A nurse in a mental health facility severely injured her back while restraining a patient. She was unable to return to work for several months. An over-the-road truck driver injured his neck while making deliveries. Even after two surgeries he remained unable to return to work. A construction worker fell in a hole at a worksite and fractured his leg. He was forced to retire due to permanent restrictions related to the injury. A repetitive motion injury caused a butcher to need several surgeries on his arm. The injury resulted in permanent restrictions that made him unable to return to work.
Workplace injuries can happen at any time, in any kind of work environment. Failing to make safety a priority can be costly for a company, and it can be life-altering for an employee who is injured as a result.
Fortunately, most employers recognize that they are legally and morally obligated to protect their employees from workplace injuries and illnesses. While certain injuries are anticipated in high-risk situations, employees in low-hazard occupations can get hurt, too. In fact, repetitive motion injuries, back strain, and slips and falls are common in many workplaces.
What happens if an employee gets injured while working for you? How can you help protect your employees from the costs of job-related injuries and illnesses? Workers’ compensation insurance is the answer in Hawaii. It is designed to help injured workers pay for medical expenses, and it also provides income replacement if they are unable to work during recovery.
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Hawaii Workers’ Compensation Laws
The Hawaii workers’ compensation law was enacted in 1915 in order to provide wage replacement and medical benefits to employees who suffer a work-related injury. The workers’ compensation law requires employers to provide certain benefits to injured employees without regard to fault. It also prohibits employees from filing a civil action against their employers for work-related injuries or illnesses.
Most employers purchase workers’ compensation insurance to cover the costs of work-related injury or illness claims. Others choose to self-insure with approval of the state. Employers in Hawaii are prohibited from requiring employees to contribute toward the cost of workers’ compensation insurance.
Every employer in Hawaii (covered by the workers’ compensation law) is required to post and maintain in places readily accessible to employees a printed statement concerning benefit rights, claims for benefits, and other pertinent information related to workers’ compensation administration. Within three working days of notice of injury from an employee, an employer must provide the injured employee with a copy of the brochure “Hawaii Workers’ Compensation Law.”
The Basics of Hawaii Workers’ Compensation
Who Is Covered?
Hawaii workers’ compensation insurance is required for any employer with one or more full-time or part-time employees, including temporary employees.
- Sole proprietors and partners are excluded from coverage, but may elect to be included.
- Corporate officers who own at least 50% of a corporation are not covered, but may elect to be covered.
- LLC members are excluded if they have less than a 50% interest in the company.
The following types of employers and occupations are excluded from the workers’ compensation requirement in Hawaii:
- Voluntary or unpaid workers for religious, charitable, educational or nonprofit organizations, and student workers performing services for a school, university, or college club in return for room, board, or tuition
- Duly ordained, commissioned, or licensed ministers, priests, and rabbis
- Domestic workers earning less than $225 per quarter and domestic workers of public welfare recipients
- Real estate salespersons and brokers paid solely on commission
Employers can elect to cover these types of employees.
Federal employees and workers engaged in fishing, maritime, and longshore activities are also exempt. Federal laws cover these employees.
What Is Covered?
Hawaii workmans’ comp benefits include medical care for the worker injuries, wage replacement for disabled workers, and rehabilitation services. In addition, death benefits will be paid to an injured worker’s surviving spouse or dependents if a worker is killed as a result of a workplace accident.
Medical benefits include payment for the following types of services related to the injury or illness:
- Medical treatments
- Hospital charges
- Prescription drugs
- Physical therapy
- Reasonable transportation expenses
Hawaii workers’ compensation insurance also pays for wage replacement in cases of:
- Temporary total disability
- Permanent partial disability
- Permanent total disability
Where Can You Buy It?
Employers in Hawaii can purchase workers’ compensation insurance through insurance carriers and insurance agents who are licensed to sell workers’ compensation insurance in the state. Hawaii employers may self-insure (pay workers’ compensation benefits directly to employees). In order to self-insure, employers must provide proof of solvency and ability to pay benefits.
High-risk employers who are unable to purchase workers’ compensation from a private insurance company in Hawaii can purchase coverage from the Hawaii Employers' Mutual Insurance Company (HEMIC). It is a private insurance company, not a state fund. It competes with other private insurers to help keep prices under control.
How Much Does Hawaii Workers’ Compensation Insurance Cost?
Workers’ compensation premiums in Hawaii are higher for more risky industries and occupations, and lower for less risky industries and occupations. Employers who establish a good safety record will be rewarded with lower premiums than others in their industry.
The National Council on Compensation Insurance (NCCI) assigns a risk classification to every occupation in the state. Each classification is assigned a specific dollar amount—or base rate—that is determined by how risky it is. Base rates are revised by the NCCI each year.
An individual employer’s workmans’ comp insurance premiums are determined by the employer’s industry risk classification and base rate, number of employees, total payroll, type of jobs performed, and the employer’s history of accidents and workers’ compensation claims.
Hawaii is a competitive workers’ compensation state. This means that private insurance companies can file their own rates with the state their own rates that reflect their underwriting requirements. But each insurance company’s rates must stay within the rate guidelines established by the state and the NCCI classifications.
Some insurance companies also offer additional discounts or surcharges (credits or debits) to certain employers, but these must also be approved by the state. Hawaii has average workers’ compensation rates relative to the rest of the U.S., although they have been increasing in recent years.
Here is an illustration of how an individual employer’s workers’ compensation premium would be determined for a low-risk occupation.
- Classification Code 8017: Retail Store
- Base Rate: $1.50*
- Employer payroll (example): $100,000
- Premium calculation: $1.50 per $100 of employer payroll (or 1.50% of payroll)
- Estimated annual premium for sample retail store: $1,500.00
*Example only. Not the actual Hawaii base rate for Retail Store classification.
An employer may have more than one classification that is included in its workers’ compensation premium calculation. All of an employer’s classifications and related premiums are combined to determine the full workmans’ comp premium.
What Is Experience Rating and How Does It Affect Your Premium?
Employers with an annual premium greater than a certain amount are usually eligible for experience rating, which adjusts the premium up or down depending on the employer’s claims history relative to similar employers (similar size and industry).
In these cases, an experience modification factor—or experience mod—is added to the premium calculation formula. That factor increases or decreases an employer’s workers’ compensation premium in a given year.
Your experience mod makes a huge difference in your workers’ compensation premiums over time, after you have established a claims history. Your mod is a numerical representation of your workers’ compensation claims experience compared to similar employers (similar size and industry). Your actual losses are compared to the expected losses for your industry (carpenters are compared to carpenters, plumbers are compared to plumbers, etc.). Your workers’ compensation premium will increase or decrease depending on your mod.
Employers in Hawaii will receive an experience mod when they meet one of the following conditions:
- $5,000 in premium during the last year or last two years
- $2,500 average policy premium for more than two years
Experience-rated workers’ compensation premiums are calculated as follows:
- Base Rate X Payroll X Mod = Premium
Experienced mods are also calculated by the NCCI. Your mod represents a debit or credit that is applied to your workers’ compensation premium.
- A mod of 1.0 is considered to be average and does not impact your premium. All employers start out with a mod of 1.0.
- A mod greater than 1.0 is a debit mod. This means that your losses were worse than expected, and your premium goes up.
- A mod less than 1.0 is a credit mod. This means your losses were better than expected, and your premium goes down.
Consider these examples of how experience rating can impact your Hawaii workmans’ comp insurance 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
Your business is your business; you can’t necessarily control how risky it is. You can, however, control your mod if you keep claims and related costs low. This will have the greatest impact on your workers’ compensation rates.
How to Find Hawaii Workers’ Compensation Insurance
This article offers highly simplified examples and calculations of typical Hawaii workers’ compensation premiums. Purchasing workers’ compensation in Hawaii is complex. Business owners must educate themselves on Hawaii’s workers’ compensation laws and how to purchase coverage for their employees. An independent insurance agent who is licensed to sell workers’ compensation insurance in Hawaii can help you.
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