Which of the following is true about the funding of workers' compensation?

The statement that it varies by state and is funded through insurance premiums is accurate and reflects the nature of workers' compensation funding. Workers' compensation is a state-based program, meaning each state sets its own laws and regulations regarding the system, including how it is funded.

Most commonly, workers' compensation is funded through insurance premiums that employers must pay. Employers can purchase insurance from private companies or may be required to provide coverage through state-run insurance programs. This system ensures that funds are available to compensate workers for job-related injuries or illnesses, with the premium costs often influenced by the industry type and the claims history of the employer.

In contrast, the other options do not accurately represent how workers’ compensation is funded or organized. For instance, it is not entirely funded by the federal government; while there may be federal guidelines impacting the program, it primarily operates at the state level. Also, employers are generally required to participate in workers’ compensation, either by obtaining insurance or by self-insuring, which makes the third option incorrect. Lastly, it is not typically funded through employee payroll deductions, although some states might have adjustments related to healthcare or disability insurance, this does not apply to the primary workers' compensation funding structure.