Workers' Compensation Coverage Options

Workers' compensation insurance carriers (INSURER) in the voluntary market have a minimum annual payroll and premium that an employer (INSURED) must meet, in order for the risk to be considered by the insurer.

The average minimum annual payroll and premium differ for each carrier in the voluntary market.

Average Minimum Annual Payroll: $150,000.00
Average Minimum Annual Premium: $10,00.00

A particular type of service (RISK) may also cause the carrier in the voluntary market to not consider the employer for coverage.

In addition, a minimum of two to three years of prior continuing workers' compensation coverage may be required, in order for the risk to be considered by a carrier in the voluntary market. The carrier also takes into consideration the employer's Payroll, Classification Codes and Experience Modification Rating, also known as an Xmod.
Please refer to the link for additional details:

If the employer does not meet the minimum requirements, then they must seek coverage through their individual state fund or an assigned risk plan.

Note: Employers that are based in a monopolistic state, must seek coverage through their state.

Voluntary Market: A group of insurers that elect to write insurance in a competitive environment retaining the right*- to accept and reject business submitted. More specifically, the term also applies to the two types of mandatory insurance: automobile liability and workers compensation. In these instances, voluntary market refers to the insurers that provide coverage to desirable risks while rejecting the less attractive risks, which must then be afforded coverage through assigned risk markets.

Competitive State Funds: State-owned and operated facilities that compete with commercial insurers in writing workers compensation insurance specific solely to that state. The states with these funds are Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Utah, and West Virginia.

Assigned Risk Plan: A method of providing insurance required by state insurance codes for those risks that are unacceptable in the normal insurance market. Every state, with the exception of those that are monopolistic, has a workers compensation assigned risk plan, which is either a stand-alone entity or part of the competitive state fund. All insurers writing workers compensation coverage in the voluntary insurance market must also participate in the plan. Refer to: National Council on Compensation Insurance

Monopolistic State Funds: Jurisdictions where an employer must obtain workers compensation insurance from a compulsory state fund or qualify as a self-insurer (as is allowed in two of the jurisdictions). Such insurance is not subject to any of the procedures or programs of the National Council on Compensation Insurance (NCCI). Instead, each jurisdiction has its own rules and regulations that govern the placement and administration of workers compensation insurance. The following states/jurisdictions are monopolistic fund states: North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the U.S. Virgin Islands.

Professional Employer Organization (PEO): A Professional Employer Organization (PEO) is defined as an organization that provides an integrated and cost effective approach to the management and administration of the human resources and employer risk of its clients, by contractually assuming substantial employer responsibilities and risk, through the establishment and maintenance of a co-employer relationship with the client's employees.

In co-employment, the PEO becomes the employer of record for tax purposes, filing paperwork under its own tax identification numbers. The client company continues to direct the employees' day-to-day activities. PEOs charge a service fee for taking over the human resources and payroll functions of the client company: typically, this is from 3 to 15% of total gross payroll.

This fee is in addition to the normal employee overhead costs, such as the employer's share of FICA, Medicare, and unemployment insurance withholding. One key service usually provided by a PEO is to secure workers' compensation insurance coverage at a lower cost than client companies can obtain on an individual basis.

Essentially, a PEO obtains workers' compensation coverage for its clients by negotiating insurance coverage that covers not just the PEO, but also the client companies. This is allowed because legally the PEO is the co-employer of the workers at the client companies. PEOs can also offer basic levels of background & drug screening.

Please refer to the California Department of Industrial Relations link regarding Professional Employer Organizations:

Click on the state to be directed to their State Fund's website:

New Hampshire
South Dakota
West Virginia

* DCI is an appointed broker for the CA State Compensation Insurance Fund