An Arkansas train engineer suffered severe, painful, and disabling injuries in a 2013 train crash. The engineer said that he stopped his locomotive to wait for three other trains to cross ahead of him. The last locomotive derailed, and a container car and parts of other cars it was carrying struck the engineer’s locomotive. The engineer suffered injuries to his head, back, neck, and limbs due to the force of the impact.
This is an extreme example, with a worker suffering life-altering injuries on the job. While incidents like this are rare, accidents can happen at any workplace, from manufacturing plants to construction sites, and even at offices and stores.
Workers’ compensation insurance makes it possible for workers to pay their medical bills and be compensated for lost wages if they are injured on the job. In Arkansas, most employers are required to purchase workers’ compensation insurance for incidents like this one, and all kinds of job-related illnesses and injuries.
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Arkansas Workers’ Compensation Laws
The Arkansas no-fault workers’ compensation law was enacted in 1939 to guarantee prompt, automatic benefits to workers who are injured on the job. If an employee is unable to work because of a work-related injury or illness, workers’ compensation insurance takes care of the medical expenses and pays wage replacement benefits until the worker is able to return to work. The benefits are designed to begin automatically, with little delay or red tape.
The employer purchases Arkansas workers’ compensation insurance; no part of it should be paid for by employees or deducted from their pay. Employers failing to comply with Arkansas workers’ compensation laws may be subject to penalties by the state and may also lose protections afforded them by the state’s workers’ compensation laws.
The Basics of Arkansas Workers’ Compensation
Who Is Covered?
Most businesses with three or more employees are required to have Arkansas workers’ compensation insurance. There are a few exemptions, including:
- Railroad and maritime workers in Arkansas are covered by federal law.
- Agricultural farm labor, domestic help, and employees of nonprofit, religious, charitable, or relief organizations are exempt from coverage.
- Real estate agents are exempt from coverage.
- Sole proprietors and partners are included in coverage, but may elect to be excluded.
- Corporate officers are included in coverage but may choose to exempt themselves.
- LLC members who are devoted full-time to the business are included in coverage but may elect to exempt themselves.
There are also some exceptions to the “three or more” provision. Employers with fewer than three employees should inquire with the Arkansas Workers’ Compensation Commission to ensure that they do not need to purchase coverage.
What Is Covered?
Arkansas workers’ compensation insurance covers accidental injuries that arise out of, or in the course of employment. To be covered, injuries must cause internal or external harm to the body, and must be caused by a specific incident that is identifiable by time and place of occurrence. Rapid repetitive motion injuries (e.g., carpal tunnel), gradual onset back injuries, and hearing loss are exceptions to these requirements.
Mental injuries are covered if they are caused by a physical injury to the employee’s body. A heart attack is compensable only if an accident is the major cause of the physical injury. The exertion of work that caused the heart attack must have been extraordinary and unusual in comparison to the employee’s regular employment, or some unusual and unpredicted incident must have occurred as the major cause of physical harm.
Benefits are available for medical care, disability benefits, rehabilitation services, and wage replacement.
Where Can You Buy It?
Arkansas has a private workers’ compensation market. This means that you can purchase it from any private insurance carrier or agency that is licensed to sell it in the state.
Businesses can self-insure with approval from the state.
Businesses with poor safety records or that are in high-risk industries that cannot get coverage in the voluntary or self-insurance markets can get coverage from the state assigned risk pool.
How Much Does Arkansas Workers’ Compensation Insurance Cost?
Workers’ compensation costs more for high-hazard industries than for low-hazard industries. Workers' comp premiums in Arkansas are determined by how many employees an employer has, the type of jobs performed, and the employer’s history of accidents and workers’ compensation losses.
Arkansas partners with the National Council for Compensation Insurance (NCCI), an independent rating and data collection bureau, to assign workers’ compensation rates for every industry. The NCCI assigns a classification code to each occupation, and each class code is then assigned a base rate for workers’ compensation insurance.
To determine an employer’s workman's comp premium, the annual payroll at the beginning of the policy period is divided by 100, and then multiplied by the base rate. For example:
- Classification Code 8380: Auto Shop
- Base Rate: $1.40
- Employer payroll (example): $100,000
- Premium calculation: $1.40 per $100 of employer payroll (or 1.40% of payroll)
- Estimated annual premium for sample auto shop: $1,400.00
Most employers have employees in more than one class code. An auto shop owner might employ mechanics, cashiers, and other types of workers. All of its applicable classifications and related premiums are combined to determine its annual Arkansas workers’ compensation insurance premium.
The Arkansas workers’ compensation market is competitive. Insurance companies can charge different premiums and compete with each other for business. But all premiums are approved and regulated by the Arkansas Insurance Department and the Arkansas Workers’ Compensation Commission. Base rates must be within the NCCI’s guidelines for the state.
Arkansas Workers’ Compensation 2017 Base Rate Examples
Arkansas workers’ compensation insurance premiums are lower than in most states. The NCCI sets a low rate and a high rate for each Arkansas class code. Insurance companies can offer certain discounts and credits to eligible policies.
Here are some sample base rates (rate per $100 of employer payroll) for 2017
- 0042 Landscaping: $2.46
- 5183 Plumbing: $1.40
- 5437 Carpentry Trim: $2.72
- 8017 Retail Store: $0.53
- 8810 Clerical: $0.08
- 9082 Restaurant: $0.61
What Is Experience Rating and How Does It Affect Your Premium?
An experience modification factor, or experience mod, is a factor that may be applied to your Arkansas workers’ compensation premium calculation. It increases or decreases your workers’ compensation premium for a given year, and can significantly impact your workman's comp costs over time.
An experience mod is a numerical representation of an employer’s actual losses as compared to the expected losses for similarly sized businesses in the same industry. The mod is applied to the Arkansas workers’ compensation premium as a debit or credit.
- A mod of 1.0 is considered to be average and does not impact premium. All employers start out with a mod of 1.0.
- A mod greater than 1.0 is a debit mod. Losses were worse than expected, and the premium goes up.
- A mod less than 1.0 is a credit mod. Losses were better than expected, and the premium goes down.
Experience-rated workers’ compensation premiums are determined using the following formula:
- Base Rate X Payroll X Mod = Premium
Here are some examples of how debit and credit mods are applied to the premium:
- 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
Arkansas employers are eligible for experience rating when they meet:
- $8,000 in policy premium generated during the last year or last two years
- $4,000 average policy premium generated for more than two years
How To Find Arkansas Workers’ Compensation Insurance
This article provides highly simplified examples and calculations of very complex workers’ compensation coverage. Most employers can obtain quotes and learn more about Arkansas workers’ compensation requirements by working with an experienced independent insurance agent.
A local Trusted Choice® agent can help guide you through the process of purchasing Arkansas workers’ compensation insurance, so you get the coverage you need to protect your employees and your business.
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