How Does Workers’ Comp Insurance Work in Maryland?

In the U.S., individual states legislate and oversee workers’ compensation insurance, not the federal government. Because the laws vary from state to state, you need to do your due diligence and research all the requirements that apply to you before starting a business or opening an additional location in a new state. In Maryland, the law requires workers’ compensation coverage for the vast majority of private companies. 

Coverage Requirements

Maryland has only a few exceptions and exemptions to its workers’ compensation laws. Nearly all businesses must have a policy; the only exception is agricultural employers with fewer than three employees or an annual payroll of less than $15,000. In terms of workers’ compensation exemptions, a business owner who is a sole proprietor or partner can opt out of coverage. 

Maryland workers’ comp laws generally require any business with one employee or more to have workers’ comp. You’ll need to show proof of coverage to be compliant with the law. If you do not offer workers’ comp, you can open yourself up to penalties and a fine of up to $10,000. If you run a corporation, your officers can be personally liable for this cost. Businesses found deducting workers’ comp costs from employees’ wages can also be charged with a misdemeanor. 

Employee Benefits

Workers’ compensation insurance benefits any employee who sustains an injury or develops an illness while doing their job. Coverage will help employees make up for lost wages, cover medical care related to the injury or illness, and provide financial benefits to family in the case of a work-related death. In Maryland, anyone financially dependent on the worker is eligible for work-related death benefits. 

Maryland also covers car accident injuries that occur while an employee is traveling for work, for example, when visiting a client. Workers’ comp also covers medical costs related to long-term injuries that require ongoing care or recovery time, such as an overuse injury. 

Coverage Options

Maryland employers have three general options for purchasing workers’ compensation insurance. The choice you make should depend on how many people you employ, what industry you operate in, and your record of workplace injuries, if applicable.  

• 1. The Voluntary Market– In a voluntary insurance market, businesses can shop around different private insurance companies and apply for coverage. The insurance companies can approve or deny an applicant and set policy rates commensurate with each business’s experience. Private insurers generally look for businesses that have been open for at least three years and have stable management, no lapses in insurance, few or no losses or claims, and low-hazard working conditions.
• 2. The Assigned Risk Pool– Many employers who can’t get coverage from the voluntary market seek it from the assigned risk pool, Chesapeake Employers’ Insurance Company. Unlike other states’ workers’ comp funds, Chesapeake competes with private sector providers and is not just an assigned risk pool insurer. This open competition model keeps the assigned pool prices in line with more competitive open market prices.
• 3. Self-insurance– To self-insure your business, you must be able to prove you have the financial means to cover employee injury and illness-related expenses. You’ll also have to apply for self-insurer status and get approval from the state authority.

Maryland’s Workers’ Compensation Authority

The Maryland Workers’ Compensation Commission (MWCC) provides guidelines for workers’ comp coverage and resources to help businesses figure out how much coverage they need. MWCC also has a database of paperwork and materials you may need while filing for workers’ comp. Some commonly used forms on the website include change of address, settlement, employee claims notice, compliance and reporting, and medical release paperwork. 

The website also provides information about the National Council on Compensation Insurance (NCCI) classification codes. Insurance companies operating in Maryland use these codes to estimate a company’s insurance rate. The council classifies industries based on the risk factors particular to each line of work. 

Workers’ Comp Compliance in Maryland

To run a successful business in Maryland, you first need to understand all the state regulations you have to comply with, including insurance laws. If you need help navigating the workers’ compensation insurance purchasing process, you can turn to the MWCC or speak with a knowledgeable insurance agent.