Monopolistic State Workers’ Comp: The 4 States and Rules

Four states require employers to buy workers’ compensation from a state-run fund instead of a private insurance company: North Dakota, Ohio, Washington and Wyoming. If you operate in one of them, or send drivers and crews through them, you cannot shop the private market for that coverage. This guide explains how the system works, what changes for multistate and trucking employers, and where stop-gap coverage fits.

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TL;DR

  • North Dakota, Ohio, Washington and Wyoming are the four monopolistic workers’ comp states, according to the Congressional Research Service.
  • In these states, covered employers buy from the exclusive state fund, or qualify as self-insured where the state allows it. Private carriers cannot sell competing coverage.
  • Coverage in your home state does not automatically cover workers who spend time in a monopolistic state. Check duration, residency and reciprocal agreements before the work starts.
  • Stop-gap (employer’s liability) coverage fills a gap the state fund does not cover, and employers in these states often need it.

Table of Contents

What “monopolistic” means for workers’ comp

A monopolistic state is one where the government fund is the only place a covered employer can buy workers’ compensation. The Congressional Research Service describes these as exclusive state funds: private insurers cannot sell competing workers’ comp policies in those four states.

The word describes the insurance market, not the benefits. Benefits and premiums are still set under state law in every state, monopolistic or not. What changes is who you buy from. In most of the country you compare carriers. In these four states you deal with one fund.

Is a monopolistic fund better or worse for employers?

It depends on your business. The Congressional Research Service notes that exclusive funds may have cost advantages because they are nonprofit and do not spend on advertising or customer acquisition the way private insurers do. The tradeoff is that a closed market places the fund in a monopoly position, so you have no competing quote to compare.

Which states are monopolistic for workers’ comp

The four states are North Dakota, Ohio, Washington and Wyoming. Each runs its own fund under its own rules, so the details differ.

North Dakota. The North Dakota Insurance Department describes the state as monopolistic and the North Dakota Workers Compensation Bureau as the exclusive provider of in-state coverage. The state’s employer guide says that, with limited exceptions, you must secure coverage through Workforce Safety & Insurance (WSI) before hiring full-time, part-time, seasonal or occasional employees. General liability, health and accident insurance are not substitutes.

Ohio. Employers go through the Ohio Bureau of Workers’ Compensation. Ohio law makes it hard to cover the risk privately: Ohio Revised Code 4123.82 voids contracts that insure or indemnify an employer against Ohio workers’ comp liability, while permitting insurance for risks in other states and certain specified Ohio arrangements.

Washington. The Department of Labor & Industries (L&I) states that Washington law does not allow private workers’ comp coverage. Employers get coverage through L&I or qualify as self-insured, subject to the state’s statutory exceptions.

Wyoming. The Wyoming Department of Insurance says the state is monopolistic and that most employers must get coverage through the Department of Workforce Services’ Workers’ Compensation Division. Employers who fall under a statutory exemption may obtain private coverage.

Notice the exceptions in every case. Self-insurance, specific exemptions and certain worker categories can change the answer for a particular business, so confirm your status with the state agency.

Four states and their workers compensation fund rules

Monopolistic funds vs. competitive state funds

Many readers confuse the two. A competitive state fund operates alongside private insurers, and you can choose either. The Congressional Research Service counts 18 states with competitive funds where employers may buy from the state fund or from private insurers. In the four exclusive-fund states, private insurers cannot sell competing coverage.

In practice, this changes how you buy. In a competitive market, you compare carriers on price, service, payment plans and claims handling. In a monopolistic state, the questions shift to classification accuracy, payroll reporting, safety programs that can affect your rate, and making sure you have the right add-on coverage around the fund.

How employers buy coverage in a monopolistic state

You do not request quotes from several carriers. You register with the state fund, report payroll by classification, and pay premiums to the fund. Each state has its own application, reporting schedule and account rules, so start from the agency’s official page for your state.

Three habits protect you:

Register before you hire. North Dakota’s guide ties coverage to the point you hire, not the point someone gets hurt. Washington and Ohio work the same way in spirit: an uninsured employer faces the state’s enforcement process, not just the cost of a claim.

Do not assume other policies count. North Dakota states explicitly that general liability, health and accident policies do not replace workers’ comp. The same logic applies elsewhere. If you want to understand where each policy ends, our guide on general liability versus workers’ comp covers the line between them.

Keep payroll and classifications accurate. Misclassified workers are one of the most common ways premiums go wrong, in any state.

Out-of-state employers and multistate crews

This is where most compliance mistakes happen. If your business is based in a competitive state and you send workers into a monopolistic one, your private policy may not satisfy that state.

What does North Dakota expect? North Dakota’s guide says employers with workers in the state must secure North Dakota coverage unless qualifying home-state coverage or a reciprocal agreement applies. It warns that coverage in your home state may not replace required North Dakota coverage. The guide also asks employers to weigh duration of the work, employee residence, where the contract was made, business contacts in the state and reciprocal agreements.

What does Ohio expect? Ohio BWC policy says Ohio coverage applies to employees hired specifically to work in Ohio, regardless of where the hiring contract was entered. Under Ohio Administrative Code Rule 4123-17-23, those employees must be reported under the Ohio fund. The same rule recognizes an out-of-state employer’s coverage for a nonresident employee working temporarily in Ohio for no more than 90 consecutive days, subject to the rule’s conditions.

What does Washington expect? Washington L&I’s employer guide says that if you send Washington workers temporarily to another state, or bring workers temporarily into Washington, you must examine both states’ rules. Washington coverage may extend beyond the state line, but the destination state may still require its own coverage. The guide also lists reciprocal agreements with Oregon, Idaho, Montana, North Dakota, South Dakota, Wyoming, Nevada and Utah. For temporary work, these agreements point to the worker’s home-state law, with varying limits.

Why this matters for trucking. A driver who crosses a monopolistic state on an interstate run is in a different position from a crew that stays and works there. Domicile, where the driver is hired and dispatched, and how long work in the state lasts all matter. Because the rules differ by state and by worker, confirm your specific routes and base locations with each state agency or a licensed professional before you rely on your home-state policy. Our breakdown of workers’ comp versus occupational accident coverage for truckers helps owner-operators and carriers sort out which protection applies to which worker. If you haul through Ohio, our pages on trucking insurance in Ohio cover the other coverages you need there.

Out-of-state employers and multistate crews — overview diagram

Stop-gap coverage: the piece the state fund leaves open

State workers’ comp generally replaces the right to sue an employer over a work injury, but gaps and exceptions exist, such as lawsuits brought by third parties connected to the injury. Stop-gap coverage, also called employer’s liability, is additional coverage for defense costs and damages from a third-party lawsuit over an employee’s work-related injury. A Washington state FAQ says it is provided for employees in North Dakota, Ohio and Wyoming, and notes that employees living there may want it if they need employer’s liability coverage.

The same FAQ, as of July 1, 2018, listed stop-gap limits of $1,000,000 for bodily injury by accident per accident, $1,000,000 for bodily injury by disease per employee and $1,000,000 for bodily injury by disease policy limit. Treat those as an example of how limits are structured, not a quote for your business. Limits and availability vary by policy and carrier.

Who should ask about it? Any employer with employees in North Dakota, Ohio or Wyoming, including out-of-state businesses that put workers there. Washington is notable here: it was not on that list of stop-gap states in the FAQ, so confirm what applies to your situation.

How rates and classifications work

Rates are state-specific, so a rate in one monopolistic state tells you little about another. Wyoming’s legislative memorandum gives a clear look at one model. The Department of Workforce Services uses a consulting actuary, who recommends industry base rates drawn from claims and payroll. Wyoming classifies employers using the North American Industry Classification System (NAICS), charges new employers the base rate for three years and then applies experience rating. Statutory limits constrain annual changes: the memorandum says base-rate increases and decreases are capped at 50 percent under the cited statute.

The takeaway applies everywhere. Your classification, payroll and claims history drive your premium, and in a monopolistic state you cannot move to another carrier if you disagree. That makes accuracy and safety programs more valuable. For a sense of how trucking premiums are built in the broader market, see what U.S. trucking fleets pay for workers’ comp.

Where Diamondback fits

We cannot place workers’ comp in North Dakota, Ohio, Washington or Wyoming, because the state fund is the only source. What we do is help you cover everything around it. Through Diamondback you can compare instant online quotes from multiple insurers for trucking insurance, general liability and other business coverages. For your operations in other states, our workers’ compensation quote page lets you start a quote online. If you want to see how requirements differ across the map, start with our workers’ comp requirements by state guide.

Our perspective

We see the same pattern with fleets and small contractors. An owner reads that workers’ comp is required, buys a policy in the home state, and assumes it covers every job. Then a crew takes a project in Ohio, or a driver is hired out of a North Dakota terminal, and the policy turns out not to satisfy that state’s fund.

Our advice is plain. Map where your people live, where they are hired and where they work. Treat each monopolistic state as its own compliance task, with its own registration and reporting. Ask about stop-gap coverage early, not after a lawsuit. And keep the rest of your program, such as liability, cargo and auto, strong, because the state fund only answers for the injury claim, not for the business risks around it.

The fastest way to lose money here is to assume. The cheapest way to avoid it is one phone call to the state agency before the work begins.

— Vladimir

FAQ

Which states are monopolistic for workers’ comp?

North Dakota, Ohio, Washington and Wyoming. In each, covered employers must buy from the state fund or qualify under a statutory exception such as self-insurance, as the Congressional Research Service notes. Private insurers cannot sell competing coverage in those states.

Which states are not monopolistic?

The other 46 states allow private insurers to sell workers’ comp. Eighteen of them also have a competitive state fund that competes with private carriers, according to the Congressional Research Service. Rules on who must carry coverage still vary by state.

Can I use my home-state policy for workers in a monopolistic state?

Sometimes, for temporary work, but not automatically. Ohio, for example, recognizes an out-of-state employer’s coverage for a nonresident employee working temporarily in the state for up to 90 consecutive days under its administrative rule, subject to conditions. Employees hired specifically to work in Ohio must be reported under the Ohio fund.

Do I need stop-gap coverage?

If you have employees in North Dakota, Ohio or Wyoming and want protection against third-party lawsuits over work injuries, ask about it. A state FAQ describes it as covering defense costs and damages from those suits. Your licensed agent or the state agency can confirm what applies to you.

Sources

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