by howmuch
Workers’ compensation is a basic part of social insurance. If you get injured while on the job and can no longer work, you might qualify for a steady income stream thanks to workers’ comp. But since it isn’t a federal program, the costs for workers’ compensation insurance depend on the state.
- Alaska is the most expensive state in the country for workers’ compensation, costing companies as much as $2.27 per $100 of payroll.
- California is the third most expensive in the country at $1.83 thanks in part to its generous provisions around parental leave.
- Texas is the cheapest costs for workers’ comp at only $0.54, but that’s because companies aren’t required to participate in the program unless they want to.
- The average cost for workers’ compensation programs across all 50 states and Washington, DC is $1.21.
We got the data for our visual from the National Academy of Social Insurance (NASI) for 2017, the latest year where complete figures were available. Proper credit to Fit Small Business for writing an original article bringing it to our attention. We broke the numbers down into a spiraling bar chart with a color-coded breakdown, highlighting each 50-cent increment of cost per $100 of payroll. This lets you easily see which states carry the heaviest and lightest burdens in paying workers’ compensation.
Top 5 Most Expensive States for Workers’ Compensation
1. Alaska: $2.27
2. Montana: $2.01
3. California: $1.83
4. South Carolina: $1.71
5. Wyoming: $1.70
Top 5 Least Expensive States for Workers’ Compensation
1. Washington, DC: $0.51
2. Texas: $0.54
3. Ohio: $0.67
4. Massachusetts: $0.73
5. Arkansas and Michigan: $0.74
Read the full report from NASI for a detailed description of the research methodology, but there are a couple things to call out in our visual before diving into the details. Workers’ compensation is for people who are injured on the job. It’s an insurance program run by individual states covering specific types of workers. The figures from NASI take into account only employers who are legally required to offer workers’ compensation benefits. Some companies may offer benefits even without a legal requirement, but a lot of workers don’t have coverage. The researchers were also only focused on workers’ compensation through official reporting channels, meaning they don’t take into account all the ways a company might support an injured employee. And finally, workers’ compensation is organized on a state-by-state basis. There is no uniform federal requirement across the country.
Alaska clearly stands out head-and-shoulders above the rest of the states as the most expensive. It costs companies a whopping $2.27 per $100 of payroll just to cover the premiums for insurance in case someone gets injured. That’s likely thanks in large part to the predominance of heavy extraction industries in Alaska and how far away many people are from major hospitals. The only other state to cost more than two bucks is Montana, where it runs employers $2.01, likely for the same reasons as Alaska. But why is California so expensive? Part of the reason has to do with California’s laws on short-term disability due to non-work related injuries as well as leaves due to pregnancy. According to NASI, other states high in the rankings also have similar programs, including Hawaii, New York, New Jersey and Rhode Island.
At the other end of the spectrum, Texas is the second cheapest in the country at $0.54 after Washington, DC at $0.51. That’s because companies aren’t required to offer it unless they want to, which means companies offer workers’ comp as a fringe benefit especially when such insurance plans are cheap. Wyoming likewise restricts workers’ compensation only for employees who are in “extra-hazardous” occupations, likely driving up the cost of insurance and placing the state fifth on the list of most expensive at $1.70.
Protecting your ability to earn an income is a key part of financial security. Consider purchasing a disability income insurance policy if you aren’t covered by workers’ compensation. Check out our disability insurance cost guide for more information, or if you’re an employer, see our workers’ compensation cost guide.