What employers need to know about Massachusetts Workers’ Compensation

If you are an employer in Massachusetts with one or more employees, workers’ compensation is a mandatory business insurance coverage. An employer may be an individual, a partnership, a corporation, or any other form of ownership that has employees. Failure to carry workers’ compensation coverage can result in an immediate stop work order and fines for every day that no coverage was available.

Besides being the law, here’s why you need it: Workers’ compensation is essentially a no-fault system designed to protect both employers and employees should a workplace injury or illness occur. Your workers’ comp insurance policy would cover payment for medical care related to the employee’s injury, and would pay wage replacement benefits, also called “indemnity” payments. In exchange for these benefits, workers’ comp rather than the courtroom becomes the employee’s exclusive remedy.

Who runs the MA workers’ compensation system?

Individual states have jurisdiction over their own systems so specific regulations and benefits vary by state. In Massachusetts, the Department of Industrial Accidents (DIA) manages the Massachusetts Workers’ Compensation system. The MA DIA adjudicates any disputes or appeals that arise. The Massachusetts Workers Compensation Rating and Inspection Bureau sets rates.

How do you obtain coverage?

Most employers secure their workers’ compensation from an insurance agent. Large employers sometimes self-insure but must pass several regulatory gating issues to qualify for self-insurance.

If two or more insurance companies decline to insure your organization, you may have to seek coverage in the MA Residual Market, also known as an “assigned risk pool.”

Workers’ compensation insurance can be cancelled by the insurance company but only for the following reasons non-payment of premium, fraud or material misrepresentation, or a substantial increase in the hazard being insured. Your insurance company would need to notify you of cancellation with 10-days written notice.

How workers’ compensation rates are set

The cost of the insurance is based on anticipated loss experience and is comprised of two basic components.

Manual Premium: The cost for your workers’ compensation policy is determined by your payroll and the classification of the work your employees do. The riskier the work, the higher the rate for the class code. There are thousands of class codes set by the Workers Compensation Rating & Inspection Bureau (WCRIB) in Massachusetts. You can look up class codes for your business on the WCRIB Employers that have drivers will have higher class codes assigned to their payroll than Computer Analysts, for example. In very simple terms, the rate for the appropriate class code is multiplied by the payroll/100 to determine the manual premium: Class Code Rate x Payroll/100 = Premium.
Modified Premium: Once you have purchased workers’ compensation for two years, if the sum of the premiums for two years is $11,000 or more, your policy will be subject to experience rating. Manual Premium is multiplied by an Experience Rating Factor (or “e-mod”) reflecting your specific organization’s loss history. Much like the experience rating system used by many states to develop auto insurance rates, a bad year will impact an employer for years to come as three prior years’ experience are used to develop a workers’ compensation e-mod. This is a complicated topic. Learn more about Massachusetts experience rating.

What benefits does workers’ comp provide to the injured worker?

Here is what workers’ compensation coverage provides:

Unlimited medical expenses
Lost wages (also referred to as “wage replacement” and “indemnity.”
Rehabilitation expenses
Dependent and funeral expenses up to a state’s limits

The amount and duration of wage replacement and medical benefits varies based on each state’s law. Generally, the injured worker faces no out-of-pocket medical costs. Learn more about Massachusetts workers’ compensation benefits for employees who have a work-related injury or illness.

Your workers’ compensation responsibilities as an employer

Obtain workers compensation insurance coverage. Failure to carry coverage can result in stop-work orders and daily fines for the uncovered duration.
Show proof of that coverage by posting notice in a public and visible place that all employees use. (Access the MA Notice to Employees poster in various languages.)
Provide a safe workplace, required by OSHA.
If an employee is injured, send them for medical care. In MA, you have the option to choose the physician for the first appointment.
Report a medical-only injury (one with no anticipated lost time) to your insurer.
Report a workplace injury with 5+ days of absence or a death to the Massachusetts Division of Insurance. You must file the Form 101- Employer’s First Report of Injury/Fatality

Recommended best practices to keep costs to a minimum.

You can lower your workers comp costs by working to the lowest possible e-mod. There are two variables that you should work to control: The frequency of injuries, or how many work-related incidents occur; and the severity of workplace injuries, or the duration of time away from work. Here are best practices to help control both and to help you attain the lowest possible experience e-mod.

Maintain a safe and healthy workplace. The least costly injuries are the ones that never happen! Control frequency by setting the expectation for an injury-free workplace, training employees to work safely, requiring personal protective equipment, and conducting periodic walk-through audits. Your insurance company can often provide safety resources.
Have a plan for point-of-injury response. A quick, caring, non-judgmental response to a work injury will help to set the trajectory for a positive outcome for all. Ensure that employees and managers know what to do if an injury occurs. Escort the injured worker to medical treatment.
Partner with a nearby occupational doctor or medical clinic. Massachusetts allows employers to choose the first medical contact. Choose a top-quality physician or a clinic experienced in workplace injuries. Your insurance company may have a good network.
Timely reporting of injuries to your insurer. Early reporting is extremely important – numerous studies have demonstrated that the sooner injuries are reported, the better the outcome. Aim for same-day reporting.
Prepare for return to work. It’s important to get employees back to work and on the team as soon as possible to help prevent disability syndrome. Plan for a transitional or modified job duties to help the employ reacclimate and work-harden to their regular job.

This guide is an overview of workers’ compensation insurance, intended as a plain-language explainer of the main concepts that MA employers need to know, but it is not exhaustive. Learn more about workers’ compensation in Massachusetts.

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