In July 2016, two construction workers were severely injured in a trench collapse in Minnetonka, MN. The workers were digging a trench for a road construction project when the dirt gave way. One worker was buried for nearly 20 minutes and later died from his injuries; the other sustained extensive injuries.
In a similar incident, a construction worker in Crosby, Minnesota got trapped inside a trench at a construction site after falling fifteen feet. He sustained several injuries.
These kinds of incidents highlight the need for a remedy when workers are injured on the job. Accidents happen all the time, even in the safest workplaces. And injuries need not be severe or life-threatening to be costly for everyone involved.
When workers become ill or are injured in the workplace, workers’ compensation insurance is there to provide wage replacement and medical treatment so employees can recover without a cost burden. Workers’ compensation insurance is required for Minnesota employers.
Minnesota Workers’ Compensation Law
The Minnesota workers’ compensation law states that all employers are required to purchase workers’ compensation insurance or become self-insured. With workers’ compensation insurance, your business is not liable for the costs related to injuries that occur, and your employees receive compensation for those injuries regardless of who is at fault.
Minnesota’s workers’ compensation system is regulated by the Minnesota Workers’ Compensation Insurers Association (MWCIA). The MWCIA collects, processes and analyzes Minnesota workers’ compensation data and disseminates it to insurance company members.
Minnesota has a no-fault workers’ compensation system designed to provide benefits to employees who are injured as a result of their employment activities, and to limit the liability of employers. An employee does not need to prove negligence on the part of the employer to receive benefits, and the employer cannot use an employee’s negligence to deny benefits.
An employer without workers’ compensation insurance can be subject to liability claims by injured employees. In addition, the employer can be fined by the Minnesota Department of Labor and Industry for failing to insure employees, whether or not an injury has occurred.
The Basics of Minnesota Workers’ Compensation
Who Is Covered?
All employers in Minnesota, except the state and municipalities, are required to have workmans’ comp coverage. Employees include all full- and part-time workers, including minors and non-citizens.
Any employer with only one part-time employee generally must provide coverage. There are some limited exceptions:
- Sole proprietors, partners and corporate officers are excluded from coverage but may elect to be included.
- Executive officers owning 25% or more of a closely held corporation, or a spouse, parent or child of the executive officer, are automatically excluded unless the business elects to cover them.
- LLC members are automatically included in Minnesota workers’ compensation coverage, but may elect to be excluded.
- Individually or family-run non-incorporated businesses owned by one person, including true independent contractors, where any employees are immediate family members (spouse, parent, or child, regardless of age) can be excluded. Coverage is required when a non-family member is hired.
What Is Covered?
Minnesota workers’ compensation insurance provides benefits for work-related injuries or illnesses. A work-related injury can be any condition that is caused, aggravated or accelerated by employment activities. This may include traumatic injuries, gradual injuries or occupational diseases. The employee must show that the employment activities were a substantially contributing factor to the disability and/or need for medical care.
Minnesota workmans’ comp insurance provides four types of benefits for injured employees:
- Wage replacement
- Compensation for the loss of use of a body part
- Medical benefits
- Vocational rehabilitation services
Where Can You Buy It?
Minnesota workers’ compensation insurance can be purchased through an insurance agent or directly from an insurance company. High-hazard employers who are unable to obtain workmans’ comp coverage in the voluntary market can obtain coverage through the Minnesota Workers’ Compensation Assigned Risk Plan.
Employers can self-insure with approval from the state.
How Much Does Minnesota Workers’ Compensation Insurance Cost?
Minnesota workmans’ comp rates are regulated by the Minnesota Workers’ Compensation Insurers Association (MWCIA). High-risk occupations have higher premiums than low-risk occupations. Employers who establish a good safety record will be rewarded with lower premiums than others in their industry.
Every occupation is assigned a risk classification, and each classification is associated with a specific dollar amount—or base rate—based on how risky that occupation is. Minnesota insurance companies file their base rates with the MWCIA each year.
Workmans’ comp insurance premium is determined by class code, number of employees, total payroll, the type of jobs performed, and the employer’s history of accidents and workers’ compensation claims.
Here is a sample illustration of how an individual employer’s workers’ compensation premium would be determined in Minnesota:
- Classification Code 0042: Landscaper
- Base Rate: $4.66
- Employer payroll: $100,000
- Premium calculation: $4.66 per $100 of employer payroll (or 4.66% of payroll)
- Estimated annual premium: $4,600.00
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.
Minnesota allows insurance companies to file annual base rates with the state, and they can add a scheduled credit or debit up to 25% of an employer’s premium.
Minnesota Workers’ Compensation 2015 Base Rate Examples
Minnesota workmans’ comp bases rates vary by class code and insurance company underwriting guidelines. Experience rating is available for some employers.
Minnesota workers’ compensation rates are competitive with other states. Here are a few 2015 base rates (rate per $100 of employer payroll):
- 0042 Landscaping: $4.66
- 3632 Machine Shop: $2.45
- 5022 Masonry: $6.57
- 5183 Plumbing: $2.96
- 5190 Electrical: $2.11
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 other similar employers (similar size and industry).
In these cases, an experience modification factor—or experience mod—is added to the premium calculation formula described above. That factor increases or decreases an employer’s workers’ compensation premium in a given year.
Your mod is a numerical representation of your workers’ compensation claims experience compared to other similar employers. Your losses are compared to the expected losses for your industry. Your workers’ compensation premium will increase or decrease depending on your mod.
Experience rated workers' compensation premiums are determined using the following formula:
- Base Rate X Payroll X Mod = Premium
The mod represents a debit or credit that is applied to your workers’ compensation premium.
- A mod of 1.0: Average mod; premium is not affected. All employers start out with a mod of 1.0.
- A mod greater than 1.0: Debit mod. Your losses were worse than expected; premium goes up.
- A mod less than 1.0: Credit mod. Your losses were better than expected; premium goes down.
Experience rating can impact your Minnesota workmans’ comp insurance premium as follows:
- 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
How to Find Minnesota Workers’ Compensation Insurance
Minnesota workers’ compensation is complex, yet as an employer, you must purchase it in order to protect your business and your employees. This article offers simplified examples and calculations, but an independent insurance agent can provide the details you need to make an informed decision about the right workers’ compensation policy for your needs.
An independent insurance agent who is licensed to sell workers’ compensation insurance can help you. Start your search now.