Workers’ Compensation vs. Health Insurance: A Guide for Business Owners
As a business owner, it is your responsibility to ensure the well-being of your employees. In the event of an on-the-job injury or illness, workers’ compensation and health insurance are two forms of coverage that can provide financial protection for your employees. However, these two types of insurance serve different purposes and have distinct differences.
This guide unpacks the key differences between workers’ compensation vs. health insurance, explores the role of disability insurance, and clarifies common misconceptions. By the end, you’ll have a clear understanding of how these policies work and how to make informed decisions for your business.
Key Differences Between Workers’ Compensation vs. Health Insurance
Although workers’ compensation and health insurance may seem similar at first glance, their scopes of coverage—and their purposes—are fundamentally different.
1. Scope of Coverage
- Workers’ Compensation: This type of insurance exclusively covers job-related injuries or illnesses. For example, if an employee sustains an injury while operating machinery or develops an illness due to workplace exposure, workers’ compensation will cover their medical bills and lost wages.
- Health Insurance: Health insurance covers an individual’s medical expenses unrelated to their work. This includes routine checkups, preventative care, and treatment for illnesses or accidents outside of work.
2. Eligibility
- Workers’ Compensation: Typically mandatory in most states if you have employees, workers’ compensation provides coverage regardless of fault, meaning employees don’t need to prove negligence to receive benefits.
- Health Insurance: Many employers offer health insurance as a voluntary benefit. However, companies with 50 or more full-time employees are legally required under the Affordable Care Act to provide health coverage. Individuals can also purchase private health insurance policies through the Health Insurance Marketplace or Medicare.
3. Who Pays?
- Workers’ Compensation: Employers are usually responsible for 100% of workers’ compensation insurance premiums.
- Health Insurance: Employers often share the cost of health insurance with employees. The business pays a portion of the premium while the employee contributes the rest. For private health insurance, the individual typically pays the full premium.
4. Claims Process
- Workers’ Compensation claims are filed with the employer, investigated for validity, and then covered as per the insurance policy.
- Health Insurance claims, on the other hand, are submitted to healthcare providers or insurers for medical services that are non-work-related.
Disability Insurance’s Role in the Mix
When comparing workers’ compensation vs. health insurance, it’s important to also consider disability insurance, which can provide significant value to employees. This type of insurance supports employees who are unable to work due to non-work-related injuries or illnesses.
Short-term disability typically provides coverage for up to six months, helping to replace a portion of the employee’s lost income during recovery. Long-term disability, on the other hand, offers extended benefits if the employee is unable to return to work for an extended period. While most businesses are not required to provide disability insurance, offering it as a benefit can make your company more attractive to potential employees.
Common Misconceptions
There’s a lot of confusion surrounding workers’ compensation and health insurance. Here are some of the most common misconceptions—and the truth to dispel them.
Myth 1: Health insurance covers everything, including workplace injuries.
Truth: Health insurance policies typically exclude workplace injuries because these fall under the scope of workers’ compensation. Employers need both insurance types to avoid gaps in coverage. Likewise, self-employed individuals should purchase both to ensure they are protected from injuries or illnesses occurring while on the job.
Myth 2: Small businesses don’t need workers’ compensation.
Truth: Workers’ compensation is usually required even for small businesses, depending on the state. For example, most states mandate workers’ compensation coverage once you hire one or more employees.
Myth 3: Independent contractors are exempt from workers’ compensation.
Truth: While independent contractors are generally not covered under workers’ compensation, some states may treat contractors as employees based on the nature of their work. This means you could still be held liable for work injuries they sustain.
Myth 4: Disability insurance isn’t necessary if you have health and workers’ comp insurance.
Truth: Disability insurance is designed to fill gaps that workers’ compensation and health insurance don’t cover, such as covering lost wages for non-work-related health issues.
Take Action with the Right Coverage
Navigating the nuances of workers’ compensation vs. health insurance might seem complex, but it’s vital for protecting both your employees and your business. By putting the proper policies in place, not only do you ensure legal compliance, but you also promote a safe and supportive work environment.
If you’re unsure where to begin, Bethany Insurance is here to help. With expertise in tailoring coverage to meet your business’s unique needs, our team can guide you toward the right solutions for workers’ compensation, health coverage, or additional policies. Give us a call today to secure your business, protect your employees, and rest easy knowing you’re covered.
