Monopolistic state funds: workers' comp in ND, OH, WA and WY

Four states, North Dakota, Ohio, Washington and Wyoming, run workers' compensation through an exclusive state fund. If you have covered employees working there, you buy the coverage from the fund (or, in Ohio and Washington, qualify to self-insure), not from a private insurer. A fund policy pays the statutory comp benefits only, so you need a separate "stop gap" endorsement for employers' liability.

Which states are monopolistic

NCCI's ABCs of Experience Rating names "four monopolistic states (North Dakota, Ohio, Washington, and Wyoming)," and Washington's Department of Enterprise Services uses the same list in its out-of-state workers' comp guidance. A monopolistic state fund is the only seller of the statutory coverage in the state. Private carriers write workers' comp everywhere else, usually alongside a state-run fund that acts as a competitor or insurer of last resort (see assigned risk and residual markets for workers' comp).

Two U.S. territories also run government-owned systems: Puerto Rico's Fondo del Seguro del Estado and the U.S. Virgin Islands' Workers' Compensation Trust Fund. Trade sources call both monopolistic, but we could not confirm from the territorial agencies that private insurers are barred, so this guide stays with the four states.

The self-insurance column rests on a June 2023 Wyoming Legislative Service Office memo, which says Wyoming and North Dakota "are the only two states that do not allow employers required to have coverage to self-insure or join a self-insurance group." Ohio's rules are in R.C. 4123.35, and Washington says plainly that employers "must purchase industrial insurance through L&I (or be self-insured through L&I)."

How each fund works

Ohio

Under R.C. 4123.35(A), every private employer pays premiums into the state insurance fund. A self-insuring employer must show enough financial ability to pay compensation and medical benefits directly. The statute lists factors such as two years of operating in Ohio (waivable), CPA-certified financial records for the current and previous four years, and an application at least 90 days before the new status takes effect. Under R.C. 4123.01, employees of a contractor or subcontractor that has not paid its BWC premium are treated as employees of the party that hired that contractor, which matters if you hire subs without checking their BWC certificates. For late premium assessments the administrator may add a fee of up to $500 plus interest-based penalties.

Washington

Washington is the one that surprises employers from other states. L&I's overview says premiums are set by risk classification and, for most purposes, charged on hours worked, not payroll. Employers report hours quarterly, even for a quarter with no hours. A portion of the premium (half of the Medical Aid rate, plus the Stay at Work and Supplemental Pension amounts) may be recovered from employees through payroll deduction. L&I notes that businesses that skip the deduction still owe the full premium. L&I describes an experience factor built from the prior three years of hours and claims. It also notes the state fund is financed only by employer premiums, with no general tax revenue.

North Dakota

WSI's employer pages say that, with limited exceptions, North Dakota businesses must carry workers' comp "prior to hiring their first employee." WSI sets rates and handles claims, and since the state allows no self-insurance, every covered employer is in the fund. WSI has a separate page for employers working across state lines.

Wyoming

Wyoming's quirk is coverage scope. The mandate applies only to "extra-hazardous" employment defined by industry code in W.S. 27-14-108(a) through (h). Employers whose work falls outside that list may elect fund coverage or may buy from a private carrier, according to the 2023 legislative memo. Wyoming, Texas (see texas nonsubscribers: opting out of workers' comp) and South Dakota (see South Dakota) are therefore not "pure" mandate states, which is why Wyoming appears in some lists of states without a general mandate. A Wyoming employer outside the extra-hazardous list that buys from a private carrier gets a standard policy with Part Two, so stop gap matters mainly for fund accounts.

What a fund policy does not cover

State fund coverage pays statutory benefits: medical care, wage replacement, disability and death benefits. It does not include the employers' liability protection that Part Two of a standard NCCI policy (WC 00 00 00) supplies in competitive states. employers' liability answers lawsuits that fall outside the exclusive-remedy bar, such as a third party suing you for indemnity after paying an injured worker, or a spouse's loss of consortium claim.

Employers fill the hole with a stop gap coverage endorsement. Without it, an uncovered suit comes straight out of company funds, and a general liability policy's standard employer's liability exclusion would not help. The details, including who sells it and how limits are set, are in stop gap coverage in monopolistic states.

What it means for a multistate employer

Employers with locations in both fund and private-market states generally run two programs. Say a hypothetical 40-employee HVAC contractor based in Pennsylvania sends crews to a job in Columbus for six months. The Pennsylvania private-market policy may cover those employees for statutory benefits elsewhere only if the policy's "other states" listing and state law allow it. Ohio is excluded from that listing by design. The contractor would typically have to register with Ohio BWC for the Ohio work, report Ohio payroll to the fund, and add stop gap coverage for the Ohio exposure. Washington's DES guidance for out-of-state employers makes the same point for Washington jobs. The mechanics are in employees in several states: other-states coverage and multistate workers' comp.

Checklist when you cross into a monopolistic state:

1. Confirm whether the state agency treats your visiting workers as covered under the fund, and whether temporary-work or extraterritorial exemptions apply.
2. Open an account with the fund before work starts, not after the first injury.
3. Get a certificate or clearance from the fund for your subcontractors. In Ohio you may be liable for their unpaid premium.
4. Ask your broker to add stop gap employers' liability for that state.
5. Tell your private carrier so the other-states listing and the audit are handled correctly.

Cost and pricing

State funds do not publish a single comparable price. Rates differ by class, and the funds use their own class systems and experience programs. NCCI's experience rating plan does not apply to the four funds, which administer their own plans, so a mod from another state does not carry over. See experience modification rate. Do not assume "monopolistic" means cheaper or costlier. Check the state's current rate announcements, and use the workers' comp premium calculator only as a rough orientation for payroll-based states, since Washington charges by hour.

Employers that qualify for self-insurance in Ohio or Washington usually have the financial strength, safety record and claims staff to run a program, and then buy excess coverage. See self-insuring workers' comp: requirements and trade-offs for how that decision works. Wyoming and North Dakota employers have no equivalent choice.

State rules shift. Look up your own state through workers' comp and benefits requirements by state, and read the state guides for Ohio, Washington, North Dakota and Wyoming for agency contacts and penalties.

Key takeaways

• North Dakota, Ohio, Washington and Wyoming sell workers' comp only through an exclusive state fund; private insurers cannot write the statutory coverage there.
• Ohio and Washington allow qualified self-insurance. North Dakota and Wyoming do not, per a June 2023 Wyoming legislative memo.
• Wyoming requires coverage only for extra-hazardous employment, and Washington premiums are based on hours worked rather than payroll.
• Fund policies leave out employers' liability, so buy stop gap coverage separately and tell your broker whenever you start work in one of these states.
• Out-of-state employers working in a fund state must usually register with that fund, and Ohio contractors can be treated as the employer of a subcontractor's workers if the sub has not paid BWC premium.