How can you be sure your Workers compensation codes are correct?
We're often asked this simple question but unfortunately the answer can be quite complicated.
The most efficient verification method is to have a work comp code review conducted on your policy. The comp code review is a detailed look into the current codes used on your policy with a comparison of your actual business operations. To verify workers comp codes often requires a specialized knowledge gained only through practical application and use of the workers compensation classification system. Verification of proper workers comp codes can be time sensitive and confusing. Verification of proper workers compensation codes can also be very important to the bottom line of a business considering the great impact on the workers comp cost for any business starts with the work comp code used for that business and the rate associated with that code.
On this page you will find some basic guides on how to verify the workers compensation codes being used on your insurance policy.
Steps you can take to Verify Workers Compensation Codes -
As a business owner the use of proper workers comp codes in the classification and pricing of your work comp policy is very important. Proper use of comp codes is the first step in knowing that you are paying the right workers compensation premium for your business and not being overcharged for your insurance coverage.
For most businesses the proper workers comp code will be the one that best describes the operations of the business and which includes the most payroll generated by the business. This step is called determining the governing classification. A common misconception regarding the use of classification codes is that each individual job within a business is to be shown on the workers compensation policy and used in the calculation of the premium. Not true. Lets look at a couple of examples:
If your business operation is say a drug store, then the governing class code will be that of a drug store and not each individual job operation found within the store such as clerks and pharmacists.
As another example lets take a look at a supermarket. Typical jobs performed within a supermarket may include checkers, meat department, stocking operations, baggers and maybe even florists and video rental. When verifying comp codes you should look for the correct application of the governing code. Remember, that's the code that best represents the business operation.
Review the governing class code for accuracy in description. Does this code seem to describe the business? If so, are there standard exceptions that may apply? If not, is there a better code description that should be used? Be sure to review similar codes for a better fit with the business description.
Use the Scopes Manual or other advisory organizations reference to compare comp codes used on your policy with the complete description as published by NCCI or the advisory organization for your state. Published manuals are usually available only with subscriptions to the various advisory organizations. Be sure to check with your insurance agent or contact a workers compensation consultant for help.
While reviewing your work comp policy codes, remember the only exception to the governing class rule is the contractor exception rule. Separation of payroll is allowed for those classes of business who qualify into the construction classes. Separation of payroll is where those individual job operations within a specific business are separately classified. Simply put, if you operate a construction company and your work processes include artisan trades such as electrical, carpentry, concrete and others, the payroll for those employees who fall into specific classes are allowed to be broken out from the governing class code. This is the only exception and there are very special rules that must be followed in order for separation of payroll is allowed.
The Importance Of Verifying A Workers Compensation Class Code -
We've discussed this topic in other sections of our website but feel so strongly about it that we've dedicated this separate page where you'll find we discuss this issue in detail.
Classification codes used on a workers comp policy, whether NCCI based or generated from another state rating authority, are the starting point that determines the basic premium you'll pay for your workers comp coverage. While the classification system may not be perfect, it's the best way of determining hazards and assigning the associated premium related to specific work processes for any business. Unfortunately mistakes, misunderstandings and errors are made in the application of these codes on a regular basis. Reasons for code errors can range from misinterpretation of code descriptions by those assigning codes to a policy to changes made in the business operations by an employer after an initial code has been assigned. Regardless the reason, code errors and mistakes play a significant role in excess premium employers pay for their workers compensation insurance.
So it's important to make sure the workers compensation codes being used on a policy are correct. The simple step of verifying proper class codes accomplishes two basic goals.
First, it can save an employer from overpaying on their policy by having the wrong code assigned;
Second, it can head off an excessive audit and large additional premium due at the end of a policy period by identifying an incorrect code and correcting it during the initial policy period. Do not wait until audit for an error to be discovered!
On this page of our website you'll find we provide you with:
A basic guide to the code verification process;
More information about workers compensation codes and their effect on a policy;
Information about the governing classification code and how it may effect your policy;
Simple examples of the classification process;
Again, verification of a class code is important. Take that step and have your workers compensation class codes verified by an independent source!
We hope you find the information in this section of our website about workers comp class codes helpful!
Thanks for watching!
Do You Need Professional to Help Determine Proper Workers Compensation Codes -
This is not an easy question! It really depends on the complexity of your workers compensation account and your access to the materials needed to properly verify work comp codes. As there are so many variables to proper code classification, it's been our experience that most clients are better served by consulting with a professional workers compensation consultant when the issue of proper codes is brought into question. Even if you are able to identify an error in your codes you still must have it corrected and that's where a professional can really help!
Workers Compensation Consultants should be your FIRST SOURCE for help with WORKERS COMPENSATION CODE PROBLEMS AND ISSUES. We help verify work comp codes on your policy. So when you need help with a WORKERS COMP CODE problem contact our office, we'll help verify your codes for accuracy and proper application and if there's a mistake, we'll help you get it corrected!