An employee is out of work for six weeks. Which policy pays?
The answer depends entirely on why they are out, and most employers have never mapped it. Work-related injury goes to workers’ compensation. Off-the-job injury or illness goes to short-term disability. Medical treatment goes through group health. Three different policies, three different carriers, three different claims processes — and the boundaries between them are where employers either leave a gap or pay twice for the same six weeks.
This article is about the seams. CFH Insurance Consultants is a benefits-only brokerage staffed by licensed insurance brokers — we place group health, disability, dental, vision and life, and we do not write workers’ compensation. But we spend a great deal of time on how the benefits side interacts with the comp side, because that is where our clients’ problems actually show up.
Workers’ Compensation Insurance Guide for Michigan Employers
- Workers’ comp covers work-related injury and illness. Nothing else.
- Michigan has no state disability program, so if you do not sponsor short-term disability, most non-work injuries produce unpaid time off.
- Michigan’s coordination-of-benefits provision lets employers offset certain employer-funded benefits against comp payments — but only if the plans are structured to allow it.
- Group health, FMLA and comp all run on different clocks, and the clocks do not synchronize themselves.
- The most common failure is not a coverage gap. It is an employee filing in the wrong place and nobody catching it.
The three policies, and exactly what each one does
Workers’ compensation
Covers injury and illness arising out of and in the course of employment. In Michigan it operates under the Workers’ Disability Compensation Act, administered by the state’s Workers’ Disability Compensation Agency. It is a no-fault system: the employee does not have to prove employer negligence, and in exchange gives up the right to sue the employer in most circumstances.
It pays medical treatment for the work injury in full, with no deductible or copay, plus wage replacement calculated on the employee’s after-tax average weekly wage, subject to a state maximum that adjusts annually.
Michigan requires most employers with employees to carry it. The thresholds turn on hours and headcount, and the exemptions are narrower than most owners assume — particularly around family members, corporate officers and workers classified as contractors. That is a question for your P&C broker and, if the classification is genuinely uncertain, your employment counsel.
Short-term and long-term disability
Covers everything workers’ comp does not: the off-the-job injury, the surgery, the difficult pregnancy, the cancer treatment, the mental health leave.
Short-term disability typically replaces around 60% of income for 12 to 26 weeks after a short elimination period. Long-term disability picks up where STD ends and can run to age 65 or Social Security normal retirement age.
This matters more in Michigan than in many states. California, New York, New Jersey, Rhode Island and Hawaii all run state temporary disability programs that pay employees during non-work medical leave. Michigan does not. If a Michigan employer does not sponsor short-term disability, an employee who has a knee replacement on a Saturday has no wage replacement at all beyond whatever PTO they have banked.
Group health
Pays for medical treatment of everything that is not the work injury. It keeps running during a comp claim — the employee still needs their blood pressure medication while their shoulder heals — which raises a question employers routinely get wrong, addressed below.
Where the three collide
Collision 1: the employee files in the wrong place
This is the most common and the most expensive. An employee hurts their back and is not sure whether it happened lifting at work on Thursday or moving furniture at home on Saturday. They file on group health because that is the card in their wallet. The group health carrier pays, then later discovers it was a work injury and seeks reimbursement. Meanwhile the comp claim was never reported, and Michigan has notice and filing deadlines that can prejudice a late claim.
The fix is unglamorous: a written, distributed, one-page explanation of which policy covers what, and a supervisor trained to report a possible work injury the day it is described to them — not the day it is confirmed.
Collision 2: paying twice for the same weeks
If you sponsor short-term disability and an employee is out on a workers’ comp claim, you can easily end up funding wage replacement twice for the same period.
Michigan’s coordination-of-benefits provision permits employers to reduce workers’ compensation payments by certain employer-funded benefits, including some disability and pension benefits. But it is not automatic. It depends on how the disability policy is written, who paid the premium, and whether the offset is properly applied.
Practically, the answer is usually to draft the STD policy so it does not pay while workers’ compensation is paying. That is a policy-language question, and it belongs in the conversation when you are placing or renewing disability coverage — not after a claim.
Collision 3: group health premiums during a comp leave
An employee on a workers’ comp claim is still your employee. Whether their group health coverage continues, and who pays the employee share while they are receiving no paycheck to deduct it from, is governed by your plan document and your leave policy — not by the comp carrier.
Employers get into trouble in two directions. Some terminate coverage prematurely, creating a COBRA notice obligation they did not realize they had triggered and, occasionally, a discrimination or retaliation exposure. Others continue coverage indefinitely, quietly absorbing the employee share, and discover eighteen months later that they have paid tens of thousands of dollars nobody authorized.
Decide the rule in advance, write it into the plan document and the handbook, and apply it consistently.
Collision 4: FMLA runs on its own clock
A workers’ comp absence and an FMLA leave can be the same absence. If you have 50 or more employees, FMLA likely applies, and its 12 weeks of protected leave run concurrently with comp — but only if you designate it. Employers who do not designate FMLA at the start of a comp leave frequently find they have given the employee twelve weeks of comp absence and then twelve more weeks of FMLA on top.
Designate at the outset. It is a form, and it is worth thousands.
Collision 5: return to work
Comp has a strong financial incentive to return an employee to modified duty. Your disability policy may define disability differently — “unable to perform the material duties of your own occupation” is a different test from what a comp adjuster is applying. An employee can be cleared for light duty under comp and still be disabled under an own-occupation LTD definition, or the reverse.
If you run a light-duty program, someone should have read both definitions.
What good coordination looks like
A Michigan employer with this handled has five things in place:
- A one-page employee explainer. Which policy covers what, who to call, what to do first. Distributed at onboarding and at open enrollment, not buried in a portal.
- Supervisor training on same-day incident reporting. Report the possibility, not the conclusion.
- Disability policy language that coordinates with comp. Reviewed at placement, not after a claim.
- A written rule on group health continuation during leave. In the plan document and the handbook, applied consistently.
- FMLA designation at the start of every qualifying absence. Concurrent by default.
None of this requires new spending. It requires somebody to own it.
Frequently asked questions
Does workers’ compensation cover an employee who gets sick with something they caught at work? Occupational disease is covered, but the standard is that the condition must arise out of the employment in a way that distinguishes it from ordinary community exposure. Ordinary illnesses circulating in the workplace generally are not compensable. This is fact-specific and contested often enough that it is a question for counsel rather than a rule of thumb.
Do we have to keep paying group health premiums while someone is on comp? Your plan document and leave policy govern that, not the comp carrier. FMLA independently requires maintaining group health on the same terms during protected leave. Beyond FMLA, it is your rule to write — write it down.
Can an employee collect short-term disability and workers’ comp at the same time? Frequently the disability policy is written to prevent it, and Michigan’s coordination provision may permit an offset. Whether it happens in your case depends on your specific policy language.
Is short-term disability worth it if we already carry workers’ comp? They cover entirely different things. Comp covers only work-related injury, which is a small fraction of the reasons employees miss extended time. With no Michigan state disability program, STD is what stands between an employee and unpaid leave for everything else.
Who should we call first when someone is injured? If it might be work-related, report it to your workers’ compensation carrier immediately, even if you are not sure. Reporting a claim that turns out not to be compensable costs you very little. Failing to report one on time can cost a great deal.
A note on what we do and do not handle
CFH Insurance Consultants is an independent employee benefits brokerage in Bloomfield Hills. We place and manage group health, dental, vision, life and disability coverage for Michigan employers, and we own the compliance that comes with it. We have been doing this since 1995.
We do not write workers’ compensation, general liability or commercial property coverage. You need a property and casualty broker for that, and we have no financial interest in which one you use. What we will do is make sure the benefits side is designed to fit alongside it rather than duplicate it.
If you want the disability and group health side reviewed against how your comp program actually works, that is a conversation worth having before your next renewal.
Sunny Connolly
Sr. Partner & Head of Growth and Partnerships
CFH Insurance Consultants
41000 Woodward Avenue, Suite 350 East, Bloomfield Hills, MI 48304
Call 248.370.8853 or book a 30-minute review.
This article is general information for Michigan employers, not legal advice. Workers’ compensation obligations, FMLA designation and benefits coordination are fact-specific — confirm your particular situation with your P&C broker and employment counsel.
