A lot of Arkansas business owners I talk to have made the same call: skip workers’ comp, save some money, and lean on health insurance if something goes sideways.
It’s understandable. Arkansas law does allow sole proprietors, partners, and LLC members to opt out of workers’ compensation by filing for a Certificate of Non-Coverage through the Arkansas Workers’ Compensation Commission. So if coverage is optional and health insurance is already in place — why carry both?
Because that assumption might be wrong. And in Arkansas, there’s a court case that proves it.
What Workers’ Comp Covers That Health Insurance Doesn’t
Before we get to the legal issue, let’s clear up a common misconception: workers’ comp isn’t just about medical bills.
Workers’ compensation covers:
- Lost wages — up to two-thirds of your average weekly pay while you’re out of work
- Vocational rehabilitation if you can’t return to your trade or occupation
- Permanent disability benefits for long-term or career-ending injuries
- Death benefits for your family if the worst happens
Health insurance covers none of that. If you’re out of work for two months after a job-related injury, your health plan isn’t sending you a paycheck. For a business owner without a safety net, that gap can do serious damage fast.
The Arkansas Court Case You Need to Know About
Here’s where it gets important.
In Atkins v. Pilot Life Insurance Company (Arkansas Court of Appeals, 1982), a worker filed a workers’ compensation claim for job-related health conditions and settled for $15,000. He then turned to his employer’s health insurance plan to cover the remaining medical expenses.
The insurer denied the claim. Why? Because the health insurance policy included an exclusion for work-related injuries and illnesses.
The Arkansas Court of Appeals upheld that denial. The court’s reasoning was direct: Arkansas law doesn’t prohibit health insurers from excluding work-related injuries from coverage. If an injury is work-related, and the policy says work-related injuries aren’t covered, the insurer doesn’t have to pay.
That case is over 40 years old — but the exclusion it addressed is still written into some health insurance policies today.
The Work-Related Injury Exclusion: Plain-Language Version
The clause is usually called a work-related injury exclusion or occupational injury exclusion. It means your health insurer can refuse payment on any claim where the injury or illness arose from your job.
The logic insurers use: workers’ compensation exists specifically to cover on-the-job injuries. If you chose not to carry it — even if opting out was perfectly legal — your health plan may argue it has no obligation to fill that gap.
Some policies go further and exclude coverage if the employee could have had workers’ comp coverage but waived it.
This isn’t a loophole. It’s an enforceable contract provision that Arkansas courts have explicitly supported.
Arkansas-Specific Details Worth Knowing
A few things that matter if you’re running a business in Arkansas:
Who can opt out: Sole proprietors, partners, and LLC members may apply for a Certificate of Non-Coverage (Form AR-A) through the Arkansas Workers’ Compensation Commission. Corporate officers have a separate exclusion process through their insurer.
Where coverage thresholds matter: Arkansas generally requires workers’ comp when you have three or more employees — but construction businesses must have coverage with just two workers, and subcontractors with even one employee. Opting yourself out as an owner doesn’t change what’s required for your crew.
The employee threshold doesn’t protect you: Even if your business is small enough that coverage isn’t legally required, the question of whether your health insurance will cover a work injury still applies to you personally.
For more information: http://Arkansas Department of Labor, Workers Compensation Commission
Before You File That Opt-Out Form
Opting out isn’t the wrong call for every business owner. But it’s a decision that deserves more than a few minutes of thought.
Before you file for a Certificate of Non-Coverage in Arkansas, get clear answers on these:
- Does your health insurance policy include a work-related injury or occupational injury exclusion?
- If you’re hurt and can’t work for weeks or months, where does your income come from?
- If the injury causes permanent limitations, what’s your long-term plan?
If the answer to any of those is “I haven’t checked” or “I’m not sure,” that’s worth a conversation before you finalize anything.
The Bottom Line
Arkansas gives business owners the option to opt out of workers’ comp. That’s a legitimate business decision — but it’s not a risk-free one.
The savings from skipping coverage might be real. The risk of a health insurance claim denial for a work-related injury is also real, and an Arkansas court has already ruled that those denials can stand.
At MBG Insurance, we work with Arkansas business owners on exactly this kind of coverage question — not to sell you something you don’t need, but to make sure the gaps in your coverage don’t catch you off guard when it matters most.
MBG Insurance — Bentonville, AR | (479) 350-6862 | support@millenniumbrokers.com