In March 2016, a grain elevator in Hinton, Iowa exploded and two employees at Central Valley Ag sustained life-threatening injuries. These men, who were both in their 20s, were taken to Mercy Medical Center in Sioux City and were then transferred to the University of Nebraska Medical Center for further treatment in their renowned burn unit. While the men ultimately survived this tragedy, their burns and injuries are likely to require a lot of long-term care. Fortunately, the company’s workers’ compensation policy enabled these injured employees to receive the extensive medical care they needed at no cost to them.
No employer wants their workers to be injured on the job, but unexpected accidents sometimes happen. Immediately following the grain elevator explosion, Carl Dickinson, CEO of Central Valley Ag stated, “We have two priorities at this point. Number one is to care for our employees, the two individuals who were injured on site, and all of our other employees who work at our Hinton location. The second priority is to identify what happened so we can do everything in our power to ensure it never happens again.” As an employer, it is important that you maintain a safe work environment and that your company is in compliance with Iowa workers’ compensation laws.
What Are Iowa Workers’ Compensation Laws?
Iowa workers’ compensation laws require most employers in this state to provide coverage against accidental injuries and illnesses that their workers may suffer on the job. It is against the law to deduct employee earnings to cover workers’ compensation premiums.
All employees must be covered with a few specific exceptions. These include:
- Domestic and casual employees earning less than $1,500 during the 12-month period prior to the injury
- Agricultural employees working for an employer with a payroll of less than $2,500 during the 12-month period prior to the injury
- Immediate family members of an employer in the agricultural industry
- The company’s president, vice president, secretary, and treasurer and their immediate family members, not to exceed four officers per corporation
- Police officers and firefighters who are covered under the Iowa pension fund
- Sole proprietors and partners who are actively engaged in the business on a full-time basis
- Members of an LLC
If you have questions about who you must cover and who is included in your list of exceptions, you can receive guidance by discussing your situation with a knowledgeable insurance agent.
The Basics of Workers' Compensation Insurance in Iowa
What Is Covered?
Workers’ compensation insurance, or “workmans' comp,” as many people call it, is designed to cover medical treatment for injuries and illnesses suffered on the job. It also covers related expenses such as lost wages for employees who need to take time off to recuperate, future medical costs for illnesses and injuries requiring long-term care, and disability and lost wages for significant injuries that render the employee unable to obtain future work. Additionally, if a worker is killed on the job, whether because of an accident, an act of violence, or a criminal act by a third-party actor, your Iowa workers’ compensation policy can pay out death benefits to the employee’s family or beneficiaries.
Insurance companies will sometime deny coverage for workers’ compensation claims. Reasons for denials of coverage should be provided to employees in writing when they are hired. These reasons may include cases when the employee was acting under the influence of drugs or alcohol; was committing a crime at the time the injury occurred; or if if the employee’s injuries were willfully self-inflicted. When employees’ claims are denied, they have the right to challenge this decision by filing a contested case petition with the Iowa Workers’ Compensation Commissioner.
Who Benefits from Iowa Workman’s Compensation?
Workers’ compensation policies are beneficial to both employees and employers.
Employees benefit from knowing that they will receive adequate compensation for losses related to occupational illnesses and injuries. This compensation is usually made available in a timely manner without requiring that the injured employee seek legal assistance. The employees who were injured in the Central Valley Ag grain elevator explosion were given the best possible medical care immediately after the accident, and this ensured that they recovered quickly and with as few long-lasting repercussions as possible.
Employers benefit from the knowing that their valued employees will get good care and their companies are not likely to be sued for negligence related to these occupational injuries or illnesses. This is because when employees accept workers’ compensation benefits, they forfeit their right to sue their employers in matters related to the injury. Such lawsuits can sometimes result in multimillion dollar judgements.
Where Can You Buy an Iowa Worker’s Comp Policy?
In Iowa, employers can obtain workers’ compensation insurance coverage in one of three ways. These are:
- Purchase it on the private market: You can buy your coverage from any insurance company that is licensed to write a policy in the state of Iowa. Private insurers are permitted to offer discounts of up to 25% for coverage. This is the most cost-effective way to obtain a workers’ compensation policy.
- Purchase it through the state fund: Iowa contracts with Travelers Insurance as its state fund carrier. Employers who are unable to acquire coverage on the private market must purchase their coverage through this fund. While these rates are usually significantly higher than on the private markets, the state fund typically provides the only option for high-risk companies that need coverage.
- Be self-insured: Companies may elect to self-insure for workers’ compensation coverage. To do this, you must meet certain requirements laid out by the Iowa Insurance Commissioner.
How Much Does Iowa Workman’s Comp Cost?
When it comes to workers’ compensation insurance, the state of Iowa operates under the jurisdiction of the National Council for Compensation Insurance, or NCCI. This means that rates are based on the NCCI’s risk assessment for jobs in your company’s given industry or industries.
Your premium price will be calculated based on:
- The posted base rate(s) for workers in your company’s industry
- Your company’s total annual payroll amount
- In some cases, your company’s risk assessment, as indicated by your experience modification factor
You can use the base rates listed in the next section to get an idea of how much coverage might cost for your business.
Iowa Workers’ Compensation 2016 Base Rate Examples
In Iowa, workmans' comp insurance rates are set by the Iowa Division of Workers’ Compensation. The rates in this state are very consistent with national averages. Listed below are some sample base rates (rate per $100 of employer payroll) as of January,1 2016. Keep in mind that not all employers qualify for the lowest rates, and that these rates are subject to change at the start of each year.
- 0042 Landscaping: $11.51
- 5183 Plumbing: $5.65
- 5645 Residential Construction/Carpentry: $13.21
- 8017 Retail Store: $2.23
- 8810 Clerical: $0.31
- 9014 Restaurant: $1.84
As you can see, it costs employers much more to insure workers in industries like construction, where work accidents are more likely and can have greater severity, than it is to cover workers in low-risk jobs such as office work.
What Is an Experience Rating and How Does It Affect Your Costs?
In this state, many companies are assigned an experience modification factor, also referred to as an experience mod. If your business qualifies, your experience mod can significantly affect how much you pay for your coverage.
Experience mod ratings provide an indication of how a company’s workers’ compensation claims compare to those of other businesses of similar size and industry. Frequent and severe worker injuries will increase your experience mod, while long periods where your company remains accident-free can decrease it. A higher experience mod will translate to higher premium rates and a lower mod can earn you discount.
Not every business qualifies to be experience rated, and eligibility requirements vary by state. In Iowa, a workers’ compensation experience rating is mandatory for employers with either:
- $7,500 in policy premium generated during the last year or last two years, or
- $3,750 average policy premium generated for more than two years
If your business is experience rated, your premiums will be calculated using the following formula:
Base Rate X Annual Payroll X Experience Mod = Total Annual
New companies start out with an experience mod of 1.0. Your modification rating is calculated by dividing your expected losses by your actual losses for each of the three previous years and averaging those three factors. Therefore, if your actual losses are the same as your expected losses, your factor will be 1.0, and if your actual losses exceeded your expected losses, your rate would be greater than 1.0.
- A mod of 1.0 does not affect your rate: New employers start out with a mod of 1.0.
- A mod greater than 1.0 is a debit mod. Your premium rate will increase.
- A mod less than 1.0 is a credit mod. Your premiums rate will be discounted.
Listed below are some examples of how an experience modification rating can affect Iowa workers’ compensation premiums:
- Premium: $25,000
- Mod: 0.75 (this translates to a 25% premium credit)
- Premium with mod credit applied: $18,750
- Premium: $25,000
- Mod: 1.0
- Premium is not adjusted: $25,000
- Premium: $25,000
- Mod: 1.25 (this translates to a 25% premium surcharge/debit)
- Premium with mod debit applied: $31,250
The best way to keep your workers’ compensation rates on the low end is to maintain a solid safety record through safe practices and employee training. A good Iowa workmans' comp insurance company can assist you in this endeavor by providing your business with resources related to workplace safety.
Get Help Securing an Iowa Workers’ Comp Policy
The Central Valley Ag Cooperative in Hinton was covered by an insurance company that understands the risks faced by workers in the agricultural industry. In the same way, there are Iowa workmans' compensation providers that are particularly well-suited to meet the demands of your particular business. An independent insurance agent can help you find a provider that offers the coverage you need as well as the resources necessary to help you ensure the highest level of worker safety. Contact an independent agent near you to learn more.