Recently, emergency crews were called to Omaha's Henry Doorly Zoo & Aquarium, where a construction worker was reported injured. According to news reports, an employee of the construction company working on the desert dome was injured by a 500-pound steel beam. He was rushed to the hospital in critical condition. Later reports indicated the employee recovered, but who pays for his medical treatment and lost wages from missed work? In Nebraska, workers' compensation insurance should cover the employee's costs. It is important for all employers to understand what workers' compensation does and the state laws regulating it.
How Nebraska Regulates Workers' Compensation Insurance
Workers' compensation in Nebraska is designed to provide certain benefits to employees who sustain injuries by accidents or occupational disease resulting from the course of their employment, and who are not negligent at the time of the injury. In exchange for the right to receive workers' compensation benefits from the employer, employees forfeit their right to file a civil action against the employer for damages for work-related injuries or illnesses.
Under the Nebraska Workers' Compensation Act, there are two ways in which employers may comply with the law:
- By purchasing a workers' compensation insurance policy from a private insurer licensed by the Nebraska Department of Insurance to write workers' compensation insurance.
- By applying to the Nebraska Workers' Compensation Court and obtaining the court's authorization to self-insure.
Employers who meet certain requirements and have been approved by the court may self-insure. The employer must be a corporation or political subdivision with a minimum of five years in business under the present organizational structure and have a minimum of 100 employees, a strong financial base, and a positive program for safety.
One or more of the following penalties may be applied if an employer fails to carry workers' compensation insurance:
- A civil fine not to exceed $1,000 for each violation. Each day of continued failure to secure coverage constitutes a separate violation.
- Imprisonment for not more than one year, a $1,000 fine, or both.
- Being barred from doing business in Nebraska until compliance is secured.
Also, an injured employee may sue the employer for damages in the district court, and the employer will lose its common law defenses.
What Does Workers' Compensation Cover?
Workers' compensation laws cover only work-related injury or illness. However, the injury or illness does not necessarily have to occur in the workplace. As long as it's job-related, it's covered. For example, employees are covered if they are injured while traveling on business, running a work-related errand, or attending a business-related social function.
Covered injuries and illnesses can range from sudden accidents, such as being hit with a half-ton beam, to injuries that happen over time, such as computer-related repetitive stress injuries or illnesses that result from exposure to workplace chemicals, air pollution, or radiation. Many workers' comp products sold in Nebraska also provide death benefits if a workplace incident results in the death of an employee.
Certain injuries or illness are not covered under workers' compensation, including:
- Injuries caused by intoxication or drugs
- Self-inflicted injuries
- Injuries resulting from horseplay or violation of company policy
- Injuries resulting from illegal behavior
- Injuries an employee suffers off the job
- Injuries claimed after an employee is terminated or laid off
Who Needs Workers' Compensation Insurance in Nebraska?
Virtually all employees are covered by the workers' compensation law, including employees in private industry, state and local government, part-time employees, minors, and employees of charitable organizations.
There are a few exceptions:
- Federal employees, railroad employees, most volunteers, and independent contractors
- Household domestic servants and some employees of agricultural operations
- Self-employed individuals, sole proprietors, partners, and limited liability company members who are actually engaged in the business on a substantially full-time basis
- Executive officers of Nebraska corporations who own 25% or more of the corporation's common stock and are not considered employees of the corporation
- Executive officers of Nebraska nonprofit corporations who receive annual compensation of $1,000 or less from the corporation and are not considered employees of the corporation.
If you or your employees fall into any of these categories (except for federal employees and railroad workers, who are covered under federal workers' compensation), you may still elect to cover them under your policy. Some employers choose to do so if their specific circumstances warrant coverage.
What Does Workers' Compensation Cost in Nebraska?
Workers' compensation rates in Nebraska are slightly less than the national average, but they have risen a bit in the last five years. As of recent years, rates were 4% lower than the national average but had recently risen 5%. Not only do Nebraska employers enjoy lower rates, but cornhuskers seem to be a hardy bunch and file fewer workers' compensation claims. According to a review by the U.S. Department of Labor and the National Council on Compensation Insurance, private insurance companies paid out $248 million in workers' compensation benefits during previous years. That may sound like a lot, but it's a far cry from the $807 million paid out by Minnesota insurance companies, which is much closer to the national average.
Three factors affect an employer's workers' compensation insurance rates:
- Size of payroll
- Employee classifications
- Experience modifier
Most employers are familiar with their workers' classification codes, since they are used for several purposes, including tax filing. An employer can have from one to several different employee codes for employees. This affects workers' compensation rates because the risk of injury for an office manager in Omaha is not nearly the same as it is for a construction worker in Lincoln. An experience modifier is simply insurance jargon for claims history.
Just as a vehicle crash can increase car insurance premiums, a workers' compensation claim can increase rates as well. Experience mods are calculated by the NCCI or by another independent agency in some states. A good experience modifier (meaning an employer has a claims-free history) can give an employer a discount on their workers' compensation premium. An experience modifier for an employer who has several workers' comp claims in recent history will increase the premiums.
To estimate your workers' compensation insurance premium, simply calculate:
Base Rate X Payroll X Modifier = 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.
Here are some examples of how experience rating impacts Nebraska workers’ compensation premiums:
- 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
For example, as of recent years, the rate for a claims-free landscaping outfit in Nebraska was $5.84 per $100 in payroll. Therefore, if GreenWorks Landscaping has an annual payroll of $500,000, the workers' compensation insurance premium will be $29,200. Base rates can fluctuate slightly from year to year. Here are some more examples of workers' comp base rates in Nebraska according to recent numbers:
- 0042 Landscaping: $11.75
- 3632 Machine Shop: $7.55
- 3821 Salvage Yard: $10.08
- 5022 Masonry: $17.38
- 5183 Plumbing: $8.30
Where Should I Buy Workers' Compensation Insurance?
Nebraska has a private market, meaning that you can purchase workers' compensation insurance from any private insurance carrier or agency that is licensed to write in that state. Nebraska workers' compensation rates are managed by the Nebraska Department of Insurance. Insurance companies are permitted to offer premium discounts and underwriting credits of up to 25% on a policy. That's why it's important to shop around for the best rates.
Knowledgeable, independent insurance agents are always available to answer any questions you may have concerning Nebraska's workers' compensation laws and policies. These experienced agents can assist you in finding a number of quotes from a variety of insurance companies, enabling you to choose a policy with the most competitive rates.
Contact a local agent today.