 14, 2013
Workers compensation was created to protect both the employer and the employee. Before workers’ compensation was established in the United States in the early 1900s, injured workers’ only recourse was to pursue legal action against their employer. To be successful, the employee had to prove that the employer was at fault. More often then not, these cases were too difficult to prove and took many years to settle. However, by 1947, all states required employers to purchase workers’ compensation insurance.
Each state administers its own workers’ compensation program and has its own statutes that govern workers’ compensation, so coverage varies from state to state. However, all states provide two types of workers’ compensation benefits. One pays the employee’s medical expenses that result from the work related injury, and the other compensates the employee for lost wages while he or she is unable to return to work. Workers’ compensation pays for all reasonable and necessary medical expenses resulting from the work related injury (Valerius, Bayes, & Newby, , 2008).
Employers obtain workers’ compensation insurance from one of the following sources: (1) a state workers’ compensation fund, (2) a private plan, or (3) directly with a self-insured fund. Under a state fund, companies pay premiums into a central state insurance fund from which claims are paid. Many employers contract with private insurance carriers, which provide access to their networks of providers. When a firm self-insures, it sets money aside in a fund that is to be used to pay workers’ compensation claims. Most states require a company to obtain authorization before choosing to self-insure. Regardless of the source of workers’ compensation insurance, the money that funds workers’ compensation insurance is fully paid by the employer; no money is withdrawn from an employee’s pay (Valerius, Bayes, & Newby, , 2008)....