An Introduction to North Carolina’s Workers’ Comp System
Workers’ compensation insurance provides valuable protections for employees and employers across North Carolina. However, the system is complex, with many moving parts. This in-depth guide will help explain what to expect from North Carolina’s workers’ comp laws and insurance rates in 2024.
Whether you’re an employer considering your insurance options or an employee wondering about your rights, this comprehensive resource has the details you need.
The Basics of North Carolina’s Workers’ Comp Program
Workers’ compensation is a type of insurance that ensures salary replacement and medical benefits to employees injured or made ill on the job. Each state handles its own rules and regulations surrounding this system. Here are some key aspects of North Carolina’s program:
Mandatory Participation
All NC employers with three or more full- or part-time workers must carry workers’ comp coverage. Failure to do so can result in hefty penalties and lawsuits if an employee is hurt without proper protection in place.
Negligence Not Considered
Workers’ comp is a “no-fault” system. This means employees who are injured receive benefits regardless of whether the employer was at fault or negligent in any way. It also protects employers from most civil lawsuits related to on-the-job incidents.
Types of Benefits
If eligible, workers receive wage replacement payments covering a portion of lost pay during recovery. They’re also entitled to all reasonable and necessary medical treatment, rehabilitation, and related services. Benefits continue until the worker reaches maximum medical improvement.
Administration and Regulation
North Carolina uses a hybrid public/private program. The state’s Industrial Commission regulates comp policies and adjudicates disputed claims. Private insurance carriers underwrite policies and handle initial benefit payments and medical case management.
This high-level overview provides context as we explore projected changes to the NC workers’ comp environment in 2024 and beyond. Understanding the basics helps ensure all stakeholders get the support and protections they need going forward.
Anticipated Rate Adjustments for 2024
The NC Rate Bureau is responsible for annually reviewing workers’ comp rates and recommending adjustments to the Department of Insurance (DOI). Their analysis incorporates trends in claims costs, economic conditions, and carrier losses or profits from prior years. Here’s what to expect from the 2024 rate revision process:
Filing Deadline
By September 1, 2023, the Rate Bureau must submit its advisory pure premium and loss cost multipliers to the DOI along with supporting data. Carriers then use these factors to modify their individual rate proposals.
Projected System Cost Increases
Early projections indicate system costs will rise 3-5% due largely to heightened medical inflation and high worker shortages elevating injury risks. Additional upward pressure stems from wage increases outstripping benefit caps. Litigated medical disputes also consume more resources.
Proposed Rate Adjustments
Given forecasted cost increases, the Rate Bureau will likely advise carriers to file for comp premium increases averaging 4-6% across industry classes. Some classes, like construction, may see larger hikes of 6-8% due to their risk profiles. Rate adjustments are subject to DOI review and approval.
Public Comment Period
Before approving final rates, the DOI will accept public comments through hearings and written submissions assessing the Rate Bureau’s recommendations and insurer filings. Feedback helps the agency balance affordability and adequacy in its approval decision-making process.
Overall, at least modest workers’ comp rate hikes appear in store for 2024 as overall claim liabilities inch upward. But final determinations won’t emerge until year-end 2023 after regulatory reviews wrap. Stay tuned for official filing information this fall.
Factors Impacting NC Comp Rates Over Time
Workers’ comp rates depend on forecasted claim costs, influenced by various economic, regulatory, legislative, and workforce trends. All have played roles in North Carolina’s rate changes over the past several years. A deeper dive into some notable factors follows:
Economic Swings
The Great Recession drove down comp rates in NC between 2008 and 2013 as fewer injuries occurred amid high unemployment. The strengthening economy since lifted rates as jobs rebounded. Economic downturns reduce risks while expansions heighten them.
Medical Cost Inflation
Skyrocketing healthcare spending has significantly pushed up comp costs nationally. In NC, average medical payments per claim grew over 5% annually from 2015 to 2019, according to the Rate Bureau. With little relief in sight, medical inflation strains rate predictions.
Benefit Schedule Changes
The state periodically updates its benefit schedule to account for wage growth and economic adjustments. The latest increase from 2019, raising maximum weekly benefits by 23-27%, added to projected losses. Such statutory changes often lead to higher rates.
Loss Experience Fluctuations
Insurer profits and losses vary annually due to unpredictable claim severity, outcomes of major litigated cases, and chance events like hurricanes. Years with surplus losses usually lead to catch-up rate hikes.
Demographic and Industry Shifts
As industries and workforces change, so too do risks and losses. Growth in higher-risk fields like construction and expanding immigrant labor pools have impacted NC comp, for example.
This handful of prominent influencing variables highlights rate volatility; costs change based on projected impacts on future liabilities. Steadily monitoring indicators arms all parties for potential adjustments.
Factors Impacting Individual Employer Rates
While systemwide rate adjustments apply uniformly, individual employers’ workers’ comp premiums also reflect their unique risk profiles. Underwriters analyze several workplace-specific characteristics in developing risk classifications and rates for each policy. The following merits attention:
Industry Class
Code rates differ dramatically by business type due to inherent risks. Construction faces higher premiums than law firms, for instance. Accurate NAICS/SIC codes capturing all operations ensure proper classification.
Size and Financial Stability
Larger, more financially sound companies tend to qualify for better rates. Small businesses may pay more due to risk uncertainty and the credibility of their own loss experience.
Experience Modifiers (e-mods)
An experience modifier compares an employer’s actual losses to expected amounts for their industry/size. Better-than-average safety records yield discounts, whereas poor loss histories incur surcharges.
Safety Investments and Programs
Underwriters provide premium credits to employers proactively preventing injuries through investments like ergonomic equipment, wellness programs, and safety training/certifications.
Claims Management Practices
How well or poorly an employer handles post-incident activities like Modified Duty programs, Return to Work plans, and dispute resolutions all factor into their experience modifier.
Understanding these rating components arms employers to positively influence their individual costs over time through prudent risk controls and management techniques. Collaboration with agents optimizes savings opportunities.
Workers’ Compensation Reforms on the Horizon
North Carolina regularly considers workers’ compensation reforms to balance the priorities of adequate benefits, reasonable costs, fair treatment, and a competitive business climate. Here are a few reform ideas generating discussion that could reshape the landscape in 2024 or beyond:
Expanding Alternative Dispute Resolution
To expedite resolutions and reduce litigation, proposals aim to grow the Independent Medical Examination and Mediation processes. Earlier interventions usually benefit all parties.
Revisiting Benefit Schedules
Continuing medical inflation and wage growth pressure the maximum weekly benefit thresholds. Reforms may raise or adjust indexes to maintain benefit adequacy over time.
Containing Medical Costs
Strategies contemplate reference pricing, utilization reviews, provider accreditation, and independent bill reviews to better manage escalating medical costs driving rates.
Enhancing Return to Work
Strengthening vocational rehabilitation requirements and return-to-work protections could slash lost time durations and associated costs. This remains a priority, given workforce strains.
Improving Data Accuracy and Sharing
Leveraging more robust loss data across key stakeholders supports better rate making, risk identification, cost containments, and program evaluations going forward.
While the impact and likelihood of adoption remain uncertain, industry players and policymakers constantly explore options to bolster the viability, fairness, and outcomes of North Carolina’s program for all involved. Stay up-to-date on proposed bills.
Common Workers’ Comp Questions Answered
Workers’ compensation presents many ambiguities that understandably create questions. Here are answers to some frequently asked concerns:
#1 Do I need workers’ comp if I only have a few employees?
Yes, in NC, coverage is mandatory for employers with three or more full- or part-time workers. Failure to carry a policy can result in steep fines and civil liability if an employee is injured.
#2 Will my rates increase if I have an accident or injury claim?
Possibly. While one incident alone typically won’t cause a spike, an employer’s “experience modifier” (or e-mod) does factor in past claim histories. Multiple or severe losses within recent years can generate rate surcharges. However, carriers also consider whether accidents are truly preventable through prudent safety programs. Prompt claim handling also influences ratings. Ultimately, a solid history with few or minor claims ensures stable premiums.
#3 Does workers’ comp cover illnesses not caused by work?
No, to be compensable, a claimed condition must arise out of and in the course of employment. If an illness existed prior to or developed independently of the job, it likely falls outside the system. The burden is on the employee to prove the work caused or aggravated their medical problem.
#4 Are there any exemptions or exclusions to comp requirements?
Yes, some professions are exempt, like owner-operators, sole proprietors without other employees, real estate agents, certain executive officers, and corporate officers/members making under $1,300/quarter. Farm/ag labor is excluded below a payroll threshold. Professions covered by other occupational programs also face exemptions.
#5 What should I do if injured at work?
Notify your employer immediately. They can launch injury reporting, authorize treatment, and initiate wage replacement if absences exceed seven days. Seeking initial first aid and promptly consulting authorized doctors keeps your claim on track. Notifying OSHA of serious incidents also protects all workers. Full cooperation optimizes benefits and a safe return to suitable work.
