U.S. Department of Health and Human Services

Accessing Workers' Compensation Insurance for Consumer-Employed Personal Assistance Service Workers: Issues, Challenges and Promising Practices

Executive Summary

Susan A. Flanagan, M.P.H.

Westchester Consulting Group

June 7, 2004

This report was prepared under contract #HHS-100-02-0018 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the Boston College School of Social Work. For additional information about this subject, you can visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm or contact the ASPE Project Officer, Pamela Doty, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201. Her e-mail address is: Pamela.Doty@hhs.gov.

The research reported herein was performed pursuant to a contract awarded to Boston College Graduate School of Social Work by the Department of Health and Human Services (HHS), Office of the Assistant Secretary for Planning and Evaluation (ASPE). The opinions and conclusions expressed are solely those of the authors and should not be construed as representing the opinions or policy of Boston College or HHS/ASPE or any agency of the Federal Government.

Individuals with disabilities of all ages have greater access to publicly-funded, self-directed home and community-based services and supports than ever before (Flanagan, 2001). Some self-directed support service programs offer service recipients the option of being the common law (e.g., household) employer of their personal assistance service (PAS) workers. However, with greater choice and control come individual responsibilities and risk of liability. One possible risk of liability is associated with a PAS worker being injured on the job. One way publicly-funded self-directed support service programs can reduce the risk of liability for workplace injury for themselves and service recipients who are common law employers of PAS workers is by arranging and paying for workers’ compensation insurance.

Workers’ compensation in the United States is essentially a combined government and private “no-fault,” social insurance program, mandated by state or territorial law, administered by one or more state or territorial agencies and paid for entirely by employers. It provides medical, disability and other benefits (e.g., death and burial) for most workers whose injuries and illnesses “arise out of and in the course of employment” (Lencsis, 1998).¹

All 50 states, the District of Columbia and the five territories have enacted workers’ compensation insurance laws and administer systems. These laws and systems are specific to each state and territory and can be complex to understand and administer. A basic objective of workers’ compensation is that coverage under the law should be virtually, if not completely, universal. In most states, coverage is compulsory for employers with penalties for those who do not comply. However, for various historical, political, economic and administrative reasons, no state law covers all forms of employment. The most common classes of exempt employees are casual workers who work only occasionally or intermittently for a given employer such as domestic servants (U.S. Chamber of Commerce, 2002).

Many states and territories, at least informally, include PAS workers under the domestic service employment classification for workers’ compensation purposes. However, the majority of state and territory workers’ compensation agency staff report that the final determination of whether a service recipient’s PAS worker falls into the domestic service classification in a jurisdiction is often made by an administrative law judge when a workers’ compensation claim is disputed. Thus, public programs administering self-directed support service programs and service recipients enrolled in these programs face great uncertainty when trying to assess the obligation to provide workers’ compensation insurance coverage for PAS workers who work for service recipients in and around their homes.

This report focuses on workers’ compensation laws and systems as they pertain to domestic service workers, and in particular, PAS workers in 50 states, the District of Columbia, five U.S. territories and one tribal government² and addresses the following questions:

• How do workers’ compensation programs work?
• What states and territories afford individuals with disabilities who are household employers the opportunity to purchase workers’ compensation insurance coverage for their domestic service workers, and in particular for PAS workers?
• How accessible is workers’ compensation insurance coverage for household employers who hire domestic service, and in particular, PAS workers directly?
• How does the cost of workers’ compensation insurance premiums vary for household employers hiring domestic service/PAS workers across jurisdictions and markets?
• What issues and challenges have been reported by state workers’ compensation agency staff and insurance carriers regarding the administration of the workers’ compensation systems and the provision of insurance for domestic service and PAS workers?
• What promising practices have been implemented by jurisdictions to facilitate public programs arranging and paying for workers’ compensation insurance for service recipients who hire domestic service/PAS workers, thereby reducing the risk of liability related to workplace injury for state program agencies and service recipients?

Workers’ compensation laws and regulations, program material and related literature and published reports pertaining to domestic service, and in particular to personal assistance, were reviewed for each of the 57 jurisdictions. In addition, follow-up calls were conducted with key state and territorial worker’ compensation agency, insurance company and agent staff as needed to obtain information not readily available in the secondary information reviewed.

Key study findings include:

• All 50 states and five U.S. territories have enacted workers’ compensation laws and administer systems, however, they are specific to each jurisdiction and can be complex.
• Twenty-five states and two U.S. territories completely exempt and 22 states, the District of Columbia and two territories partially exempt domestic service workers from their workers’ compensation laws.
• All jurisdictions, except for Wyoming, allow household employers to elect coverage for domestic service workers who are exempt from workers’ compensation laws.
• The majority of jurisdictions’ workers’ compensation laws and employment classification codes do not clearly define domestic service or reference PAS workers in the definition.
• The majority of jurisdictions reported that PAS workers fall under the domestic service employment classification for workers’ compensation purposes.
• The majority of jurisdictions also reported that the final determination of whether a service recipient’s PAS worker falls into the domestic service classification is often made by an administrative law judge when a workers’ compensation claim is disputed.
• Publicly-funded self-directed support service programs and service recipients who are the common law employers of their PAS workers face great uncertainty when trying to assess the obligation to provide workers’ compensation insurance coverage for PAS workers.
• Publicly-funded self-directed support service programs can reduce/eliminate the risk of liability for workplace injury for themselves and service recipients who are the common law employers of their PAS workers and the uncertainty regarding coverage by arranging and paying for workers’ compensation insurance.
• In the majority of jurisdictions, access to workers’ compensation insurance through the voluntary insurance market is extremely limited for publicly-funded self-directed support service programs and service recipients (e.g., household employers), and in some jurisdictions it is “non-existent.” This is due in part to insurance agents and carriers having little incentive to broker/write policies for household employers due to small fees/premiums, significant administrative burden and costs and the perceived high risk of domestic service and PAS worker injury.
• Workers’ compensation claims experience for the Massachusetts Medicaid Personal Care Attendant Program and the New Jersey Personal Preference Program have challenged widely held assumptions regarding the perceived high risk of domestic service and PAS worker injury over the past three years.
• Household employers’ access to workers’ compensation insurance typically is greater through exclusive or competitive State Insurance Funds or through residual insurance markets (e.g., jurisdictions’ Assigned Risk Plans or Insurers of Last Resort).
• Eighteen states, the District of Columbia and two U.S. territories offer household employers the opportunity to purchase a workers’ compensation insurance rider on a conventional homeowner’s and tenant’s insurance policy for occasional domestic service workers with at least three states reporting that the option is mandated by law. However, there is a concern that filing a claim for workers’ compensation through a homeowner’s insurance policy could jeopardize the status of the household employer’s homeowner’s insurance policy (e.g., could be cancelled) and thus jeopardize their mortgage which may have homeowner’s insurance as a requirement.
• The cost of workers’ compensation insurance varies significantly by jurisdiction, with the residual insurance market premiums, in general, being the most costly. This insurance market is often the only option for household employers to purchase workers’ compensation insurance for their domestic service (e.g., PAS) workers.
• The most frequently reported issues/challenges reported by jurisdictions’ workers’ compensation agency staff regarding the administration of workers’ compensation systems and providing insurance for domestic service and PAS workers included:
  • Difficulty classifying PAS workers for workers’ compensation purposes (e.g., are they under domestic service or not; if not, what classification are they in?),
  • Limited access to the voluntary workers’ compensation insurance market for household employers,
  • Premiums for domestic service workers tend to be low and often do not cover the cost of losses incurred,
  • Workers’ compensation agency staff reported they do not many policies or claims related to domestic service so are not knowledgeable regarding the issues (e.g., PAS) and often do not have good premium and claims data to make policy with, and
  • In many jurisdictions, workers’ compensation insurance premiums have gone up for all employers including household employers.

Key promising practices include:

• Workers’ Compensation Laws That Include PAS In The Definition of Domestic Service -- Hawaii

  Hawaii includes the terms “attendant care” and “day care services” in the definition of domestic service included in the state’s workers’ compensation law. This clarifies the classification for PAS in the state’’ workers’ compensation law for household employers, PAS workers, publicly-funded self-directed support service programs and workers’ compensation hearing officers.

• Including PAS In The Employment Classification For Domestic Service -- North Dakota

  North Dakota includes the term personal assistance in its employment classification under domestic service for workers’ compensation purposes as “those individuals performing home help services or providing personal assistance or home care for persons who are convalescent, aged or acutely or chronically ill or disabled.”

• Developing An Employment Classification For PAS Under Domestic Service -- Massachusetts

  Massachusetts has developed an employment classification code, specifically for PAS workers (0918, Domestic Service, Inside, Physical Assistance) that clearly describes the tasks performed while keeping the classification under domestic service.

• Developing A Workers’ Compensation Program Specifically For Domestic Service -- Pennsylvania

  Pennsylvania’s State Workmen’s Insurance Fund (SWIF) has a program and a workers’ compensation insurance policy (Domestic Service Exemption Policy) that is specific to household employers who employ domestic service workers to work in and around their homes. It also has a designated staff who is well trained and knowledgeable regarding domestic service issues and SWIF policies and procedures. The application process has been streamlined and staff is easy to access for assistance.

• Accessing Workers’ Compensation Insurance Through The Voluntary Insurance Market -- Massachusetts

  Massachusetts has successfully recruited an insurance agent and a voluntary insurance carrier to broker and write insurance policies for over 9,000 persons with disabilities enrolled in the State’s Medicaid Personal Attendant Care Program rather than purchasing policies from the residual insurance market.

• Accessing Workers’ Compensation Insurance Through The Residual Market -- Arizona and New Mexico

  Arizona and New Mexico both have residual insurance markets that consist of both “insurers/markets of last resort” and Assigned Risk Plans. Having both options appear to increase small and moderate sized employers access to workers’ compensation insurance at more competitive prices. This approach has the potential of providing increased access to household employers who wish to purchase workers’ compensation insurance for their in-home domestic service workers including personal assistance workers.

• Accessing Workers’ Compensation Insurance For Domestic Service Through Homeowners’ And Tenants’ Insurance Policies -- New Jersey

  New Jersey provides the most comprehensive system for accessing workers’ compensation insurance through homeowners’ and tenants’ insurance by requiring all homeowners’ and tenants’ insurance policies to include an endorsement for workers’ compensation insurance for occasional domestic service workers. Homeowners and tenants can then purchase an endorsement for full-time domestic service workers. Workers’ compensation service endorsements for domestic service are available in both the voluntary and residual insurance markets in New Jersey. One concern regarding household employers accessing workers’ compensation insurance coverage through homeowners’ insurance policies is that a workers’ compensation claim could cause the insurance carrier to either significantly raise the household employer’s homeowner’s insurance premium or cancel the homeowner’s insurance policy, which often is a requirement for a mortgage. New Jersey covers this issue by providing workers’ compensation insurance coverage for occasional and full-time workers in both the voluntary and residual insurance markets.

• Rate And Premium Setting Methods -- Massachusetts, Maryland and Washington State

  Massachusetts and Maryland use the “per $100 payroll” and “per household policy” method to compute workers’ compensation insurance rates and premiums, respectively. These methods reduce the level of administrative burden for the household employer, his or her Fiscal/Employer Agent and the insurer, particularly when the household employer hires multiple PAS workers.

  Washington State uses the “per hour” and “per household” method to compute workers’ compensation insurance rates and premiums, respectively. The “per hour” method more accurately measures the risk of workplace exposure for multiple workers. However, to work effectively, good time reporting must be available for all workers.

• Using Minimum Premium Data To Develop Benchmarks For Workers’ Compensation Premiums -- New Jersey, Idaho And Maryland

  The minimum premium data presented in Table 4, Table 5, and Table 6 demonstrates the variability of workers’ compensation insurance rates by market and jurisdiction for similar employment classifications (e.g., domestic service). Jurisdictions can use this information to develop benchmarks to compare their workers’ compensation premiums and learn from other states’ experience. For example, the jurisdiction that has the lowest actual premiums for a standard domestic service workers’ compensation insurance policy from the voluntary and residual insurance markets is New Jersey. The actual premium for a standard workers’ compensation insurance policy for all occasional domestic service workers in a household is $16.00/household/year. The actual premium for a standard workers’ compensation insurance policy for a full-time domestic service worker is $76.00/year for the first worker and an additional $60/year for each additional full-time worker hired. Under the homeowners’ or tenants’ insurance workers’ compensation endorsement the premium is $1.00/policy/year for all occasional domestic service workers working in the home and $61/year for the first full-time worker and $60/year for each additional full-time worker working in the home. The premiums for the standard workers’ compensation insurance policy and the homeowner’s/tenant’s workers’ compensation endorsement for domestic service are the same for both the voluntary and residual insurance markets.

  Idaho and Maryland also offer low minimum premiums through a State Insurance Fund (e.g., $150 per capita for 0908-occasional and $175.00 per capita for 0913 -- full-time and $175 per household policy for 0913 -- part or full-time, respectively (see Table 6). However, Idaho’s minimum premiums for the residual insurance market are almost twice as much as the State Insurance Fund, whereas Maryland’s minimum premiums are the same in the State Insurance Fund as they are in the residual insurance market (see Table 4).

• Using Fiscal/Employer Agents To Facilitate Purchasing Workers’ Compensation Insurance, And Invoicing and Processing Claims -- Massachusetts, New Jersey And Pennsylvania

  In Massachusetts, New Jersey and Pennsylvania, Fiscal/Employer Agents participating in the State’ s self-directed support service program (e.g., MA Personal Attendant Care Program, NJ Personal Preference Program, and PA Attendant Care Program) will not process a payroll check for a worker unless the service recipient has a current workers’ compensation policy for his or her PAS worker(s). Thus, the Fiscal/Employer Agent ensures the publicly-funded self-directed support service program that workers’ compensation insurance coverage has been obtained for all service recipients and renewed annually.

  In each state, the Fiscal/Employer Agent(s) is the key contact that communicates with either the insurance agent, or the voluntary insurance carrier/State Insurance Fund/residual market administrator or both making sure initial policies are implemented and that policies are renewed in a timely manner. In addition, each state’s Fiscal/Employer Agent(s) is responsible for completing the Wage Statement Form that the insurer needs to accurately compute a benefit for an injured worker.

  In all three states, the Fiscal/Employer Agent(s) is responsible for paying the service recipient’s workers’ compensation premiums out of their public benefit. In Massachusetts, the insurer bulk invoices the four Fiscal/Employer Agents for the service recipients they represent, reducing the insurer’s invoicing efforts from 10,000 to four invoices per year.

• Allowing Household Employers To Elect Workers’ Compensation Insurance Coverage For Family Members Who Are Paid Domestic Service Workers, Including PAS Workers -- Hawaii

  Many states’ workers’ compensation laws are silent on whether family members who are paid domestic service workers, including PAS workers, may be considered covered workers. For the purpose of this study it was determined that these states allowed household employers to elect workers’ compensation insurance coverage for family members who are paid domestic service workers including PAS workers.

  Hawaii exempts family members who provide paid domestic services, including personal assistance services from its workers’ compensation law, but allows household employers to elect coverage for these workers. States should consider clarifying their workers’ compensation laws to allow household employers to elect workers’ compensation insurance coverage for family members who are paid domestic service workers including PAS workers.

NOTES

1. Except in the case of Washington State and Oregon. Under Washington State law, a portion of the workers' compensation insurance premium, equal to one-half of both the medical-aid rate and supplemental-pension assessment may be paid by employee contribution. The Department of Labor and Industries does not collect each worker' share directly. Instead, employers have the option to collect their employees' portion through payroll deductions. Oregon has implemented the Workers' Benefit Fund Assessment ("Cents-Per-Hour") Rate to pay for certain programs that provide direct benefits to injured workers and their beneficiaries. In 2003, the assessment rate was 3.6 cents per hour or partial hour worked by each paid employee that an employer provides with workers' compensation insurance coverage. Employers contribute at least half (1.8%) deducting no more than half of it (1.8%) from workers' wages. Employers then submit the total to the state through OR Combined-Payroll-Tax Reporting System.

2. Five territories include American Samoa, Guam, Commonwealth of Northern Mariana Islands, Puerto Rico and the Virgin Islands. The tribal government is the Navajo Nation.