The $5,000/Year Compliance Scam
What I learned buying workers' comp for my first employee
Today I tried to buy workers’ compensation insurance.
NEXT Insurance quoted me $412/month.
I paid $18.67/month.
Same coverage. Same carrier (The Hartford). Same employee.
The dark pattern:
Search “workers comp” → Land on their site → Every flow funnels to $400/month “Business Insurance Bundle.”
That bundle includes professional liability, general liability, errors & omissions, and workers’ comp buried inside.
Standalone workers’ comp for one office employee? $15-30/month.
They make a 10x margin on bundles vs. commodity WC.
22x markup for coverage you don’t need.
The fix:
Your payroll provider already has standalone workers’ comp. Gusto, ADP, Paychex - they all offer it. No upsell. Real rates. Same carriers.
I clicked one button in Gusto. Policy active. Done.
While I was at it, CorpNet (compliance provider I had used to business registration in MA) tried to sell me this:
“Annual Meeting Minutes” - $205
Actual cost: $0. Written consent replaces formal minutes. The consent IS the record.
Delaware Annual Report - $352
Actual cost: $50-225. File direct at corp.delaware.gov.
MA Annual Report - $259 (on top of $500 state fee)
You file direct, you just pay the state fee
The compliance industry makes money by wrapping simple tasks in scary language.
A few more things while we’re here:
Owner exemption (Form 153)
If you own 25%+ of your C-Corp, you can exempt yourself from workers’ comp.
File Form 153 with your state. MA founders: email DIAForm153@mass.gov.
You’re required to cover employees, not yourself as an owner. This saved me from paying double.
Labor law posters
Gusto wants $12/mo to email you poster PDFs. $144/year for something you can do yourself in 5 minutes.
For remote employees, emailing PDF posters satisfies the DOL requirement.
Download federal posters (dol.gov/agencies/whd/posters) and your state posters, email to your team, save in your HR folder.
Cost: $0.
The irony: Gusto is great for workers’ comp (no upsell, real rates). Then they turn around and try to sell you a poster subscription. Everyone’s got their margin game.
The math on why standalone WC is so cheap
Software/office work = class code 8810 = $0.04 per $100 payroll.
A $100K employee = $40/year in actual risk premium.
Minimum premium floors push it to $200-500/year.
Still nowhere near $412/month.
The bundle sites know this. That’s why they bury standalone WC and funnel you to bundles.
For H1B founders specifically:
You’re a W-2 employee of your own company on an H1B. But you’re also 25%+ owner = you can exempt yourself with Form 153.
Your first hire (even H1B sponsored) MUST be covered. No exceptions.
Don’t restructure your cap table to make your spouse exempt. $300/year for coverage isn’t worth 25% equity dilution. Just pay it.
The numbers:
What I almost paid: ~$5,000/year
What I actually paid: ~$600/year1
Savings: $4,400/year
The fix: Your payroll provider already has standalone workers’ comp. Use that.
You shouldn’t have to learn this the expensive way.