How to Buy Workers' Comp Insurance in Maryland

In early September 2016, two Maryland construction workers were injured when a house in Owings Mills collapsed. The workers were on the beams of the roof when the building collapsed and were pinned until freed by emergency responders. Hopefully, the employees' injuries will be covered by the construction company's workers' compensation insurance.

Workers’ compensation insurance is a no-fault benefits system. Employers who obtain workers’ compensation insurance are protected against liability arising under the Maryland workers’ compensation law. In other words, workers' compensation protects employers from being sued by employees following a workplace injury or illness. The insurance company will provide benefits to injured workers as allowed under Maryland’s workers’ compensation law. These benefits may include medical care, physical and vocational rehabilitation, medical equipment, and payment for lost wages and permanent disability.

Who Is Required to Purchase Workers' Compensation in Maryland?

With a few exceptions, every employer in Maryland with one or more employees is required by law to provide workers’ compensation coverage for their employees. Employers must obtain workers’ compensation insurance from a licensed insurance company or be approved as self-insurers, which requires prior approval by the Maryland Workers' Compensation Commission.

The exceptions to the law include:

Employers failing to secure workers' compensation insurance as required by law shall be guilty of a misdemeanor, and shall be subject to a fine of not less than $500 nor more than $5,000, or by imprisonment for not more than one year, or both fine and imprisonment.

Any employer who deducts any portion of this premium from the wages of an employee who is entitled to the benefits under the law shall be guilty of a misdemeanor.

What Does Maryland Workers' Compensation Insurance Cover?

Not all injuries are covered by the Workers' Compensation Law, even if the injury happened on the job. In Maryland, in order for an injury to be covered, the harm suffered by the employee must have been caused by an "accidental personal injury arising out of and in the course of employment." Those words from the Maryland statute are extremely important. Just because a person is hurt while working, on the job, or at work may not be enough for the insurance to apply.

For example, an employee who is injured due to being intoxicated while working will most likely have their workers' compensation insurance claim denied. However, if an employee breaks an arm due to an equipment malfunction, that injury will be covered.

Additionally, if an employee can prove that they have an occupational disease, such as carpel tunnel from extensive computer work, they may be entitled to workers' compensation benefits.

What Does Workers' Compensation Insurance Cost in Maryland?

According to a report from the U.S. Department of Labor and the National Council on Compensation Insurance, private insurance companies in Maryland paid out more than $502 million in workers' compensation benefits in 2013. Wisconsin, with a population size similar to Maryland, paid out more than $1 billion that same year.

The good news is that workers' comp rates in Maryland are lower than the national average; as of 2014, they were 12% percent lower. Three factors affect the rate a business will pay for workers' compensation insurance:

It is a good idea for employers to be familiar with their employees' classification codes, since they are used for several purposes, including tax filings. The experience modifier is simply the employer's workers' compensation claims history. Just as an accident claim can increase car insurance rates, so too can a workers' comp claim increase an employer's premiums.

To estimate your company's workers' comp premium, calculate:

    Base Rate X Payroll X Mod = Premium

Experience mods are calculated by the NCCI or by another independent agency in some states. 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. 

Here are some examples of how experience rating impacts Maryland's workers’ compensation premiums:

Base rates can fluctuate slightly from year to year. Here are some more examples of how Maryland base rates are affected by different employee classifications and experience modifiers, according to 2016 rates:

0042 Landscaping
Low mod: $5.25    High mod: $8.40

3632 Machine Shop
Low mod: $3.45    High mod: $5.52

8006 Gas Station
Low mod: $1.76    High mod: $2.82

8017 Retail Store
Low mod: $1.16    High mod: $1.85

8380 Auto Shop
Low mod: $3.11    High mod: $4.98

8742 Outside Sales
Low mod: $0.32    High mod: $0.52

For example, a landscaping company with several workers' compensation claims in its past will pay $8.40 per $100 in payroll in premiums. A gas station owner with a claims-free history will pay $1.76 per $100 in payroll for workers' compensation insurance policy. If the gas station's payroll is $350,000 annually, the workers' comp premium will be $6,160.

Some insurance companies offer discounts on these rates if the business implements risk avoidance measures such as drug testing its employees.

Where Can I Buy Maryland Workers' Compensation Insurance?

Chesapeake Employers' Insurance, formerly known as the Injured Workers' Insurance Fund, is the state option and operates in competition with hundreds of private insurers in Maryland. Employers may purchase a workers' compensation insurance product from any of the providers licensed to sell such policies in Maryland. It is always recommended that a business compare rates from several different insurance companies before choosing a workers' compensation insurance policy.

Knowledgeable, independent insurance agents are always available to answer any questions you may have about Maryland's workers' compensation system. These experienced agents can assist you in finding multiple quotes from a variety of insurance providers, ensuring you can choose a policy with the most competitive rates. Contact an agent today to get started.