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.