What is the true workers’ compensation cost? A guide to California's broken workers' comp system
November 9, 2020
If you’re a business owner in California, then you’ve probably researched workers' compensation costs. A frequently overlooked factor is that you may incur significant costs beyond your monthly premiums.
Unfortunately, the workers’ compensation system has many flaws, especially here in California, which results in business owners paying much more than they should. In this article, we're exploring everything you need to know about hidden workers’ compensation costs in California.
Premiums are just part of your workers’ compensation cost
Workers' compensation is supposed to protect employers and their employees in the event a worker sustains an on-the-job injury. For example, an injured worker can access benefits through their employer’s workers’ comp plan, and the employer doesn’t have to worry about paying out-of-pocket medical bills. Instead, the medical bills and rehabilitation costs are covered by the workers’ comp policy.
In order to have a workers’ compensation plan in place, an employer must pay monthly premiums. These monthly premiums vary depending on the type of business you have. Workplaces that are known to be dangerous, such as construction sites and industrial facilities, may have higher premiums.
That said, whenever an employee files a claim for workers’ comp, then your premiums will likely be raised. Even if the employee’s claim is later denied, you might still see a bump in your monthly premiums. Likewise, the case may be assigned to a doctor who overdiagnoses the patient, leading to a higher overall claim amount. These instances can all result in higher monthly payments.
Fraudulent claims and litigation costs
Fraudulent claims are a major problem for California employers, and they contribute to a significant amount of extra costs. Let’s say that one of your employees files a claim for workers’ compensation, and you believe it is fraudulent. If their claim is denied, they still have a right to appeal the claim.
The appeals process can be lengthy, and because it involves the court system, it can be costly as well. Even if you are able to prove that the employee filed a fraudulent claim, you still have to pay for attorneys fees and related costs during the legal process, which can be in the thousands.
Also, if a judge orders a settlement in favor of the worker, there isn’t much recourse for you as a business owner. This will likely increase your premiums as well, and you may be ordered to cover wages for any absences not covered by your workers’ comp plan.
How to reduce your total incurred workers’ compensation cost
As you can see, your total incurred cost might involve much more than your monthly premiums. This is why many California business owners turn to professional employer organizations, also known as PEOs. With a PEO, you can fully outsource your workers’ comp functions.
For instance, here at Samuel Hale, we are a PEO that manages workers’ compensation on behalf of California businesses. Since we specialize in workers’ comp, we know exactly how to save on monthly premiums, analyze claims for fraud, and much more.
Another benefit of choosing Samuel Hale is that we offer Alternative Dispute Resolution, which is a separate judicial system that is approved for workers’ comp disputes. By resolving disputed claims through our administrative process, you can avoid costly legal fees. This reduces claims costs by an average of 50%, and it helps resolve claims quickly.
Take back control and reduce your workers’ compensation cost
Workers’ compensation should help you, not add to your many costs as a business owner. That’s why our team is dedicated to helping California businesses take back control and save money.
We can help you secure significant savings on monthly workers’ comp premiums, resolve disputes quickly, and more. Contact Samuel Hale to learn more about reducing your workers’ compensation cost with a free claims analysis.