New CA Law Changes Inclusion of Officers for Workers’ Comp Coverage


On November 4, 2016 California passed a new law that dramatically changes who can be excluded from workers compensation coverage while causing significant increases in premiums for physician medical groups and healthcare organizations.

The Assembly Insurance Committee has made changes to the definition of an employee and exclusions to the definition of employee set forth in the Labor Code. Per this new designation, officers and members of boards of directors while rendering actual service for the corporation for pay, will be covered employees unless the officer or member of the board of directors owns at least 15 percent of the issued and outstanding stock of the corporation.

Until recently, many physician groups excluded their physician owners from workers compensation coverage, which resulted in significantly lowered premiums, and they typically had better coverage on other plans through their health, life and long-term/ short-term disability insurance policies. On the other hand, the new law will now force owners and their associated compensation to be included in workers compensation coverage unless they’re a 15% owner of the outstanding stock.

This new law may work out for small medical groups where the requirement of at least 15% ownership is easily met so that the owners can be excluded. However, it may not fair so well for groups that don’t meet these new criteria. This may result in big increases to premiums.

We’re on top of this critical issue and will help you deal with this new challenge and be sure negotiate with your current carrier and survey the market for lower cost solutions while sustaining the proper coverage.

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