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In the Keystone State (well, Commonwealth, to be precise) there
are some unique aspects to Workers' Compensation insurance that
employers would
do well to understand. Here are some important aspects of the
Workers' Comp system in Pennsylvania. We've tried to
answer some of the most common questions. First off, though is
something we here at AIM have discovered that affects what
contractors in Pennsylvania pay for their Workers Compensation
insurance:
A 2012 study by the PCRB (Pennsylvania Compensation Rating
Bureau) found that 90% of eligible contractors
were missing a significant premium
credit on their Workers Compensation insurance.
Now, Advanced Insurance Management specializes in finding and
fixing premium overcharges in Workers Compensation insurance.
We don't sell insurance, we just recover money back for
employers by correcting mistakes on past policies. So this
PCRB study tells us that there are many, many contractors in
Pennsylvania who have been overcharged for Workers Comp
insurance in recent years.
And because we work on a contingent-fee basis, we can
check if a company has been overcharged without it
costing that company anything for our services. We only
earn a fee if we can successfully recover money.
No recovery, no charge.
To talk with us about this and to see if we can get
money back for your company, call us at 800-288-9256.
Or
email us. There's no cost for us to check if
your company has been overcharged because of this common error.
Who has to get Workers Compensation coverage in
Pennsylvania?
In Pennsylvania, any
business that has
workers, full or part-time, is required to
meet their statutory Workers Compensation obligations by either
getting an insurance policy, or by being approved as a
self-insurer (only practical for large companies) or by getting
coverage from the State
Workers' Insurance Fund (SWIF).
n Pennsylvania, an employer may be excluded from the
requirement to insure its workers’ compensation liability
only if ALL workers employed by it fall into one or more of
the following categories:
-
federal workers
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longshoremen
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railroad workers
-
casual workers whose employment is casual in character AND
not in the regular course of the business of the employer
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persons who work out of their own homes or other premises
not under the control or management of the enterprise AND
make up, clean, wash, alter, ornament, finish, repair, or
adapt articles or materials for sale that are given to them
-
agricultural laborers earning under $1200 per person per
calendar year AND no one agricultural laborer works 30 days
or more per calendar year, unless the agricultural labor is
provided by the employer’s spouse or child(ren) under the
age of eighteen and they have not sought inclusion under
Pennsylvania’s workers’ compensation laws by filing an
express written contract of hire with the Department
-
domestic workers who have not elected with the Department of
Labor and Industry to come under the provisions of the
Workers’ Compensation Act
-
sole proprietor or general partners
-
have been granted exemption due to their religious beliefs
by the Department of Labor and Industry
-
executive officers who have been granted exclusion by the
Department of Labor and Industry
-
licensed real estate salespersons or associate real estate
brokers affiliated with a licensed real estate broker or a
licensed insurance agent affiliated with a licensed
insurance agency, under a written agreement, remunerated on
a commission-only basis and qualifying as independent
contractors for State tax purposes or for Federal tax
purposes under the Internal Revenue Code of 1986.
NOTE: unless ALL employees meet one or more of the above
exclusions, you must insure your workers’ compensation
liability even if the workers are working limited hours
part-time or are family members such as your spouse or
children.
Employers may request exemption from the provisions of the
Workers’ Compensation Act for any employees who are members of a
recognized religious sect and adhere to its established tenets
or teachings which conscientiously oppose acceptance of public
or private insurance benefits by filing a "Section 304.2
Application for Religious Exception of Specified Employees from
the Provisions of the Pennsylvania Workers’ Compensation Act,"
concurrently with the appropriate number of properly executed
forms LIBC-14B, "Employee’s Affidavit and Waiver of Workers’
Compensation Benefits and Statement of Religious Sect" with the
Compliance Section, Bureau of Workers’ Compensation. If the
Compliance Section grants exemption, the employer may omit
insuring its workers’ compensation liability only with
respect to the particular employees exempted for as long as the
particular employee is a member of and adheres to the tenets of
that religious sect and the sect continues to conscientiously
oppose acceptance of public or private insurance benefits.
A non-profit corporation may request exclusion of any of its
executive officers who serve voluntarily and without
remuneration. A subchapter S for-profit corporation may
request exclusion of any of its executive officers who have
an ownership interest as defined by Tax Reform Code of 1971.
A subchapter C for-profit corporation may request exclusion
of its executive officers if they have at least a 5%
interest in the corporation.
To request exclusion of permissible executive officers from
the provisions of the Workers’ Compensation Act, complete
and file an "Application for Executive Officer Exception,"
form LIBC-509, concurrently with the appropriate number of
properly executed "Executive Officer’s Declarations," form
LIBC-513. These forms must be filed with the employer’s
insurance carrier if the employer has a policy covering its
other employees. The forms must be filed with the Compliance
Section, Bureau of Workers’ Compensation if the employer has
no other employees.
What About Independent Contractors?
Pennsylvania doesn't require sole proprietors or
partners to cover themselves for Workers Compensation.
(They are required to get coverage, though, as soon as they
have any employees.) But as in many other states, if
another company hires a sole proprietor or partner who is
operating their own business, the company that hires them
may well end up being charged extra premium by their own
insurance company, if that independent contractor is
uninsured.
It's a bit of a Catch-22--the state says these sole
proprietors and partners don't have to get Workers Comp
insurance on themselves, but as soon as a third party hires
them that third party can get charged extra premiums on
their policy. But nonetheless, that's how it works in
Pennsylvania and many other states.
So if you hire such a sole proprietor or partnership, keep
in mind that contractually you can now require that they get
coverage. Pennsylvania rules were recently changed to
enable sole proprietors and partners to elect to cover
themselves, even though the state doesn't require it.
And companies have the right to insist that any independent
contractor they use be covered for Workers Compensation, to
make sure they don't get his with a premium charge on their
own policies.
Unlike some other states, Pennsylvania currently does not
have a mechanism whereby such sole proprietors or partners
can register and exempt their customers from Workers Comp
premium charges. So they only way to avoid those
premium charges is to insist that any independent
contractors have their own coverage. even if it is a sole
proprietor or partnership.
How are the premiums calculated?
Workers Compensation premiums are calculated by assigning
classifications to the business operations (according to a
system devised by the Pennsylvania
Compensation Rating Bureau, or
PCRB). Each classification has a particular rate, which is
applied to remuneration (the rate is per hundred dollars of
remuneration). The policy starts out with estimated remuneration
(usually referred to as payroll, but it can be more than that)
and then, when the policy ends, actual remuneration is
determined, and the policy premium is adjusted by an audit.
Keep in mind, PCRB classifications are used only for operations
within Pennsylvania. If a company also has operations in other
states, then the classification system used in those other
states would be used for those exposures. Most other states
(but not all of them) use the classification system devised by
the National Council on Compensation Insurance, or NCCI. So a
company's operations in Pennsylvania would be classified using
the PCRB system, while operations elsewhere would be classified
using the NCCI classification system. Also keep in mind that a
few states don't use the NCCI classification system, but instead
operate their own rating bureaus with their own classification
rules.
The PCRB classification system is quite distinct from the NCCI
classification system. PCRB uses three digit classification
codes, while NCCI and other states use a four digit
classification code. There are fewer classifications in the
PCRB system than in the NCCI system, also. PCRB has about 350
separate classifications, while NCCI has more than 500
"National" classifications, and then another thousand or so
"State Special" classifications that apply only in particular
states within the NCCI jurisdiction.
Insurance companies are also allowed to create "subclassifications"
within the PCRB classification system, essentially refining the
PCRB system by coming up with their own specialized
classifications for certain kinds of exposures.
Premium is further adjusted, for companies paying $10,000 or
more a year in premium, by application of the Experience
Modification Factor. This factor, calculated annually by
PCRB, is based on prior loss and payroll data of the particular
business. And if a company operates both in Pennsylvania and
in other states, there will be a separate Pennsylvania
experience modifier calculated by PCRB, and then another
modifier calculated by NCCI for non-Pennsylvania operations. (A
couple of other states also have stand-alone modifiers:
California, Michigan, Delaware, and New Jersey).
Companies with less than $10,000 in Pennsylvania WC premium may
qualify for a 5% Merit Rating, based on loss history.
In Pennsylvania, different insurance companies compete on
price. That is, the rate charged by different carriers for the
same classification may well vary. They do this by means of a
Loss Cost Multiplier (LCM) that is applied to the base rate for
each classification code. The base rate is calculated by PCRB.
And in Pennsylvania, unlike most other states, the premium
portion of overtime pay is NOT excluded when computing premium
charges.
Who regulates Workers Compensation in Pennsylvania?
Claims matters are handled by the Pennsylvania
Department of Labor & Industry. This body resolves disputes
regarding proper claims settlements, and compensability of
particular claims.
But disputes regarding insurance coverage (other than claims)
are handled by the Pennsylvania
Department of Insurance.
Information about Workers' Compensation in other states is
available through our state by state directory.
For more information about how Workers' Compensation insurance
premiums are calculated, please consult our online
Guide.
Advanced Insurance Management has been helping
employers reduce
their Workers Compensation insurance premiums since
1987.
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