Although workers’ compensation is a major business cost, it is not a tax. The law requires that every employer subject to the federal Workers’ Disability Compensation Act provide a way to assure that it can pay benefits to its workers injured on the job.

Most companies buy insurance to protect them from workers’ injury claims. With state permission, some financially sound employers are permitted to self-insure for this coverage by paying into a regulated pool.

Significant reforms in Michigan’s workers’ compensation system have resulted in lowered costs and increased efficiency. Under the reforms:

• An open competitive system allows employers to "shop around" for the least expensive insurance carrier.
• Eligible businesses can self-insure or join self-insurance pools allowing some companies to save as much as 50%.
• In five of the last seven years, workers’ compensation insurance rates have declined.