A construction worker crushes the tips of his fingers on both hands. A school bus driver develops carpal tunnel syndrome from the repetitive use of his arms while driving. A salesman herniates a disk in his back while moving heavy merchandise from his car. A restaurant worker slips on a greasy kitchen floor and fractures his wrist.
These are real examples of work-related injuries. Some are common and predictable, and some are completely unexpected. But no matter how or where a workplace injury occurs, employers are obligated to help employees get the medical care they need to return to work as soon as possible.
All of these cases highlight the need for workers’ compensation insurance. Workers’ compensation insurance pays for the employee's medical expenses and other related costs, without a further liability burden for the employer. Alaska workers’ compensation is necessary because it protects employees from the costs of work-related injuries and illnesses, and protects employers from being sued for additional damages.
Alaska Workers’ Compensation Laws
The Alaska Workers’ Compensation Act requires each employer having one or more employees in Alaska to obtain workers’ compensation insurance, unless the employer has been approved as a self-insurer. Employers are required to provide proof of workers’ compensation coverage to the Division of Workers’ Compensation. There are substantial civil and criminal penalties that apply to employers who fail to maintain coverage or pay compensation.
Alaska also has a state Fishermen’s Fund, a special fund unit of the Workers’ Compensation Division. Established in 1951, it provides for the treatment and care of licensed commercial fishermen who have been injured while fishing on or off shore in Alaska. It is financed by fishermen’s license and permit fees for the state, and is administered by the Commissioner of Labor and Workforce Development.
The Basics of Alaska Workers’ Compensation
Who Is Covered?
All employers who have one or more employees in Alaska must purchase workers’ compensation insurance, with a few exceptions. Those who are exempt from coverage include:
- Sole proprietors and partners
- Executive officers in a nonprofit corporation
- Members in a member-managed limited liability corporation
- Part-time babysitters, non-commercial cleaning persons, harvest help, and similar part-time/transient help
- Sports officials for amateur events
- Contract entertainers, commercial fishermen, and taxicab drivers whose compensation is by a contractual arrangement
- Professional hockey team players and coaches who are covered under a health insurance plan
Executive officers in for-profit corporations may exempt themselves by filing a special waiver with the Alaska Department of Labor and Workforce Development.
In addition, the statute spells out the following coverage provisions:
- High school students in work-study programs and volunteer emergency medical technicians are covered as employees of the state
- Executive officers of municipal, religious, and nonprofit corporations are not considered to be employees unless the organization specifically elects to cover them
- Special public safety officers are covered as employees of the state
- Volunteer firefighters are covered as employees of the local fire department
- Individuals engaged in civil defense or disaster relief in Alaska are covered as employees of the state
- Individual members of the Alaska State Defense Force who have been called into active duty are covered as employees of the state
What Is Covered?
Alaska workers’ compensation benefits include:
- Disability and impairment benefits (temporary total disability, temporary partial disability, permanent partial impairment, permanent total disability)
- Death benefits in the case of a work-related death (funeral expenses and survivor benefits)
- Medical expenses related to the on-the-job illness or injury for up to two years following the event
Where Can You Buy It?
Alaska workers’ compensation insurance can be purchased from commercial insurance carriers. Employers should contact their insurance agent or broker for help in acquiring Alaska workers’ compensation insurance. If a business cannot obtain coverage through a commercial carrier, they can obtain coverage through the Alaska Assigned Risk Pool, which is administered by the National Council on Compensation Insurance (NCCI).
How Much Does Alaska Workers’ Compensation Insurance Cost?
The cost of an Alaska workers’ compensation policy is based on the employer’s payroll, type of business risk (risk classification), and individual loss history. Alaska is one of the most expensive states in the U.S. for workers’ compensation. Alaska partners with the NCCI to determine rates on workers’ compensation coverage and to be the assigned risk provider for the Alaska Assigned Risk Pool.
Alaska workers’ compensation insurance costs more for industries and occupations that have a higher risk of occupational injuries or illnesses.
The NCCI assigns a risk classification for each occupation. Each classification is given a recommended base rate for workers’ compensation insurance. To determine the total premium, an employer’s annual payroll at the beginning of the policy period is divided by 100, and then multiplied by the base rate. Consider the following example:
- Classification Code 5183: Plumbing
- Base Rate: $5.08
- Employer payroll (example): $100,000
- Premium calculation: $5.08 per $100 of employer payroll (or 5.08% of payroll)
- Estimated annual premium for sample plumber: $5,080
Most employers have employees in more than one classification. All applicable classifications and related premiums will be combined to determine the annual Alaska workers’ compensation insurance premium.
Alaska Workers’ Compensation 2016 Base Rate Examples
The NCCI sets a low rate and a high rate for each Alaska risk classification, but rates may vary by insurance company underwriting standards.
Consider the following sample base rates (rate per $100 of employer payroll) as of January 1, 2016:
- 0042 Landscaping: $7.20
- 5183 Plumbing: $5.08
- 5427 Carpentry: $9.06
- 8017 Retail Store: $1.94
- 8810 Clerical: $0.41
- 9082 Restaurant: $2.52
What Is Experience Rating and How Does It Affect Your Premium?
Experience rating allows employers with good safety records to get a credit on their Alaska workman's comp premium. An experience modification factor, or experience mod, is applied to qualifying workers’ compensation premiums. It increases or decreases the Alaska workman's comp premium for a given year.
Your experience mod is a numerical representation of your actual losses as compared to expected losses for similarly sized businesses in your industry. The mod is applied to your premium as either a debit or credit.
- 1.0: Average mod. Does not impact premium.
- Greater than 1.0: Debit mod. Losses were worse than expected, premium increases.
- Less than 1.0: Credit mod. Losses were better than expected, premium decreases.
The formula for experience-rated Alaska workers’ compensation premium is:
- Base Rate X Payroll X Mod = Premium
Consider how the mod affects the premium in the examples below:
- Premium: $100,000
- Mod: 0.75 (25% premium credit)
- Premium with mod credit applied: $75,000
- Premium: $100,000
- Mod: 1.0
- Premium is not adjusted
- Premium: $100,000
- Mod: 1.25 (25% premium surcharge/debit)
- Premium with mod debit applied: $125,000
Alaska employers can receive experience-rated workers’ compensation insurance when they generate:
- $5,000 in policy premium during the last year or last two years
- $2,500 in average policy premium for more than two years
How to Find Alaska Workers’ Compensation Insurance
A Trusted Choice® agent can help you understand Alaska workers’ compensation insurance and help you determine if you are required to purchase coverage. Workers’ compensation is complex, and the examples we have offered here are highly simplified. Failure to comply with Alaska workers’ compensation laws can result in fines for your business.
To obtain workers’ compensation quotes and learn more about how to protect your business and your employees, contact a local Trusted Choice agent.