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ARCHIVED  August 1, 1997

How to choose a workers’ compensation carrier

One of the givens of being an employer of even a single employee is carrying workers’ compensation insurance. In Colorado, such coverage is regulated by the state Legislature, and benefits are mandated by law. So are the penalties that can shut a business down.

In industries where the use of subcontractors is extensive, the principal contractor is well-advised to request the subcontractor’s certificate of insurance and to require a statement of indemnity in which the main contractor is held harmless for damages. In that very gray area of subcontracting, workers have successfully sued principal contractors for compensation.

Carriers, rates and servicesIn Colorado, there are two kinds of workers’ comp insurance carriers: for-profit and nonprofit. A for-profit carrier is free to choose those companies for which it will write insurance. The nonprofit carrier will not turn anyone away. In each case, rates will vary according to the classification of the business and the services offered to the insured.Set up as the basis for determining the rate a particular employer must pay, business classification codes should remain consistent across carriers. Therefore, buyers should be alert to coding to make sure that an improper code is not being used to artificially lower the base rate. Rate variability comes from the services the carrier offers.
Among the services that an employer might look for when choosing a carrier are safety-training services, loss-prevention services, managed-care services for injured employees and claims-handling capabilities. Other variables for consideration might involve evidence of ongoing research into loss-prevention and a carrier’s pre-Occupational Safety and Health Administration experience with insuring workers and promoting workplace safety.Cost-containment certification
Once insured, an employer has ongoing opportunities to lower the premium. Among these opportunities is the Premium Cost Containment Program, through which an existing insurance rate may be reduced by 2 percent to 10 percent. The program is administered by the Department of Labor and Employment, Division of Workers’ Compensation in Denver, (303) 575-8873. To obtain the certification, a company must document that it has actively followed an approved, seven-point loss-prevention and loss-control program for at least one year.
The seven requirements in the cost-containment program, including the appointment of a formal safety coordinator or committee and the designation of a medical provider, are available from the Denver office and can serve as a reference point for services that a carrier can offer in support of gaining certification.Group-dividend plans
Many workers’ compensation carriers offer groups-dividend plans through which employers can reduce insurance costs by “earning” premium money back. Members of an association – of veterinarians, onion growers, loggers, etc. – or of a local chamber of commerce, can join together and agree as a group to implement certain claims-management and loss-control measures. These measures might include designating a medical provider and reporting claims quickly. Because only those groups with good safety and containment performances get dividends, a business owner should review the dividend history of an association before deciding to join it.

One of the givens of being an employer of even a single employee is carrying workers’ compensation insurance. In Colorado, such coverage is regulated by the state Legislature, and benefits are mandated by law. So are the penalties that can shut a business down.

In industries where the use of subcontractors is extensive, the principal contractor is well-advised to request the subcontractor’s certificate of insurance and to require a statement of indemnity in which the main contractor is held harmless for damages. In that very gray area of subcontracting, workers have successfully sued principal contractors for compensation.

Carriers, rates and servicesIn Colorado,…

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