Monopolistic Workers' Comp States: Which States Require the State Fund

8/22/2026

In most of the country, an employer buys workers' compensation from whichever licensed insurer offers the best terms, or self-insures if it qualifies. In four states, that choice does not exist. North Dakota, Ohio, Washington and Wyoming are the monopolistic states: workers' comp coverage for employers in those states comes from the state's own fund, and private insurers cannot write it.

For an employer based entirely in one of those states, this is simply how workers' comp works there. The complications arrive for multi-state employers, and they show up in three places: a private policy that does not cover the monopolistic state, a missing layer of employer's liability coverage, and payroll reporting that runs on a different schedule, and sometimes a different basis, from the rest of the company. This guide explains each and what payroll and HR should set up.

What "Monopolistic" Means

Workers' compensation is a state system. Each state decides how employers satisfy their obligation to provide benefits, and states have taken three broad approaches:

Competitive states, where private insurers write coverage, often alongside a competitive state fund or an assigned-risk market for employers that cannot find coverage. This is most of the country.
States with a competitive state fund, where a state-created insurer competes with private carriers. The fund exists, but it is one option among several.
Monopolistic states, where the state fund is the exclusive source of insured coverage. Private carriers are shut out of the workers' comp market itself.

North Dakota, Ohio, Washington and Wyoming are the four monopolistic states. NCCI identifies these four as administering their own rating plans and rates, and a 2023 memo from Wyoming's Legislative Service Office describes Wyoming as "one of four states (North Dakota, Ohio, Washington, and Wyoming)" that require coverage through the state fund rather than the voluntary competitive market. North Dakota's Workforce Safety & Insurance (WSI) states directly that North Dakota law does not allow private insurers to underwrite workers' compensation in the state and that WSI is the sole provider.

Lists of monopolistic jurisdictions sometimes include U.S. territories as well. If you have operations outside the 50 states, check the territory's own rules.

The Four States at a Glance

The monopolistic states share the exclusive-fund model, but they differ in who must be covered, whether self-insurance is allowed and how premium is calculated.

State	Fund	Self-insurance	Notable feature
North Dakota	Workforce Safety & Insurance (WSI)	Not available for employers required to have coverage	WSI is sole provider and regulator
Ohio	Ohio Bureau of Workers' Compensation (BWC)	Available to qualifying employers	Optional Other States Coverage offered for out-of-state work
Washington	Department of Labor & Industries (L&I)	Available to qualifying employers	Most premium based on hours worked; workers pay part of it
Wyoming	Workers' Compensation Division, Department of Workforce Services	Not available for employers required to have coverage	Coverage compulsory only for extra-hazardous employment

North Dakota

WSI is both the insurer and the regulator. Coverage for owners, partners and corporate officers is optional: WSI says an employer may purchase elective coverage for itself and for employees otherwise exempt. WSI also notes it may provide limited coverage for North Dakota-based employees working outside the state for no more than 30 consecutive calendar days, and offers an optional All States Coverage program for employees working temporarily in other states. See our North Dakota workers' comp page.

Ohio

Ohio employers obtain coverage through BWC unless they qualify to self-insure, and BWC administers the self-insurance program as well. BWC also offers an optional Other States Coverage arrangement for Ohio employers whose employees work outside Ohio. See our Ohio workers' comp page.

Washington

Washington is the most different from the rest of the country, and payroll teams feel it directly. According to L&I:

Most risk classifications and premiums are based on hours worked, not payroll dollars.
Workers share the cost. Employees pay half of the Medical Aid Fund, Stay at Work Program and Supplemental Pension Fund portions; the employer pays the entire Accident Fund portion. Employers collect the employee share through payroll deduction, and L&I warns that withholding more than the authorized amount is illegal.
There is no minimum premium; employers report no hours when no one works.
Experience factor changes are generally capped at 25% a year, and small firms can receive claim-free discounts.

That means a Washington employee needs an hours-based workers' comp calculation, an employee deduction and quarterly reporting to L&I, none of which exist in the rest of a typical multi-state payroll setup. See our Washington workers' comp page.

Wyoming

Wyoming's coverage requirement is narrower than most states'. Coverage is mandatory only for employment the statute defines as "extra-hazardous," which covers a long list of industries, and employers in other occupations may elect coverage. For employers required to have coverage, the state fund is the only source and self-insurance is not an option. The Wyoming Legislative Service Office notes that Wyoming and North Dakota are the only two states that do not allow employers required to have coverage to self-insure. See our Wyoming workers' comp page.

The Gap: Employer's Liability

The standard workers' compensation and employer's liability policy used in competitive states has two main coverage parts. Part One pays the statutory workers' comp benefits. Part Two, employer's liability, pays damages the employer becomes legally obligated to pay because of an employee's work injury, in the situations where the employer can still be sued despite the exclusive-remedy rule: third-party-over claims, consequential injury claims by family members, dual-capacity claims and similar cases.

Monopolistic state funds provide the statutory benefits. They are widely reported not to provide the Part Two employer's liability coverage that a private policy includes. An employer in a monopolistic state that relies only on the state fund therefore has its statutory obligation covered but may have no insurance for the lawsuits Part Two normally handles.

The usual solution is stop-gap employer's liability coverage, purchased from a private insurer. It is most often added by endorsement to the employer's commercial general liability policy, though it can be written in other ways. It responds to bodily injury to employees by accident or disease, with limits per accident, per employee and in the aggregate, mirroring the structure of Part Two.

Practical points:

Check the CGL itself. A standard general liability policy excludes injury to the insured's own employees. Stop gap must be specifically added; it does not come with the CGL automatically.
Match the limits to what your contracts require. Owners and general contractors often specify employer's liability limits, and a certificate showing state fund coverage alone will not satisfy that requirement.
Cover every monopolistic state where you have employees, not just your home state.
Coordinate with any umbrella. Umbrella and excess policies often require employer's liability as an underlying coverage. Confirm that stop gap is scheduled as underlying insurance.

Our companion guide to employer's liability explains Part Two coverage in detail.

What Multi-State Employers Must Set Up

The most common failure is an employer with a private multi-state policy that assumes it covers everywhere. It does not cover the monopolistic states.

Private policies cannot provide coverage in monopolistic states. Private carriers cannot write workers' comp in those states, so a private policy's other-states coverage is not a substitute for state fund coverage. When an employee begins working in North Dakota, Ohio, Washington or Wyoming, the employer needs its own account with that state's fund (or qualified self-insurance where the state allows it).

The trigger is where the work is performed and where the employee is based. Each state has rules on when an out-of-state employer must cover an employee working there, and when temporary work is covered by the home state's coverage. Extraterritorial and reciprocity rules vary and change. Confirm with the state fund before a project begins, not after the first injury.

Payroll must be split by state. Each fund needs its own report of payroll or, in Washington, hours. The private carrier must also be told which payroll belongs to the monopolistic state so it is not charged twice. That requires state work location data in payroll that is accurate at the employee level, not just at the company level.

Reporting runs on the fund's calendar. State funds have their own reporting and payment schedules, separate from the private policy's audit. Build them into the payroll compliance calendar alongside the other state filings.

Add stop gap. As covered above, for every monopolistic state with employees.

Certificates look different. Owners and general contractors familiar with ACORD certificates from private carriers may not recognize a state fund certificate. Expect to explain it, and expect to show the stop-gap coverage on the CGL certificate.

For the wider multi-state picture, our Multi-State Payroll Tax Compliance webinar covers the payroll tax side of working across state lines, which runs on similar work-location data.

Experience Rating and Class Codes in Monopolistic States

Because each monopolistic fund sets its own rates and rating plans, NCCI's experience mod does not apply to work in those states, and their classification systems are their own. A multi-state employer will therefore have a separate experience rating outcome in each monopolistic state, calculated under that fund's rules. Washington's hours-based system and its 25% annual cap on experience factor changes are one example of how differently the funds can work.

Do not assume an NCCI class code carries into a monopolistic state, and do not compare a monopolistic state's rating factor with an NCCI mod as though they measured the same thing. Our guides to calculating workers' comp premiums and the payroll professional's role in workers' comp cover the mechanics in competitive states.

What Payroll and HR Should Own

Monopolistic states are mainly a data and calendar problem for payroll. A sound setup includes:

Accurate work-state data for every employee, updated when assignments change
A separate account with each monopolistic state fund where you have employees
In Washington, an hours-based calculation and a capped employee deduction for the worker share
A reporting calendar for each fund
Payroll excluded from the private carrier's premium basis for work covered by the state fund, with records to prove it
Confirmation from your broker that stop-gap employer's liability is in force for each monopolistic state
Benefit payments to injured employees handled according to the fund's process (see our guide to processing workers' comp payments through payroll)

Frequently Asked Questions

What are the four monopolistic states for workers' comp?

North Dakota, Ohio, Washington and Wyoming. In each, workers' compensation insurance comes from the state fund (North Dakota's Workforce Safety & Insurance, the Ohio Bureau of Workers' Compensation, Washington's Department of Labor & Industries and Wyoming's Workers' Compensation Division) rather than from private insurers. Ohio and Washington allow qualifying employers to self-insure; North Dakota and Wyoming do not allow self-insurance for employers required to carry coverage. Some U.S. territories also operate exclusive systems, so check separately if you have employees outside the 50 states.

Can I buy private workers' comp insurance in a monopolistic state?

No, not for the statutory workers' compensation coverage itself. Private insurers cannot write workers' comp in the monopolistic states, which is the defining feature of those states. Coverage comes from the state fund, or from self-insurance in states that allow it. Private insurers can, however, sell the employer's liability coverage the funds do not include, usually as stop-gap coverage endorsed onto a general liability policy. Private carriers may also offer products for out-of-state exposure, but those do not replace the state fund for work in the monopolistic state.

What is stop-gap employer's liability coverage?

Stop gap is employer's liability insurance for employers in monopolistic states. Because the state funds pay statutory workers' comp benefits but are widely reported not to include the employer's liability coverage found in Part Two of a standard private policy, employers buy it separately from a private insurer. It is commonly added to a commercial general liability policy by endorsement and covers lawsuits arising from employee injuries, such as third-party-over and consequential injury claims. Confirm the limits match your contract and umbrella requirements.

Does my multi-state workers' comp policy cover employees in Ohio or Washington?

Generally not. A private policy's other-states coverage cannot extend into states where private insurers are not permitted to write workers' comp. If you have employees working in North Dakota, Ohio, Washington or Wyoming, you usually need your own account with that state's fund, subject to each state's rules on temporary out-of-state work. Contact the state fund before work begins. Then make sure the payroll for that state is reported to the fund and excluded from your private policy's premium basis.

Why do Washington employees have workers' comp deducted from their paychecks?

Washington's system has workers share part of the premium. According to the Department of Labor & Industries, employees pay half of the Medical Aid Fund, Stay at Work Program and Supplemental Pension Fund portions, while the employer pays the full Accident Fund portion. Employers collect the employee share through payroll deduction based on hours worked, using the rates on their rate notice. Deducting more than the authorized employee share is illegal, so the deduction must be calculated exactly. Do not carry a workers' comp deduction into any other state without first confirming that state's law permits it.

Is Texas a monopolistic state?

No. Texas is unusual in a different way: most private employers there may choose not to carry workers' compensation, becoming "nonsubscribers," but those that do carry it buy from private insurers or the competitive market, not an exclusive state fund. Texas nonsubscribers must file an annual notice with the Division of Workers' Compensation and notify employees. That is the opposite of a monopolistic system, which mandates coverage and specifies where it must come from.

Learn the System Behind the Rules

Monopolistic states are easiest to handle when the people setting up payroll understand how workers' compensation is structured in the first place: who provides coverage, what the policy covers and what it leaves out. The How Workers' Compensation Works program is a foundation for HR and payroll staff taking on workers' comp responsibilities. For state-specific details, see our pages for North Dakota, Ohio, Washington and Wyoming, and our workers' comp FAQs.