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The workers compensation system was one of the triumphs of theindustrial age. The system is the cumulative result of years ofstrife and compromise between employer/owners and employee/labor.The struggle toward this useful social compromise began in the1870s with the organized labor movement and came to fruition in1911 with the passage of the first state workers compensation lawin Wisconsin.

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In the workers compensation system, injured employees relinquishthe right to sue their employers for employment-related injuries inreturn for a statutorily imposed mechanism that provides specificscheduled benefits. These benefits are funded, for the most part,through insurance policies that employers purchase from insurancecompanies. Indeed, in most states, employers must insure theirworkers compensation exposure or become qualified self-insurers.Employers should not simply decide to operate without insurance. Ifthey do, they risk being fined—and still have to pay the benefitsthat are set by law when an employee is injured on the job.

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There are many aspects to consider: how to calculate premium;how experience rating and modifiers work; and various financialplans and considerations. The standard workers compensationinsurance policy is published by the National Council onCompensation Insurance, and is available for use in more than 30states, plus the District of Columbia. The remaining states usesimilar forms are approved and published by their respectiveworkers compensation rating bureaus.

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There is perhaps no other type of insurance that uniformlyaffects the American population as much as workers compensation.Human resource professionals, who often are charged with managing aprogram that a financial officer negotiated, need to be well versedon premium, experience rating, financial plans and costmanagement.

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Recognizing that state workers compensation systems were notadequate to protect all workers; for example, laborers working onwaterways and on federal lands, the federal government enactedlegislation such as the Longshore and Harbor Workers CompensationAct, the Jones Act, and other legislation protecting federalworkers or workers on federal lands.

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Workers compensation is much more than an insurance policy. Itis a system in the truest sense of the word; its cost is a basiccost of doing business. Because of this, the financial aspect of acompany's workers compensation program often takes on a life of itsown, outside the issues of coverage.

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