Important: This article was originally authored by Tim Wahl of Gallaher Insurance and printed in the Missouri Association of Insurance Agents’ Missouri Agent magazine, July/August 2019 edition. Reprinted with permission. This article is based on Missouri law but the premise is likely valid in many, if not most, states. The reader is cautioned to investigate workers compensation vs. health insurance plans in their own subject states.
Over the last decade the health insurance marketplace has drastically changed. Gone are the old legacy benefit-rich health plans. What owners, officers and employees don’t realize is many health insurance programs and policies no longer provide coverage for occupational injuries and illnesses.
Examples of common exclusions found in health insurance policies include:
- “If coverage under workers’ compensation or similar legislation is optional for you because you could elect it, or could have it elected for you, benefits will not be paid for any injury, sickness or mental illness that would have been covered under workers’ compensation or similar legislation had that coverage been elected.”
- “Services for which coverage is available under workers’ compensation, no-fault automobile coverage or similar legislation if you could elect it, or could have it elected for you.”
- “Charges for on-the-job injuries or illnesses. These charges are excluded whether or not your employer obtained a Workers’ Compensation policy.”
- “What is not covered: For or in connection with an Injury or Sickness arising out of, or in the course of, any employment for wage or profit.”
- “Occupational injury or disease charges incurred in connection with (a) injury arising out of, or in the course of, any employment for wage or profit or (b) disease covered, with respect to such employment, by any workers’ compensation law, occupational disease law or similar legislation.”
Regarding the first two exclusions, most don’t realize how broad the word “elect” can be. It means there is likely no health coverage if the injured or ill person was able to be covered under a workers’ compensation policy, even if that person (or person’s employer) didn’t actually buy workers’ compensation insurance. For example, consider the following representative court case:
Candace J. Wilson v. The Prudential Ins Co of America, 97 F.3d 1010 (8th Cir 1996)
On Aug. 22, 1994, Wilson was employed as a Missouri farm laborer on a dairy farm run by Midway Dairy Farms II. Midway purchased a group health policy from Prudential. Midway did not purchase a workers’ compensation policy. Under Missouri law, agricultural employers such as Midway are exempted from the workers’ compensation law’s requirement that they furnish workers’ compensation to employees (Section 287.090 RSMo). However, such employers may elect to come under the workers’ compensation provisions by purchasing a policy.
While working for Midway, Wilson was struck by a cow. She was taken to the hospital and despite all efforts was permanently paralyzed from the waist down. As a result of the accident Wilson submitted medical bills to Prudential, who denied her health insurance coverage using the following exclusion from her employer-based policy:
A charge in connection with injury or disease that is eligible under any workers’ compensation law, occupational disease law or similar law. This applies if you could be covered under such laws. But if you are a partner, proprietor or corporate executive officer of the employer, this (1) applies only if you are covered. (This 21-year-old exclusion gives medical coverage for occupational injuries and illness back to certain individuals (owners/officers); today occupational health insurance policies are harder to find).
The Court of Appeals agreed with Prudential and the district court which stated this opinion about the above exclusion:
The first sentence states that benefits exclusion applies to “[a] charge in connection with injury or disease that is eligible under any workers’ compensation law, occupation disease law or similar law.” This sets the first condition of the exclusion – the injury or illness must be of the type covered by workers’ compensation. Significantly, the sentence does not state that the claimant must be covered by workers’ compensation herself. Indeed, it makes no mention of the status of the claimant, but rather only the nature of the claimant’s injury. Because Wilson incurred her injury in the course of her employment at Midway, an injury within the scope of workers’ compensation coverage, she satisfies the first exclusion requirement.
The second sentence imposes the second condition of the exclusion, stating that “[t]his applies if you could be covered under such laws.” Id. “This” is synonymous with “exclusion.” It clarifies that any Plan claimant who is covered by workers’ compensation, or is not covered by workers’ compensation but could be, will be subject to the exclusion. While Missouri law clearly excludes agricultural employers from mandatory participation in the workers’ compensation program, it also gives employers an opportunity to opt into the program by either filing notice of acceptance of the provision or by purchasing a valid compensation insurance policy. Because Midway had this option, Wilson could have been covered by workers’ compensation even though she was not.
Ms. Wilson was severely hurt while working, she purchased health insurance through her employer’s plan and in the end the health insurance carrier didn’t have to pay one dime toward her occupational injury, all because her employer could have elected to purchase a workers’ compensation policy to cover her injuries but didn’t.
If your customers have a health policy with one of the first two exclusions listed above and don’t get coverage under their own workers’ compensation policy or buy a workers’ compensation policy, how do you feel about that decision now?
The last three exclusions are so clear that there’s no coverage for occupational injuries or illnesses, very little litigation exists. Attorneys trying to void an exclusion are looking for ambiguous wording, but there isn’t any here. These exclusions are crystal clear.
Several of these exclusions go far beyond voiding health coverage for injuries and illnesses that could be covered by workers’ compensation and actually exclude ALL on the job injuries and illnesses, including those that are no longer compensable thanks to the 2005 Missouri workers’ compensation law changes. These non-occupational injury/illness policies provide sub-par coverage that leave gaps even if owners/officers are covered under a workers’ compensation policy and also affect employees and covered spouses that might own their own businesses. These types of health policies should be avoided at all costs.
Over the last year, I have counseled my insureds about this subject. Several insureds have stated they won’t tell the insurance carrier the injury was work related. That is likely insurance fraud and could land the owner/officer in jail. When medical bills are submitted to health carriers that appear to be from an accidental injury or illness, the carrier typically conducts a review/investigation to determine the cause. Many carriers send forms asking if the injury was an accident or work related. The carrier wants it signed so it becomes a legal statement. When ER records show the owner/officer said this was a workplace accident, flags will be raised. When the insurance carrier finds the injury or illness arose from a work-related accident or illness, they may deny all future claims and rescind payments made. Just because the health insurance company pays the first few medical bills doesn’t mean the owner/officer is in the clear. It’s a question of when, not if, the health insurance carrier finds out.
This article doesn’t discuss advantages of workers’ compensation coverage (payment of lost wages, no co-payments or deductibles, payments for full or partial disability, payment for death) because space will not allow and much has been written about this already. Simply search the web for “advantage of workers’ compensation for owners.”
There are health insurance carriers that cover occupational injuries. Those that purchase health insurance from a carrier will find it easier to get occupational coverage than those getting health coverage through an employer or spouse’s employer.
Health Insurance policies are not a commodity; not all policies are the same. When checking or selling health policies, realize that just because the law allows owners or officers the ability to reject, not elect or not purchase workers’ compensation coverage, that doesn’t make it a good idea. Rejecting, not electing or not purchasing workers’ compensation when the owner has no occupational health insurance coverage maybe the biggest mistake the owner or officer ever makes!
Copyright 2019 by Tim Wahl. All rights reserved. Reprinted with the permission of the author.