Monopolistic States and Workers’ Compensation Insurance

In the United States, most employers can purchase workers' compensation insurance from private insurers, but a few states operate under a monopolistic system. In these states, employers are required to buy workers' compensation coverage exclusively from a state-run fund, with no private insurance competition allowed. The four monopolistic states are Ohio, North Dakota, Washington, and Wyoming.

What Are Monopolistic States?

Monopolistic states have a government-owned workers' compensation fund that serves as the sole provider of workers' compensation insurance. This means private insurers cannot offer workers’ compensation coverage in these states, and employers must obtain their policies directly from the state fund.

Why Do Monopolistic Workers’ Compensation Systems Exist?

The primary reason for the existence of monopolistic workers' compensation systems is to ensure that all employers have access to workers' compensation insurance, regardless of industry or company size. This system provides a standardized level of coverage and benefits for injured workers, removing the variability that can come with private insurance markets. Additionally, state-run programs help stabilize costs and minimize market-driven pricing fluctuations.

The Four Monopolistic States

Each of the four monopolistic states has its own workers’ compensation fund with specific rules and regulations:

Ohio – Employers must purchase coverage through the Ohio Bureau of Workers' Compensation (BWC), which is one of the largest exclusive state funds in the country. Ohio also offers various incentive programs for workplace safety.

North Dakota – The state-run fund, Workforce Safety & Insurance (WSI), is the sole provider of workers' compensation insurance. North Dakota prohibits private insurers from selling workers’ compensation policies.

Washington – Employers must buy coverage from the Washington State Department of Labor & Industries (L&I). However, Washington does allow certain large employers to self-insure if they meet specific financial requirements.

Wyoming – The Wyoming Department of Workforce Services operates the state’s workers' compensation fund, ensuring that all employees have access to standardized benefits.

Implications for Employers–Inflexib

Operating in a monopolistic state means employers must comply with state-specific regulations and premium structures. Unlike competitive markets where businesses can shop for the best rates among private insurers, employers in these states must adhere to the rates and policies set by the state fund. Additionally, because private insurers cannot compete, employers may have limited options for customizing their coverage.

Conclusion

Monopolistic workers' compensation states maintain exclusive state-run funds to provide uniform coverage and benefits for injured workers. While this system ensures consistency and stability, it limits employer choice and competition. Businesses operating in Ohio, North Dakota, Washington, or Wyoming must understand their state’s regulations and work closely with their respective state agencies to ensure compliance and proper coverage.