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 her 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 her wrist. These are real examples of work-related injuries. Some are common and predictable, and some are 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.
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Michigan Workers’ Compensation Laws
Most Michigan employers are required to purchase insurance coverage that compensates workers who are injured on the job. Workers’ compensation insurance pays for medical care and lost wages for the injured worker and protects employers from being sued for further damages. The Michigan Worker's Disability Compensation Act was adopted in 1912. It is administered by the Michigan Workers’ Compensation Agency. Nearly all employers in Michigan are covered by this law, including public and private employees.
The Basics of Michigan Workers’ Compensation
Who Is Covered?
Any private employer who has three or more employees at any one time, or who employs one or more workers for 35 or more hours per week for 13 or more weeks, is subject to Michigan’s workers’ compensation law. Agricultural employers must provide workmans’ comp coverage if they have three or more employees who work 35 hours or more per week for over 13 weeks a year. Domestic employees who work more than 35 hours per week for 13 weeks or longer during the preceding 52 weeks are entitled to workers’ compensation benefits in Michigan.
Named partners and officers who are shareholders of small, closely-held corporations may exempt themselves from Michigan workers’ compensation coverage. The Worker's Disability Compensation Act covers the employees of a sole proprietorship, but the self-employed sole proprietor does not have to be covered. Independent contractors may be covered by Michigan workmans’ comp, under certain circumstances.
They are considered to be employees and qualify for coverage if they do not maintain a separate business, do not render services to the public, and do not employ other workers. A few classes of workers who are covered under federal laws are not covered under the Michigan Worker's Disability Compensation Act:
- Federal employees (postal workers, Veterans Administration workers, etc.)
- People who work on interstate railroads
- Seamen on navigable waters
- People who load and unload vessels
What Is Covered?
Michigan has a no-fault workers’ compensation system. This means that benefits are available for injured workers regardless of who is at fault for the workplace accident. Also, employers are protected from being sued by injured employees. Injured employees are entitled to medical care for work-related injuries and diseases. This includes medical, surgical, and hospital services, dental services, medical equipment, chiropractic treatment, and nursing care. They are also entitled to compensation for lost wages and vocational rehabilitation. Benefits are available when a worker’s injuries arise out of and in the course of employment.
Where Can You Buy It?
Most businesses in Michigan purchase workmans’ comp insurance from a private insurance company that is authorized to operate in the state. Some employers obtain permission to self-insure or belong to a trade organization that self-insures as a group.
How Much Does Michigan Workers’ Compensation Insurance Cost?
Employers in high-hazard industries pay more for workers’ compensation insurance than employers in low-hazard industries. If you have a good safety record, you may be rewarded with lower premiums than others in your industry. Michigan workmans’ comp premiums are based on how many employees you have, your total payroll, the types of jobs performed at your business, and your history of accidents and workers’ compensation claims.
In Michigan, every occupation is given a classification, or class code, based on the type of work performed. Insurance companies establish a premium rate, or base rate, for each classification based on the level of hazard associated with it. These rates are filed each year with the Compensation Advisory Organization of Michigan (CAOM), which administers the program. Your base rate and total payroll are used to determine your full workers’ compensation premium. Here's an example:
Classification Code 5190: Electrical
Base Rate: $1.90
Employer payroll (example): $100,000
Premium calculation: $1.90 per $100 of employer payroll (or 1.90% of payroll)
Estimated annual premium: $1,900.00
Most employers have employees in more than one classification. An electrician may employ a variety of office workers in addition to electricians. All class codes and related premiums are combined to determine the full Michigan workers’ compensation premium.
Michigan Workers’ Compensation Recent Base Rate Examples
Rates for workmans’ comp insurance in Michigan are below average. They vary significantly between insurance companies, however, so employers need to do their homework and find the policy that best fits their needs. Michigan’s workers’ compensation rates are administered by the Compensation Advisory Organization of Michigan (CAOM). While insurance companies must file their rates with the CAOM, they may offer additional discounts and credits to employers who qualify. Here are some sample base rates (rate per $100 of employer payroll) as of recent years.
- 0042 Landscaping: $4.28
- 5183 Plumbing: $2.47
- 5427 Carpentry: $4.09
- 8017 Retail Store: $0.81
- 8810 Clerical: $0.09
- 9082 Restaurant: $0.87
What Is Experience Rating and How Does it Affect Your Premium?
Experience rating is a way to increase or decrease your Michigan workers’ compensation premiums depending on your actual loss experience. When you are eligible for experience rating, an experience modification, or e-mod, is added to your workers’ compensation premium calculation. Your mod can have a significant impact on your premium as you establish a claims history. It is determined by comparing your actual claims to what was expected for your industry in a given year.
If you operate a restaurant, you will be compared to other similarly sized restaurants. If you own a retail store, you will be compared to similarly-sized stores in your state. Employers in Michigan may be assigned an experience mod after they have been in business and had workers’ compensation coverage for two years. Experience mods are assigned by the CAOM. When your workers’ compensation policy is experience-rated, your premiums are determined using the following formula:
Base Rate x Payroll x Mod = Premium
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 the impact of experience rating on workers’ compensation 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
By keeping claims and related costs low, you can control your mod and reduce your workers’ compensation premiums. If you have a lot of losses, your mod will force your premiums upward. Remember that small, frequent losses have a greater impact on your mod than a few large or out-of-the-ordinary losses.
How to Find Michigan Workers’ Compensation Insurance
Remember, this article offers only highly simplified examples and calculations of typical Michigan workers’ compensation premiums. Michigan employers have a lot of options for workers’ compensation insurance. An independent insurance agent who understands your business and the Michigan workers’ compensation law can help guide you. To learn more about Michigan’s workers’ compensation law and obtain coverage for your business, contact an experienced independent insurance agent.
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