When you have employees you need to make certain your Marijuana Business Insurance program includes workers compensation insurance. This covers the state mandated benefits for medical expenses and lost wages to employees injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue their employer for the tort of negligence. This trade off is known as “the compensation bargain.”
If an employee were to be injured on the job and workers compensation insurance is not in place the state would assess a fine for being out of compliance. At present placing workers compensation for marijuana businesses in the voluntary marketplace is difficult if not impossible to place. There are a few reasons for this:
- The marketplace is new and the hazardous exposure for employees has not yet been compiled.
- As long as the federal government continues to classify marijuana as a Class I substance the voluntary marketplace will not provide workers compensation for marijuana businesses.
Because marijuana businesses are deemed an excessive risk to insure in the voluntary market, you can obtain coverage through the Assigned Risk Plan (ARP) which is also known as “the pool”. This provides a guaranteed workers’ comp insurance market for marijuana related businesses that are unable to secure coverage in the voluntary market.
The main question asked about workers compensation for marijuana businesses is how is the workers compensation insurance rate determined? The following factors play a part in your marijuana businesses workers compensation insurance rate:
- The market are you in: Because more than likely you are not able to find an insurer in the open or general market (called the voluntary market) when you are placed in the assigned risk market you typically pay a bit more for the coverage.
- Job Classification: Businesses are assigned rates according to industrial categories called classifications. Classifications are tied to risk factors, or the recognized potential for loss within a particular industry. There are close to over 800 risk classifications. The marijuana business classifications range from employment settings such as retail dispensaries, grow operations, lab settings and more.
- The size of your payroll: Your marijuana business workers compensation insurance rate is determined by taking your payroll in the various classifications of job responsibilities that are assigned to your operation and multiply it by a rate per every $100 of remuneration.
- The Modification (MOD) Factor or Experience Rating: Experience Modification takes into account your premiums paid and your losses as compared to other businesses in the same job class code. Experience modifications are built up over a three year period and the last year is not included. So, for a policy renewal date of June 1, 2015, your experience modification would include claims from June 1, 2011 to June 1, 2014. If your marijuana business has better experience than the average business in your classification and the premium is large enough you would receive a premium credit. Your experience rating / modification factor is determined by the following:
Accident Frequency: frequency is a measure of how many accidents a business has had during the experience period. Accident frequency is a better indication of future losses and is the more important of the factors when it comes to the rating.
Accident Severity: severity measures the cost of any accidents that have occurred.
The premium you pay is based in part on payroll which is estimated at the beginning of the policy year, the final premium could be more or less, depending on your actual payroll expenses reported at the end of the year. Adjustments are made at that time, resulting in either a refund or an additional bill.
As you can see there are a few moving parts that come into play and contribute to the workers compensation rate for marijuana businesses.