Workers’ Compensation and Premiums: What You Need to Know

If you feel confusion or anxiety about workers’ compensation insurance, you are not alone! Many dental practice owners and policyholders get intimidated when they hear words like “audit,” “loss history,” “payroll report” or “classification.” While these terms and procedures are not unique to The Dentists Insurance Company’s policies, we think you will find our approach to guiding our policyholders through them is unique. 

About workers’ compensation 

The concept of compensating injured workers is not new, with ancient Sumerian records dated as far back as 2050 B.C. detailing the value of specific body parts for laborers. In more recent times, individual states began adopting labor reform laws that would form the basis for current-day workers’ compensation laws in 1911. The most important thing to realize about modern day regulations for workers’ compensation is that they are designed to protect both workers and employers. 

By definition, workers’ compensation insurance provides medical and wage benefits to people who are injured or become ill at work. Business owners are protected from civil suits filed by workers who become injured on the job through the benefits provided to workers by their workers’ compensation policy. 

While other insurance policies — like cyber security — are highly recommended but not necessarily required to maintain a business, workers’ compensation insurance is required by law. Any dental practice with workers is required by the laws of the state in which it operates to provide workers’ compensation to its workers.   

Workers’ compensation premiums 

You might wonder if the process TDIC uses to determine premium amounts is different than other insurance companies. In reality, all workers’ compensation insurance providers utilize a formula that includes type of work and payroll audits to determine premium costs for their insureds.  

• Type of work. Businesses with comparable workplace injury patterns or costs are grouped into classes by the Workers Compensation Insurance Rating Bureau. Rates are determined for each class based on the prior five years of loss costs for all businesses within that class. This means dental practices are grouped in a different risk class than police officers, for example.  

• Payroll. State regulations require insurance providers to conduct annual payroll audits of their workers’ compensation policyholders to ensure that the premiums have been calculated correctly.  

It may be helpful to think of the payroll audit process as a system of checks and balances. 

One familiar comparison to payroll audit is the filing of income tax returns. Each year, you report what you earned, getting either a refund on the earnings you withheld, or owing additional taxes if your withholdings didn’t match the taxable rate of your earnings. 

Just as unexpected income may require adjustment to an income tax bill, unexpected changes in staff or payroll will influence your workers’ compensation premium. Some common scenarios that create changes in payroll from one year to another are: 

• A highly experienced staff member retires and is replaced by a new staff member who has less experience, resulting in a significant decrease in payroll. 

• You expand your practice to a new location, hiring additional staff members, which significantly increases your payroll. 

By checking to ensure your payroll is accurate, TDIC can protect you when you need us. The payroll paid to your staff is what determines the premium charged for your workers’ compensation policy. This data is also reported to the state regulatory authority and is used to set classifications and rates for all insurers. Find answers to common worker’s compensation questions in our FAQ’s.   

TDIC’s supportive approach 

Payroll audits are utilized by all insurance carriers to determine premium costs for workers’ compensation insurance. The audit process will determine if there is any difference between the payroll quoted at the beginning of the policy period and the actual payroll paid during that policy period. If the amounts are different, the price of your workers’ compensation policy premium is adjusted for that policy year. Consider your yearly payroll audit to be a checkup on the health of your policy. 

TDIC takes a supportive approach to ensuring policyholders receive dentistry-specific guidance throughout the payroll audit process each year. TDIC’s experts are here to help make audits less stressful and more accurate.  

To better understand your TDIC Workers’ Compensation Audit process, review the following reference guide. And if you are a dentist practicing in California, you can contact an insurance advisor to request a free, no obligation quote for TDIC's Worker's Compensation policies.