Michigan Nursing Home Administrator (NHA) Practice Exam

Employers must provide coverage for worker's compensation through which of the following methods?

1. Purchasing insurance or self-insuring

2. Using government funds

3. Employee contributions

4. Outsourcing to third-party companies

The correct answer is: Purchasing insurance or self-insuring

The requirement for employers to provide coverage for worker's compensation is primarily fulfilled through purchasing insurance or self-insuring. This means that employers can either buy an insurance policy from a licensed insurer to cover potential work-related injuries or illnesses that employees might sustain, or they can choose to set aside financial reserves to pay for any claims directly without transferring the risk to an insurance company. Purchasing worker's compensation insurance transfers the risk from the employer to the insurance company, ensuring that employees receive benefits without the employer facing potentially crippling costs from claims. Self-insuring allows employers, typically larger ones with enough resources, to manage their claims directly. This flexibility in funding methods is essential because it helps to ensure that employees are protected and receive the necessary care and compensation for work-related injuries, which is a fundamental component of workplace safety laws. Other methods mentioned, such as using government funds, employee contributions, or outsourcing to third-party companies, are not standard practices for providing worker's compensation. Government funds are typically not available for this purpose, and relying on employee contributions can create a conflict with the no-fault nature of worker's compensation insurance, where employees do not have to prove fault to secure benefits. Outsourcing, while possible for claims administration, does not replace the