Workers' compensation insurance is designed to benefit both employers and their employees.
Though it is difficult to imagine, any employee at your company could become ill or injured on the job. If that employee does, the cost of their medical treatment could be the responsibility of your business.
Workers' compensation insurance alleviates that burden. Let’s talk about how this type of insurance works.
How does workers' comp work?
When and how to file a workers' comp claim must follow a strict five step claims process:
- Report an injury
This crucial step belongs to the employee. It is highly recommended that all incidents, big or small, are reported.
They have ten days after a workplace injury or related illness to notify you in writing about the matter. Then, within 10 days of receiving notice, you must file a claim with your workers' comp insurance carrier.
Employers must file a claim with their workers’ compensation carrier.
Many carriers track how long it takes for a claim to be filed. Continuous late reporting can potentially affect your policy premium.
If an injury is not reported to the employer at the time of the incident, the employee can still file a claim with the Colorado Division of Workers' Compensation within two years.
Within 20 days from when the employee files the claim with the Division, an employer must file one of the following:
- General Admission to accept claim liability
- or a Notice of Contest to deny liability
If you choose to file for denial of liability, the employee may apply for an expedited or standard hearing with the Colorado Division of Workers’ Comp within 45 days. Expedited hearings will occur within 60 days of the application. Standard hearings occur within 120 days of the application.
- Initial treatment
In non-emergency situations, we recommend helping your employee get medical treatment as soon as possible. Employers can do this by providing a Letter to Injured Worker or a list of designated providers to choose.
If it's an emergency, injured workers should immediately seek treatment from the nearest hospital.
- Resume work
If an employee gets approval from the designated medical provider, they can return to work using a modified duty task list until they have reached a full and certain recovery.
- Ongoing care
Medical care continues until the medical provider deems the employee has reached maximum medical improvement (MMI).
- Claims closure
Once the employee has reached MMI, you must file a Final Admission of Liability (FAL) with the Division within 30 days of the MMI date.
If the employee doesn't follow up within two years during any step of the process, the claim will be closed.
Who needs workers' compensation?
Colorado workers’ comp coverage is legally required for all businesses with one full-time or part-time employee (excluding sole proprietors).
The only exemptions are:
- Workers performing casual maintenance or repair work for less than $2,000 per calendar year
- Part-time private domestic and maintenance or repair workers
- Real estate agents and brokers paid by commission
- Independent contractors with no employees and drivers working for a contract carrier
- Volunteers
Corporate Officers and members of LLCs are automatically included in coverage. If they own at least 10% of the business they may reject coverage.
If they have less than 10% ownership of the business they can be excluded only if they are not active in the business operations.
For those Officers and Members who choose to be included, they are included at a capped payroll amount and not at their actual wages
For businesses in the construction industry, Colorado has additional insurance requirements. Failure to carry insurance can result in fines.
What does workers' compensation cover?
Colorado workers' comp covers:
- Claims-related employee medical treatment and care
- Lost wages
- Permanent disability benefits
- Death benefits
- Ongoing care
Are there workplace injuries or illnesses not covered by workers' comp insurance?
Colorado workers' compensation does not fully cover all injuries. Those not covered may include any of the following:
- The worker was injured while intoxicated.
- The worker injured themselves or others on purpose.
- The worker was injured while engaged in a social or athletic event that wasn't considered work-related duties.
- The worker was engaged in horseplay with another employee.
- The worker was injured by an act of God. (There may be exceptions for employees who were exposed to increased risk due to job functions.)
If an employee was intoxicated on the job, the injured worker may be penalized and lose part of their benefits. They are, however, still entitled to the benefit.
Workers' comp benefits for employees
The advantages of workers' compensation benefits for employees are that they experience less financial strain while receiving care and treatment for an injury. Coverage can include compensation for permanent injuries, access to vocational rehabilitation, free health and safety training as well as survivor benefits.
Workers' comp benefits for employers
Reduction in financial liability is the biggest benefit of workers' comp insurance for an employer. Without coverage, employers would be responsible for the cost of an ill or injured employee's medical expenses, rehabilitation, and lost wages.
According to Pinnacol claims data, the average cost of an on-the-job accident claim in 2023 was $9,861 per closed claim. Workers' comp insurance covers anywhere from a large portion to all incident-related worker expenses. For a small business, that's a significant amount compared to out-of-pocket.
How much does workers' comp cost?
Fortunately for Colorado businesses, the state enjoys one of the lower rates for workers' comp insurance.
According to the latest data from the National Academy of Social Insurance, the average cost of workers’ compensation insurance in Colorado is $0.71 per $100 in payroll. This rate compares well with Alaska’s, the highest in the country, at about $2.32 per $100 earnings.
Policy costs vary from business to business due to factors including but not limited to:
- Your industry’s workers’ comp class code
- Annual payroll
- Accident and claims history rating (experience modifier)
Companies with a lower than industry average experience modifier (e-mod) often see lower premium costs.
How to reduce workers' compensation costs
While there is a cost to carrying workers' compensation insurance, there are ways to lower your premium.
One way is by completing Colorado's Premium Cost Containment program. Getting certified saves businesses five percent on their policy cost if they have a safety program in place or develop one.
You can qualify for discounted premiums if your e-mod rate is better than your industry's average. Discounts are also available for participating in safety group programs and using designated medical providers.
Other Colorado workers' compensation considerations
As long as a claim is accurate and prompt, workers are eligible for compensation regardless of fault. This no-fault system eases the worries of both the injured employee and the employer.
If you are looking for peace of mind, choose the workers' comp partner who's been helping employers for over 100 years.
Pinnacol not only provides your business, no matter the size, with reliable coverage but also free:
- Injured worker support
- Return to work programs
- Safety services
Get a quote online in 90 seconds or connect with an agent partner to see if Pinnacol is right for you.
Pinnacol Assurance assumes no responsibility for management or control of customer safety activities. Please ensure your business meets the requirements of all federal, state, and local laws, regulations, or ordinances related to workplace safety.
