What is Workers Compensation Like in Monopolistic States?

Worker’s insurance has become the norm when it comes to job hunting – in fact, a study has shown that 96% of Americans believe that insurance plays a big part before accepting a job. But for some U.S. states, companies are not allowed to use privatized workers comp insurance and are legally required to purchase from state-run funds instead.

These U.S. states are called monopolistic states, and all of these states are legally mandated to use government-based insurance instead of privatized ones instead.

But what are monopolistic states, and what makes worker’s compensation in these said states different from other, more popular U.S. states? Read on to learn more.

Which states are considered monopolistic?

There are a total of six monopolistic states that are currently in the U.S. that follow the same worker’s comp insurance regulations. These states are:

1. North Dakota,

2. Wyoming,

3. Ohio,

4. Washington,

5. U.S. Virgin Islands,

6. and Puerto Rico.

Keep in mind that although both the U.S. Virgin Islands and Puerto Rico are included in the list, they are not part of the mainland U.S., which means that most – but not all – federal laws apply.

How does workers' compensation differ in monopolistic states?

Workers’ compensation in monopolistic states differs from regular states because they’re legally mandated to use worker’s compensation policies. That means they can only use government-mandated worker’s comp insurance instead of privatized ones.

Although it’s a less flexible method compared to other states, it provides a more straightforward approach to compensation insurance. It aims to provide every employer within the state to back up all types of employees with a standard subsidized rate which is paid by taxpayer dollars.

It is also important to note that since monopolistic states use a state fund rather than a private one, every company policy does not include employer’s liability insurance. This means that in the worst-case scenario, employees can sue for work-related injuries and illnesses.

Add a reliable compensation planning software to the mix, and companies within the state can see positive financial growth.

Laws that surround workers' compensation in monopolistic states?

Although all these states follow the same monopolistic practices, there are variations that make each state unique from one another.

• North Dakota

  The North Dakota Workforce Safety & Insurance (WSI) is the one responsible for distributing the workers’ comp to the companies within the state. This fund can be distributed to all types of employees within the state. This can include everyone from full-time employees to seasonal and occasional workers as well.

• Ohio

  Ohio has a larger scale when it comes to worker’s comp as everyone can receive it as long as they’re identified as an employee, but with a few caveats. Self-employed individuals or partnerships are not covered by state law. Other than that, the worker’s compensation insurance for Ohio works similarly to North Dakota’s.

• Wyoming

  Wyoming’s Provider, Injured Worker, Employer Resource System (PIERS) provides an online platform for employers to file their worker’s information. This can be accessed by most employees, but the following workers aren’t covered by the law:

  • Temporary or part-time workers

  • Private household employees

  • Professional athletes

  • Federal government employees

  • Volunteers working for certain organizations

  Wyoming’s worker compensation also covers ongoing treatments, funeral expenses, disability benefits, and lost wages on top of the expected benefits.

• Washington

  Washington employees with at least one employee – even part timers – are legally required to have worker’s compensation insurance. It should be noted that remote workers, real estate brokers, gig workers, and volunteers who receive monetary compensation in exchange for work are included in this policy.

  It should also be noted that Washington’s worker’s comp insurance covers the following:

  • Travel expenses for medical purposes

  • Total/partial permanent disability

  • Employment assistance for injured workers

  • Death benefits for eligible survivors of deceased workers

How do monopolistic states differ from competitive states and workers’ compensation insurance?

Since worker’s compensation insurance in monopolistic states comes directly from state-run funds, it means that every employee can be insured even if private insurers consider them to be too risky.

This ensures that every employee is covered by the state, potentially removing any insurance issues in the long term, along with companies - from big conglomerates to small business owners - can have more competitive workers compensation funds. Combine that with a compensation planning software that can easily manage and simplify an employee’s benefits and companies within these states can focus more on their growth and less on insurance claims.

However, this comes with the glaring drawback which is policies are less flexible and there is less coverage terms compared to private insurance companies. Premiums also do not reflect the market conditions or business-specific risks, which can hinder a company’s risk reduction efforts.

Since these states essentially also run a monopoly in the worker’s compensation insurance game, customer service and claims can take significantly longer compared to states utilizing private companies.

Political practices also come into the equation when it comes to these states. Since the government buys workers' compensation insurance instead of private firms, lowering the premiums too much can mean that the government can subsidize the deficiencies that they created.

Insurance fraud is also a huge factor in these states, as studies have shown that depending on the state, 5% to 10% of work comp claims are fraudulent.

FAQs

Here are some frequently asked questions about workers compensation in monopolistic states.

Why is worker’s compensation different in monopolistic states?

Worker’s compensation insurance in monopolistic states differs from regular states since they use government funds to cover the workers compensation costs instead of private insurance companies. This ensures that every employee – regardless of risk – can be insured.

What are the 4 monopolistic states?

The 4 monopolistic states located within the mainland U.S. are Ohio, North Dakota, Wyoming, and Washington. However, the U.S. Virgin Islands and Puerto Rico are also considered as monopolistic states, but since federal laws does not apply to them, their regulations are different compared to the other four states.

What are the 2 examples of monopolistic worker’s compensation?

There are separate state funds that monopolistic states use to compensate their workers. For example, Washington uses the Washington State Department of Labor and Industries (L&I), and Wyoming uses the Wyoming Workers' Safety and Compensation Division.