Exempt Officers: What if a workplace injury occurs?
· When an officer or owner takes a workers' comp exemption, they have no workers' comp coverage for themselves if they're hurt on the job. That part is well understood.
· What's less understood: many assume their personal health insurance will simply step in instead. In most cases, it won't.
· Nearly every health plan (individual, group through the business, even a spouse's plan through a separate employer) excludes injuries that arise out of and in the course of employment. That exclusion is based on the nature of the injury, not on whether workers' comp coverage actually exists.
· Smaller claims sometimes get paid without being flagged as work-related, but that's not something to count on. If it's identified later, the health insurer can deny it outright or seek reimbursement after the fact.
Why It Matters
· An exempt officer who's seriously hurt on the job can end up with no coverage from either side: no workers' comp, and a denied health insurance claim. Medical bills and lost income both come out of pocket or out of the business.
· This is the real risk behind an exemption. It isn't just trading one type of coverage for another, it can mean no coverage at all for a work injury.
Pros and Cons of Relying on an Exemption
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Pros • Lowers payroll-based premium, since that officer's wages come out of the calculation entirely. • Simple to set up, with no added cost for the coverage being given up. |
Cons • No workers' comp coverage at all for that officer if they're hurt on the job. • Health insurance will very likely deny an injury as work-related, creating a true coverage gap. • Has to be renewed every 2 years or it lapses, sometimes without anyone noticing. • Only covers that specific officer; doesn't reduce the requirement to cover any other employees. |
What to Do Before Signing an Exemption
· Before signing an exemption, please make sure you understand this gap. Don't assume your health plan will pick up the slack, and check your own plan's exclusion language.
· If you want that officer protected, the options are revoking the exemption or looking at a standalone product like occupational accident insurance, not adding a workers' comp endorsement.