Key Takeaways
- Arkansas law allows sole proprietors, partners, and LLC members to opt out of workers’ compensation — but opting out doesn’t mean health insurance will cover you.
- Some health insurance policies include work-related injury exclusions that allow the insurer to legally deny claims from on-the-job accidents.
- Workers’ comp covers lost wages, permanent disability, and death benefits — none of which health insurance touches.
- In Arkansas, opting out isn’t as simple as just skipping the policy — it requires a formal Certificate of Non-Coverage filed with the state.
- Before opting out, get specific answers about your policy’s exclusions and your income protection plan.
The Assumption That Could Cost You Everything
Every week, I talk to Arkansas business owners who’ve made the same call: skip workers’ comp, pocket the savings, and lean on health insurance if something goes wrong.
It sounds reasonable. Arkansas law does allow sole proprietors, partners, and LLC members to opt out of workers’ compensation coverage. Health insurance covers medical bills. So why pay for both?
Here’s where it falls apart.
First, Know What Arkansas Law Actually Requires
Before we get to the health insurance gap, it helps to understand where you stand legally.
Arkansas workers’ comp requirements aren’t one-size-fits-all:
- Most businesses: Workers’ comp is mandatory once you have 3 or more employees
- Construction: Coverage is required with just 2 or more workers
- Subcontractors: Must carry coverage with even 1 employee
- Sole proprietors, partners, and LLC members: Not required to cover themselves, but must formally opt out if they want that exclusion documented
That last point surprises a lot of people. In Arkansas, opting out isn’t passive — it requires filing Form AR-A with the Arkansas Workers’ Compensation Commission, submitting a notarized affidavit, and paying a $50 fee to receive a Certificate of Non-Coverage (CNC). Without that certificate, your coverage status can be ambiguous — which creates its own problems.
What Workers’ Comp Covers That Health Insurance Doesn’t
Most people think workers’ comp is just about doctor bills. It’s not. Workers’ compensation covers a much broader range of losses — most of which your health plan will never touch:
- Lost wages while you’re out recovering
- Vocational rehabilitation if your injury prevents you from returning to your trade
- Permanent disability benefits if the damage is long-term
- Death benefits for your family
If you’re a sole proprietor or small business owner in Northwest Arkansas, losing six weeks of income isn’t just inconvenient — it could end the business. Health insurance doesn’t replace a single dollar of that income. For most business owners I talk to, the wage-replacement piece hits harder than anything else. We think about whether the ER visit gets covered. We rarely think about what happens when we can’t work for two months.
The Fine Print That Changes Everything
Here’s something that catches people off guard — and it’s already acknowledged across the insurance industry in Arkansas.
Multiple Arkansas insurance sources warn directly: your personal health insurance plan might exclude workplace injuries. This isn’t a fringe concern. It’s a documented feature of some health policies called a work-related injury exclusion (also called an occupational injury exclusion).
In plain terms: if you’re hurt on the job and your health plan includes this clause, your insurer can legally deny the claim. Their reasoning — backed up by courts in multiple states — goes like this: workers’ compensation exists specifically to cover work injuries. You had the option to carry it. You chose not to. Therefore, your health plan shouldn’t be responsible.
I called my own health insurance agent to ask about this directly. Her answer: my specific policy doesn’t have that exclusion — but some do. And the ones that do can legally deny your claim if you were injured at work.
That’s not a hypothetical. That’s a documented outcome that has happened to real people who made the same assumption you might be making right now.
https://labor.arkansas.gov/wp-content/uploads/laqabrochure.pdf
The Stakes Are Higher in Arkansas Than You Might Think
One more thing worth knowing: Arkansas takes workers’ comp compliance seriously.
If you do have employees and fail to carry required coverage, the penalties aren’t just a slap on the wrist. Non-compliance can mean fines up to $10,000, a Class D felony conviction, and personal liability for every dollar of an injured employee’s costs — medical bills, lost wages, all of it.
That’s a very different conversation than “I saved a few hundred dollars a year on premiums.”
So Should You Opt Out of Workers’ Comp?
Maybe. But you need real answers first — not assumptions.
Before you opt out, get specific answers to these three questions:
- Does your health insurance policy include a work-related injury exclusion? Call your agent and ask directly. Get the answer in writing.
- If you’re injured and can’t work, what covers your income? If the answer is “nothing,” that’s a problem worth solving before something happens.
- If your injury is permanent, what’s your plan? Permanent disability benefits don’t come from health insurance. Ever.
If you can’t answer all three confidently, you’re not really opting out of workers’ comp — you’re just hoping nothing goes wrong.
The Bottom Line
Opting out of workers’ comp in Arkansas is legal. But legal and smart aren’t always the same thing.
The savings are real — and for a small owner-operator in Bentonville or anywhere in Northwest Arkansas, that matters. The risk is also real: medical claims that get denied, income loss with no safety net, and benefits your family never sees.
One conversation with an insurance professional who can look at your actual policies side by side is worth more than a year of saved premiums — if it keeps you from making a decision based on a wrong assumption.
Frequently Asked Questions
Does health insurance cover work injuries in Arkansas? It depends on your specific policy. Some health plans include a work-related injury exclusion that allows the insurer to deny claims from on-the-job accidents. This is a documented feature of certain policies — not a rare edge case. Check your policy or call your agent before assuming you’re covered.
Can Arkansas business owners opt out of workers’ compensation? Yes, but it’s a formal process. Sole proprietors, partners, and LLC members can opt out by filing Form AR-A with the Arkansas Workers’ Compensation Commission, submitting a notarized affidavit, and paying a $50 fee to receive a Certificate of Non-Coverage. Simply not buying a policy is not the same as formally opting out.
What is a work-related injury exclusion? A work-related injury exclusion (also called an occupational injury exclusion) is a clause in some health insurance policies that permits the insurer to deny coverage for injuries that occur on the job. Courts in multiple states have upheld these exclusions.
What does workers’ comp cover that health insurance doesn’t? Workers’ compensation covers lost wages, vocational rehabilitation, permanent disability benefits, and death benefits. Health insurance covers none of these — only medical expenses, and only if your policy doesn’t include a work-related injury exclusion.
How many employees do I need before workers’ comp is required in Arkansas? For most businesses, the threshold is 3 or more employees. Construction businesses must carry coverage with 2 or more workers. Subcontractors need coverage with even 1 employee. Sole proprietors and partners are not required to cover themselves but must file for a Certificate of Non-Coverage if they want that exclusion formally documented.
What are the penalties for not carrying workers’ comp in Arkansas? For businesses required to carry coverage, non-compliance can result in fines up to $10,000, a Class D felony conviction, and personal liability for all costs associated with an injured employee’s claim.
What should I do before opting out of workers’ comp in Arkansas? Ask your health insurance agent whether your policy includes a work-related injury exclusion. Identify what would cover your income if you were injured and couldn’t work. Then talk to an insurance professional who can review your actual policies side by side before you make the decision.
MBG Insurance works with Arkansas business owners on exactly these kinds of coverage questions — not to sell you something you don’t need, but to make sure you’re not making a costly decision based on a wrong assumption.
Call us before you opt out. One conversation could save you from a decision that costs far more than the premium you’re trying to avoid.
📍 Bentonville, AR | 📞 (479) 350-6862 | 🌐 www.mbinwa.com | ✉️support@millenniumbrokers.com www.millenniumbrokers.com/workcomp/
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