Workers Compensation Insurance – Crossing A State Line Could Leave You With Huge Bills November 28, 2011

Workers compensation insurance was and is by its very nature a compromise.  In agreement for not allowing your employees to sue you for injuries that occur on the job, these same workers gain the benefits for injuries and accidents that are spelled out in your state’s workers compensation statute.  Whatever the statute says determines when and how much the injured worker will receive.   And this compromise keeps business and commerce humming along with much less disruption.  But we have 50 states in this country and thus 50 different sets of statutes and rules.  So what happens when you cross state lines to do work or to hire other employees?   That’s when things become more complicated.

First of all, as you read this article, bear in mind that our starting point and our vantage point  is North Carolina and North Carolina workers compensation insurance rules.  If your business is located in some other state,  then some of what you read in this blog may or may not apply to you.  Please keep that in mind as you read further.

There are several ways in which going out of state can get a company in trouble with workers compensation rules and laws.  The most vulnerable businesses are those who can pick up and go to another state to perform work there.  Usually this applies most to artisan contractors whose work opportunities here in North Carolina may be diminished by the economy and so they chase storms and other natural disasters to find work in other states. 

If a contractor with a NC workers compensation insurance policy takes their North Carolina employees (those who live in NC and were hired in NC by your NC based company) to do work in other states, then their North Carolina workers compensation policy will protect them from losses that may happen on these out of state jobs.  But, if a contractor hires new employees who live in this other state, then that contractor is risking a coverage gap.  You see, some states have more generous benefits to injured workers.   Some will allow injured workers  to choose which state (either the state they live in or the state they worked in or the state where your business is domiciled) work comp rules they want to file their claim under.  Of course these newly injured employees of yours will choose the state with greatest benefits for them and their claim.  If that happens to be a state other than NC, then you may be paying some of the claim yourself.  This is because your NC workers compensation policy could be limited to the benefits stipulated by NC workers compensation law.

There are several  solutions to this problem.  The safest solution  is to let your insurance company know who is working where and let them add the appropriate state rates and class codes for those workers to your policy.   A catch all type of solution which is less fail safe, is to endorse the all states endorsement on to your workers compensation policy.   The all states endorsement on a NC workers compensation policy will extend benefits for your policy to match those of the states listed on the endorsement. 

Another  area where employers can run into trouble is with the employees who live in a different state from the one in which the business is located.  This often happens with businesses located near state lines.  If your business is based in NC but you are near the Virginia border for instance, you may  hire employees who live in Virginia.   If this happens, then you should add Virginia rates and class codes to your NC workers compensation policy for those employees on your staff.

The last trip wire to watch for in all of this is the monopolistic state fund states.  These are states that require that all workers compensation insurance in their state be written by the state government workers compensation program.  This means that no private insurance companies are allowed to write workers compensation insurance in these states.   If you operate in one of these states and have a claim there, your only protection on your NC workers compensation insurance policy will have to come from the employers’ liability insurance section on your workers compensation insurance.  This may be suffice if your exposure is only incidental but if you are running ongoing projects and operations in that state or hiring employees that live in that state, my advice is that you purchase a policy from that state’s monopolistic state fund.   Don’t take chances here, the risks are just too great to ignore.

When it comes to workers compensation insurance, all of the simplicity of the policy disappears as soon as you start crossing state lines for work or for hiring.  You should make sure that you keep your agent informed of what you are doing and where you are doing it.  Clinard Insurance Group, located in Winston Salem, is an agency with a great deal of experience in the North Carolina workers compensation business.  If we can help you with your workers compensation insurance questions in NC, please feel free to call us, toll free, at 877-687-7557.

Code 59 – Is This Little Number Driving Up Your Work Comp Rates? August 12, 2011

The Office of Inspector General (OIG) recently investigated Medicare and Medicaid medical providers suspected of overbilling the system by using billing override code 59.  Code 59 is just one of 35 different coding edits used to bypass Medicare’s National Correct Coding InitiativeThe OIG audit showed that 40% of all code pairs billed with the code 59 modifier resulted in overpayments to medical providers.  And these overpayments totaled $59 million.  Worse yet, code 59 is  just one of 35 modifiers used to override coding edits on bills submitted.   The OIG audit also indicated that computer billing programs did not detect overbilling errors cause by the use of these modifiers.  The errors were only found in the rare instance that the bill was reviewed independently by a human being.   We all know that there is fraud in the government medical systems, but what does that have to do with you and your workers compensation insurance rates?

In North Carolina, workers compensation policies are experience rated policies.  This means that your claims experience, either good or bad, will affect the rates that you pay each year.  This is accomplished through the use of an experience modification factor on each policy.  Your experience modification factor, referred to in the business as your mod, is an extra multiplier on your rate.  Good loss experience over time can result in a modifier that is less than 1.  When that happens it means that you are receiving a discounted rate below what you would have otherwise had without the excellent record.  But when your mod increases to numbers above 1.0, then you are paying an more for your workers compensation policy due to your past claims experience.  Experience mods are calculated based on the frequency and severity of claims.  So if you can avoid severe losses and reduce the amount that is paid out, then you can help to keep your experience modification factor lower.  It is an important maxim to remember that money paid out for your workers compensation claims is almost always going to cost you more in premiums later.  So you must do all that you can to reduce and control workers compensation losses.

Here are some important facts to keep in mind.  First, workers compensation insurance companies face the same mult-billion dollar challenges as the Medicare and Medicaid system face when it comes to avoiding fraud and billing errors.  Most workers compensation insurance companies rely solely on computer technology to find and correct billing errors and most do not conduct reviews of modifier 59.   More often than not, they just apply the fee schedule discount and pay the bill without investigating the accuracy of the medical bill.

So what can a business owner do to protect his or her business from intentional and unintentional billing errors that will mean rate increases in the future?  The best plan of action is to carefully select the insurance company you buy your work comp insurance policy from in the first place.   I generally recommend that businesses buy their workers compensation insurance policy from a company that writes workers compensation insurance only.  These specialty companies tend to have lower rates to begin with, but beyond that, since workers compensation claims are the only type that they handle, they generally have a better system for watching for fraud in the billing process.  They also will often provide on staff nurses to manage a case as well as more systematic and careful review of all medical bills.  Thes additional claims services will almost always result in lower claims costs and will generally get your injured employees back to work sooner.  These techniques will not only show up in lower initial rates, but will also help you keep your experience modification factor lower, thus keeping your costs lower over time. 

At Clinard Insurance Group, we are an independent insurance agency that is actively engaged in helping businesses all across North Carolina with their work comp and business insurance.  We can show you how to cut your workers compensation costs dramatically with very little effort on your part.  If you have questions about your business insurance policies, please call us, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

Painting Contractor’s Insurance – Don’t Forget The Workers Compensation Policy November 29, 2010

NC Painter’s insurance plans can be found in many different forms.  One coverage that every painting company with employees should have is workers compensation.  In North Carolina, the law states that if you have fewer than 3 employees you don’t have to purchase workers compensation insurance.  But what this rule doesn’t tell you is that not buying a policy could wipe you out.

In NC, the workers compensation rules and regulations are controlled by the NC Rate Bureau.  And the rules do give you an out  when it comes to buying a workers compensation insurance policy if you have less than 3 employees.  In fact, there are no real teeth in the law that will catch and find employers who have 3 or more employees who also don’t purchase a workers compensation insurance policy.  So, yeah, you could go years without purchasing a workers compensation policy for your painting business.   But that would be a very dangerous choice.  Here’s why:

Although the law may not require that you actually purchase a workers compensation insurance policy, it will require that you pay all of the claims yourself just as if you were the insurance company.  Workers compensation benefits in North Carolina are statutory and claims are governed by the NC Industrial Commission.  That means that exactly how much gets paid for each type of illness or injury has already been determined by state law.   Therefore, if you are paying out of your own pocket for a claim, you will not have the opportunity to determine how much you are going to pay.  And in the case of a long term disability the amount you might have to pay out is staggering.

So, using the loophole in the law to avoid buying a workers compensation policy only gets you out of paying the policy premium.  In fact, it puts you in the unenviable position of being the insurance company and on the hook for all claims.  And these claim costs can be enormous.  Imagine coming up with $100,000 to pay for injuries that resulted in permanent disability, then paying disability payments for years after that for one of your employees.  Pretty scary huh?  So even if work comp insurance seems expensive, you should realize that purchasing it is a no brainer because going bare means you are pretending to have the assets of an insurance company.  For most painters, that just isn’t the case.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping painters with their insurance needs.  If you have any questions about your general liability insurance, your workers compensation insurance, your business auto insurance or any other insurance policies, please call us toll free at 877-687-7557 or visit us on the web at www.LowRatesForPainters.com.

The source information for this blog can be found in articles located at the blog found at www.InsuranceAnswerGuy.com.

NC Work Comp Insurance – Not All Rates Are Created Equal October 27, 2010

If you have a business with employees in NC, then chances are you are have at least a passing familiarity with work comp insurance and how it is set up.  In my conversations with lots of different types of business owners all across North Carolina, I have found that many wrongly assume that workers compensation rates are the same from one company to the next.  Nothing could be further from the truth.  This article will go over the rating process and how the rates are established and what this means for you, the business owner and insurance consumer.

Let’s start with the easy part, the policy coverage itself.  In NC, all workers compensation policies have the same coverage form.  The coverage is statutory, which means that it follows the current NC workers compensation statutes.  Therefore, with the exception of a few items, all policies are basically the same.  The rates however, are not the same. 

Each insurance company has to file their rates with the NC Rate Bureau for each different classification of labor that they write.  And while company A may love to insure landscapers and their rate would reflect that, company B may not want to write this class of business, so their rates might be higher for that classification. 

So what does this mean for you?  Well, if you own a business in NC and are buying workers compensation insurance, then you should take some time to understand the marketplace and make sure that you have purchased your coverage from a company that is eager to write your business and has the rates to reflect that eagerness.  Also, in the past it may have been wise to always place your workers compensation insurance with the same company that handles your general liability insurance, your business auto insurance or your commercial property insurance.  The workers compensation marketplace in North Carolina has changed quite a bit over the past 15 years and now there are many insurance companies out there that write only workers compensation insurance.  We call these monoline work comp companies and they are a good choice for lots of NC business owners because the are not only able to offer very competitive rates on the classes of business that they want to write, but also, they often have loss control and back to work programs that are more effective and more helpful to small businesses.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping small businesses all across NC with their workers compensation insurance policies.  We have created special insurance programs for plumbers insurance, HVAC insurance, carpenters insurance, painters insurance, restaurant insurance, floor and tile installers’ insurance, landscapers insurance and electricians insurance.  If you need help with your workers compensation insurance or any other insurance policies, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

The source information for this article was pulled from other articles which can be found at www.InsuranceAnswerGuy.com.

Landscaper’s Insurance – Don’t Forget The Workers Compensation Policy March 5, 2010

Landscaping insurance can be found in many different forms.  One coverage that every landscaper with employees should have is workers compensation.  In North Carolina, the law states that if you have fewer than 3 employees you don’t have to purchase workers compensation insurance.  But what this rule doesn’t tell you is that not buying a policy could put your business assets at risk.

In NC, the workers compensation law does give you an out if you have less than 3 employees.  In fact, there are no real teeth in the law that will catch and find employers who have 3 or more employees who also don’t purchase a workers compensation insurance policy.  So, yeah, you could go years without purchasing a workers compensation policy for your landscaping business.   But that would be a very dangerous choice.  Here’s why:

Although the law may not require that you actually purchase a workers compensation insurance policy, it will require that you pay all of the claims yourself just as if you were the insurance company.  Workers compensation benefits in North Carolina are statutory.  That means that exactly how much gets paid for each type of illness or injury has already been determined by state law.   This means if you are paying out of your own pocket for a claim, you will not have the opportunity to determine how much you are going to pay. 

So, using the loophole in the law to avoid buying a workers compensation policy only gets you out of paying the policy premium.  It does not get you out of paying the costs of any and all claims.  And these claim costs can be enormous.  Imagine coming up with $100,000 to pay for injuries that resulted in permanent disability, then paying disability payments for years after that for one of your employees.  Pretty scary huh?  So even if work comp insurance seems expensive, you should realize that purchasing it is a no brainer because going bare means you are pretending to have the assets of an insurance company.  For most landscapers, that just isn’t the case.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping landscapers with their insurance needs.  If you have any questions about your general liability insurance, your workers compensation insurance, your business auto insurance or any other insurance policies, please call us toll free at 877-687-7557 or visit our landscaper insurance web page.

The source data for this blog can be found at www.InsuranceAnswerGuy.com.

NC building and construction contractors – Here’s just what those uninsured subcontractors will do to you and how you can prepare yourself to minimize the damage. July 6, 2009

It is a fact of life in the construction business.  Almost all construction contractors, from the general contractor all the way to the landscape contractor will occasionally have to hire an uninsured subcontractor.  There are hidden costs to this arrangement but knowing them in advance can help you prepare for the costs and minimize the damages to your insurance program.

It’s helpful to understand, from the beginning, that insurance companies don’t like for their clients to hire uninsured subcontractors.  The reason is that they feel that your control over a subcontractor is much reduced and therefore losses are more likely.  If they are uninsured, then the exposure for those losses is pushed on to your insurance company.  And that makes you a less attractive risk for your insurance company.

So hiring uninsured subs causes two big problems that can generate increased insurance costs for you.  Both are things you can prepare for if you do your homework in advance.  And by taking the steps I will outline below, you can possibly reduce the cost to zero for each of these problems.  And remember, if you use a subcontractor that is insured, be sure to take the appropriate steps to obtain a valid certificate of insurance.  To read more about what you need to know about insurance certificates, please click here.

The first problem that uninsured subs will cause for you is increased insurance premiums on your general liability insurance policy and your workers compensation insurance policy.  This is a stealth increase because if you don’t take steps in advance to protect yourself, then by the time you find out how much your subcontractor costs you, the sub may be long gone and your chances or wringing it out of the him or her will be nil.  If you are unable to produce a valid certificate of insurance on a subcontractor, then when your policy is audited by the insurance company  at the end of the policy term, they will include as payroll, the full amount of cost that you paid to the uninsured subcontractor.

You can defend against this problem by withholding from the amount you pay the uninsured subcontractor an amount equal to or greater than the amount you will be charged by the insurance company at audit.  To understand how much to charge, you should contact your agent and find out the rate per $1000 of payroll for the subcontractor’s classification on both workers compensation and general liability insurance.  I would suggest that you add an amount over the rates you face to cover your administrative expenses of handling this transaction. 

The second problem caused by uninsured contractors has to do with the insurance company’s reaction to finding out you have used them.  As I mentioned earlier, insurance companies do not like for their clients to utilize uninsured contractors but their appetite for them will vary.  Check with your agent first and find out just what percent of payroll or gross sales paid out to uninsured subs will be tolerated by your insurance company.  Some may not tolerate any and still others may be willing to let you go as high as 50%.

It is important to know in advance how high you can go so that you don’t break your insurance company’s rules unknowingly.  If they find out on audit that you have been using more uninsured subs than their underwriting guides allow, they may cancel your policy or take away discounts that will result in much higher rates for you.  In this case it is better to ask permission first then to ask for forgiveness later.

Remember, when you deal with an uninsured subcontractor you are now allowing them to use your insurance for their risks.  Over the long term this is not advisable because they could cause a loss that is so catastrophic it might destroy your ability to get insurance at all, or it may create a high experience modification factor on your workers compensation policy that might cost you a lot of money for the next 3 years.  It is always best to deal with subcontractors that have their own insurance.

Clinard Insurance Group, in Winston Salem, NC specializes in helping small contractors of all types all across North Carolina.  If you would like a second opinion on your business insurance or if you need help with your general liability policy or your North Carolina workers compensation policy,  please feel free to call us, toll free at 877-687-7557 or visit us on the web at www.thecontractorshelper.com.

The source information for this article was taken from an article found at www.insuranceanswerguy.com.

NC Used Car Dealers – Don’t Forget About Workers Compensation Insurance June 30, 2009

At Clinard Insurance Group, in Winston Salem, NC, we specialize in helping used car dealers with their dealers insurance policies.  And 95% of the time, when a dealer calls us for insurance, the only policy on his mind is the NC garage insurance policy.  But there is another, very important policy that all dealers must consider.  And leaving this one out can do a lot more than just ruin your day.  It could wipe out your business.

Why so few used car dealers remember to purchase workers compensation insurance is a mystery to me.  It probably stems from the nature of their employees since many hire their salespeople as independent contractors.  But while hiring them as independent contractors may change how taxes are paid, it will not allow the dealer/owner to avoid paying the losses under North Carolina Workers Compensation law.

In NC, purchasing workers compensation insurance is voluntary if you have 3 or fewer employees.  And you don’t have to count your independent contractors as employees either.  But here’s the rub.  Just because you don’t purchase the insurance, doesn’t mean you are safe from the losses.  In fact, not purchasing the insurance policy means you are putting your own assets on the line to pay all claims required by the NC workers compensation statutes.  So, if your employee is injured or killed on the job, then your business will have to pay the statutory benefits required by law.  Essentially, you have chosen to put yourself in the position of the insurance company for all losses.  And a big loss could put most small used car dealers out of business.

Insurance is a good deal for the consumer any time that the consumer can trade a small, affordable, known loss – in this case the workers compensation premium, for a larger, unknown and possibly catastrophic loss.  If you own a used car dealership and you have anyone besides yourself working for you in any capacity at all, you owe it to yourself to get a price on a workers compensation policy.  You may be surprised at how affordable it is.  In this case, going bare is a huge risk.  If you are going to go without insurance, please recognize that you have only chosen to shift the risk of loss to yourself in exchange for not paying an annual workers compensation premium that is probably very affordable for you.

At Clinard Insurance Group in Winston Salem, NC, we want all insurance consumers to be educated consumers.  If you would like help with your dealers insurance, or if you want a workers compensation quote, please call our office, toll free at 877-687-7557 or visit us online at www.clinardinsurance.com.

The source information for this article was taken from data found at www.insuranceanswerguy.com.

The General Liability and Workers Compensation Insurance Policy Audit Trap – A Cash Flow Disaster March 31, 2009

If you are business owner or the manager of a business, then you probably have some working knowledge about general liability insurance and workers compensation insurance.  At Clinard Insurance Group in Winston Salem, NC, we specialize in insuring contractors and other small businesses who need these types of policies.  And we have found time and again how many small businesses are seduced into the cash flow nightmare I call “the audit trap”.

 

For most contractors, their general liability and workers compensation insurance policies are rated based on payroll, and in some cases gross receipts as well.  Since the exact amount of payroll or receipts is unknown to the insurance company when the policy is first written, the policy holder has to give the insurance company an estimate of the total payroll for the coming policy year.  Many contractors and small businesses are tempted to “low ball” this estimate to reduce the total premium on their policy.   While this strategy can work well if the company plans ahead for it, just shooting in the dark with low estimates can create a cash flow disaster.

 

Here’s why.  Let’s say your actual payroll on for your company is $500,000 per year.  And let’s also assume your general liability rate is $5 per $1000 of payroll.  This means your policy costs would be $2500.  Now let’s assume you start your policy with a low ball estimate of $250,000.  This means your new policy is issued at a cost of $1250 instead of $2500.  Looks pretty good so far.  But now jump ahead 15 months and the insurance company has now performed an audit of your payroll and found that your actual payroll during that policy term was $500,000.  So they send you a bill for the additional premium due of $1250.   Now that wasn’t really unexpected, but if you didn’t budget for this, it could put a crimp in your cash flow.  But here’s the kicker.  The insurance company will now increase the payroll on your renewal policy and send you another bill for $1250 due right away.  Suddenly you have to come up with $2500 to square yourself with the insurance company.  And that can make for a real cash flow problem.

 

Again, if you plan for the audit and reserve funds to make the payment then you can gain a cash flow “float” advantage by low balling your payroll and gross receipts estimates.  But more often than not, the business owner fails to implement a plan to reserve these funds and instead faces a cash flow crunch at audit time.

 

At Clinard Insurance Group in Winston Salem, NC, we specialize in insuring small contractors located all over the state of NC.  If you would like help with your general liability or workers compensation policy, please give us a call, toll free at 877-687-7557 or visit us on the web at www.clinardinsurance.com.

 

Source material for this article was taken from the site: www.insuranceanswerguy.com.