Workers’ Compensation in Arizona: What Every Employer Needs to Know Today
A worker gets accidentally injured every single second in America. In Arizona, that has led to more than 7,000 workers’ compensation claims and more than $255 million in medical bills in 2020 alone. Don’t accidentally skip on workers’ compensation insurance. Every Arizona business, big or small, needs to understand the latest workers’ compensation regulations, how workers’ comp insurance works in the 48th state, what it covers and what to do in the event of a workplace injury.
Arizona Workers’ Compensation Laws Make Insurance Mandatory
It’s a common mistake to think that if you own a small business, or only have one or two staff members, that there’s no need to worry about workers’ comp insurance. Unlike many U.S. states, all businesses in Arizona — including self-employed sole proprietors — that have at least one employee are required to carry workers’ compensation insurance by law.
One reason such insurance is mandatory in the Grand Canyon State is because the state’s approach to workplace injuries and workers’ comp is through a no-fault system: No matter the cause of the work-related injury, the worker is guaranteed to receive medical benefits and compensation benefits.
- Coverage of medical expenses
- Temporary wage compensation
- Permanent compensation or job retraining for severe injuries
Governance: Workers’ Comp Claims are All Handled by the Industrial Commission of Arizona (ICA)
Navigating the various branches of the government agency that oversees Arizona workers’ comp claims can be confusing and stressful for business owners and HR professionals, which is why many small businesses partner with a professional employer organization (PEO) like Integrity Outsource.
When someone gets hurt on the job, there are two divisions in the Industrial Commission of Arizona that you’ll deal with:
- The Claims Division: This division provides oversight of the dozens of insurance companies offering coverage in Arizona, and ensures workers’ comp claims are processed and that employees receive the right compensation and benefits.
- The Administrative Law Judge Division: Some workers’ comp claims require a hearing, such as when there’s a dispute between the injured worker and the insurance company and/or small business. When that happens, the judge division oversees the process.
The 5 Responsibilities as an Employer
1. Notice of Coverage Must be Posted
2. Let Employees Know They Can Reject Coverage
Your employee doesn’t need to accept workers’ compensation coverage. Before he or she is injured or gets sick, your employee can elect to reject their coverage in writing.
However, if an employee rejects coverage, the employer may open themselves up to potential litigation from the employee should a job site injury occur.
3. Cover Workers’ Compensation Insurance Costs
All costs related to workers’ comp insurance is paid by the employer. State regulations ban employers from making workers pay for any of the insurance premiums.
4. Respond Within 10 Days
When an employer receives a notice that an employee has filed a claim of an on-the-job sickness or injury, the employer has 10 days to file a report of injury. To save time, this form can be filed online.
5. Things are Slightly Different For Those Who are Self-Insured
Some Arizona employers are self-insured. To be self-insured, an employer must have a payroll that exceeds $2 million dollars and must have assets in excess of $50 million dollars.
3 Factors That Affect Workers’ Compensation Insurance Rates
Workers’ comp insurance rates are calculated in terms of costs per $100 of payroll, and it can have a significant impact on a small business’ cash flow and budget. There are three specific factors that affect how much workers’ compensation will cost:
1. The Classification Rate
Different businesses and industries carry different levels of risks, and this affects insurance rates.
Job classifications (or job codes) identify the specific type of work each employee does, and helps insurance companies determine the employees’ job-related injury risks.
2. The Size of the Payroll
Workers’ comp premium is directly tied to a business’ payroll: The higher the payroll, the higher the insurance rates. If cash flow is an issue, work with a PEO that offers flexibility in terms of paying for insurance premiums in one big lump sum, or spreading it out through every payroll period.
3. The Experience Modification Factor
The experience modifier (MOD) refers to a company’s history of workers’ comp claims, and how a specific business’ employee safety compares to other businesses in an industry/niche. Essentially, the safer a company’s employees and the lower the company’s claims history, the lower the insurance premiums.
Putting It All Together
While workers’ comp insurance rates are a complex calculation crunched by analysts at an insurance company, it basically boils down to the following equation: The payroll (per every $100 on the payroll) multiplied by the job classification code rate multiplied by the experience modifier (e-mod), plus Arizona’s various fees and taxes.
Need Help Navigating the Workers’ Compensation Process or Obtaining Coverage in Arizona?
You don’t have to navigate the complexities of Arizona workers’ compensation alone. Many small businesses feel overwhelmed by the process, but remember: workers’ comp insurance is mandatory by law. Don’t skip this important step. Contact us today to schedule a consultation with a workers’ comp professional. At Integrity Outsource, our team can help you to get set up, meet Arizona regulations and requirements, and find the best workers’ comp insurance for a company’s personalized needs.
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