Maynard J. Keenan, You need to wake up to the times. The old adage you speak of does not work any more. If you are a legitimate contractor in any form, you are held accountable for every dollar you pay someone.
My certification authority does not allow me to have any 1099 employees. If they work for me, then they are my bona-fide employee. regardless if I have workman's comp or not, I am responsible for any injury's they receive on the job. Just one litigation before a Judge and you will soon realize you cannot afford to not pay for workman's compensation.
They are going to get you one way or another. I sleep good at night knowing I don't have to worry if my employee's are going to sue me for medical bills while hurt on my job.