Workers' Compensation

What is a Monopolistic State?

Ella Baker
What is a Monopolistic State?
Reading time 5 Mins
Published on Jul 24

Understanding workers’ comp coverage in states without an open market

The term monopolistic state refers to any state that has special legislation in place that requires workers’ compensation coverage be provided exclusively by the state’s workers’ compensation program. In monopolistic states, there is no open market for workers’ comp insurance and seeking such insurance through private companies is not allowed nor offered. Monopolistic states do offer some companies the ability to self-insure, though the requirements to qualify for as a self-insuring employer are restrictive. Currently, there are four monopolistic states in the US, and Ohio is one such state.

The Ohio Bureau of Workers’ Compensation

Nearly every state requires workers’ compensation insurance for all businesses other than sole proprietorships, partners in a partnership and individuals incorporated as a corporation (with no employees), the state of Ohio’s Bureau of Workers’ Compensation (BWC) has several key and important differences.

The primary difference between Ohio and most other states is that Ohio is a monopolistic state. Only Ohio, Washington, Wyoming and North Dakota operate state-monopolized BWC markets. Of these, Ohio has the largest state fund in the nation with an estimated value of more than $19 billion in assets, and the second largest underwriter of workers’ compensation insurance in the country. The BWC provides coverage to more than 280,000 employers, paid out workers’ compensation benefits in excess of $1.9 billion, processed more than 185,000 new claims, and collected more than $2.1 billion in premiums and assessments.

In conjunction with the BWC, the state of Ohio mandates that employers work with Managed Care Organizations for the medical management of all claims. Employers may select their preferred MCO partner or allow BWC to assign an MCO partner for them.

Many businesses also choose to work with a third-party administrator (TPA) to manage the potential legal pitfalls of Workers’ Compensation Insurance claims. TPAs are also able to negotiate group ratings for their group of clients, which can provide valuable discounts to employers. Often, TPAs and MCOs work together to help facilitate the return of injured employees to the workplace.

How to secure coverage

In Ohio, the state is the insurance company. Due to the restrictive qualifications for self-insurance, the BWC provides coverage to more than two-thirds of workers in Ohio. The first step in obtaining coverage for your employees is to complete the Application for Ohio Workers’ Compensation Coverage, commonly known as the U-3. While completion of the application is not difficult, it does help to gather some information prior to beginning the U-3. These items include:

  • Full legal name of your business or your own (if operating under your own name)
  • Federal Identification Number (FEIN) your business or your personal Social Security Number
  • Physical street address of your business and mailing address (if applicable)
  • A detailed description of the type of work performed by your business and equipment used, for classification purposes
  • Estimated 12-month payroll

Individuals who are self-employed, a partner in a business, an officer of a family farm corporation, or an individual incorporated as a corporation are not automatically covered. You may voluntarily elect coverage in the Elective Coverage and Owners/Officers/Ministers sections of the U-3.

Upon receipt of a completed application and a $120 non-refundable application fee, your company’s BWC policy will be considered effective. Payments may be made by check/money order, credit card, ACH, or at any of the BWC Customer Service Offices. Timely submission of your first installment payment is critical.

Stop-gap coverage

Due to the limiting nature of monopolistic state markets, workers from these states cannot be insured under multi-state workers’ compensation policies. If a business operates across multiple states and one of those is a monopolistic state, the business will need to acquire separate workers’ compensation policies to ensure that all of their employees are covered.

Additionally, unlike policies in states with an open market, workers’ compensation policies in monopolistic states do not include employer’s liability coverage. Typically, employers’ liability in monopolistic states is covered via an endorsement as part of a general liability policy. When obtained via endorsement, employers’ liability insurance is often called stop-gap coverage.

Workers’ Compensation Insurance protects your employees

The workers’ compensation insurance programs in monopolistic states is not so radically different than in other states. Even in states where employers can shop on an open market for insurance, workers’ compensation is still tightly regulated and subject to strict rate controls by the state. In Ohio, and other monopolistic states, when an employer and their employee are working through a workers’ compensation claim, they are directly interacting with an administrative arm of the state of Ohio government. Regardless of their market type, workers’ compensation insurance in every state exists to protect your most valuable resource – your employees.

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