Let’s start by clarifying the notion of workers compensation codes. They are classifications used by work compensation insurance companies to classify the degree of workplace risk exposure for different jobs. They depend on the complexity of workers compensation accounts and it is essential for a person to have access to the materials which are necessary to properly verify workers compensation codes.
Manuals, rules and procedures for managing workers compensation are all controlled by the advisory organization used in different counties or states. It is not easy to determine the proper code and sometimes it can be really difficult. There are many causes of overcharges and misclassification is one of them. A proper classification of an employer’s business can save a lot of money in the workers compensation premium which the employer pays for coverage. Thus it is very important that the proper classification and application of the workers compensation codes should be applied for any contracting operation. In simple terms these codes are four numbers assigned to a description of a specific job process. Each of them is then assigned a rate per 100 of payroll when used to price out a workers compensation policy. At first sight it seems easy but there are over 700 possible codes now in the use and you have to choose one from them. There is a system of classification, which was developed as an organized structure intended to group similar work process together. The purpose of this system is allowing insurance rates to be more representative of the type of exposures generated by the work processes. That means that similar businesses with similar work processes will receive similar rates for their workers compensation insurance. An example of the code which best describes the business operation and which includes the most payrolls generated by the business is the governing class code.
Moreover, these codes are published and circulated in manuals by each advisory organization. For example, National Council on Compensation Insurance or NCCI published its classification definitions and codes in a manual entitled “Scopes Manual”. But this copyright material is available from them only by purchase either in print or on-line subscription because NCCI is a for-profit organization. It is important to add that subscription to NCCI is expensive enough. The Scopes Manual is very important for workers to help them choose the best appropriate code. In conclusion, it is essential to understand the importance of these codes because proper codes lead to correct premiums. You should never underestimate the impact on a workers compensation policy premium which incorrect codes can play.
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