Workers Compensation, the Sole Proprietor and Health Insurance.

Question: What if you have a sole proprietorship which has formed a separate business and has no coverage for workers compensation insurance. The sole proprietorship only has health insurance, which is not primary. The sole proprietorship does medical transcription for a company & gets carpal tunnel syndrome. The health insurance carrier declines coverage stating it was work related. Would this person be able to file a claim back on the business which  hired them to do the transcription work for them?

Answer...

Answer:

First, is the sole proprietor an employer subject to
the workers' compensation act? In order to answer that
question, please see Sec. 115(b). A private employer
is subject to the act if it "regularly employs less
than 3 employees if at least 1 of them has been
regularly employed by that same employer for 35 or
more hours per week for 13 weeks or longer during the
preceding 52 weeks."

Second, if the sole proprietor is an employer subject
to the act and the employer does not have workers
comp. insurance, then see Sec. 171. This is the
"shoot-through" provision which means that the
employee could seek compensation insurance through the the
company that hired the sole proprietor to do the
transcription work.

However, for the sake of this example, lets assume the transcriptionist in question works for herself and has
no employees. He or she does not have a separate LLC
or other corporation which in turn hires her as an
employee thereby making the LLC the "employer." He or
she wanted to save some money and elected to waive the
purchase of workers compensation insurance. The
Michigan Statute permits the sole proprietor to do so,
as long as he or she has no employees. (or does not
meet the definition of "employer" as set forth above)

So, in this situation it is prudent for the sole
proprietor to purchase health insurance and a
disability policy (for wage loss coverage). The
health insurance policy should pay for the medical
costs of the CTS injury despite the work relatedness
because the health insurance policy makes itself
"secondary" to any workers compensation coverage.
Although I have never seen it, it could be possible
that the health insurance policy has an exclusion for
work injuries, however I think it is unlikely.

Procedurally, in order to invoke the coverage of the
health carrier, I would suggest that the sole
proprietor explain to the health carrier that he or
she is not an employer subject to the comp act and
therefore there is no comp coverage. The Michigan statute makes a health
care carrier primarily liable for benefits if there is
a dispute.

Sec 230(2)(d) states, "In a dispute over who assumes
liability for the payment of benefits for a
particular claim, the nonprofit health care
corporation shall initiate payment of benefits pending
resolution of the dispute."

If you have any questions concerning Michigan Worker's Compensation Law, please do not hesitate to call or write.

Comments

[Robert Monk]

Does any insurer offer combination personal/family health insurance and Workers Compensation insurance? I am a sole-proprietor with no employees working in the electrical trade. Institutional clients often reject my bids because I have no WC coverage. Once I have health insurance coverage, any and all injuries of any kind are covered, so the added liability exposure to the insurer to provide WC coverage is much less than the exposure they would face by offering WC only. So, they ought to split the difference with me and offer WC as an add-on to health coverage, at half or less than the cost of WC only. Right?

For example, with health coverage only, if I fall off a ladder or shock myself and get a heart attack that puts me in hospital, the health coverage covers it. In the same scenario with combined health+WC coverage, the cost to the insurer is identical (except, maybe, that WC would have no deductible?). So the difference in cost between health-only coverage and health plus WC coverage for a sole proprietor with zero employees, should be equal to the difference between high-deductible health and the added liability for zero deductibles for work-related health costs. The latter difference should be much smaller than the full cost of WC coverage purchased on its own.