Injuries or illnesses established as compensable under applicable workers’ compensation law require prescribed benefits be paid to the injured employee. Benefit limits and duration vary by jurisdiction but each state provides essentially the same three “classes” of benefits:
- Medical benefits;
- Disability/Indemnity benefits; and
- Death benefits.
Medical benefits are usually unlimited with no deductible. Payments are made to the point that the injured employee is cured and/or given maximum relief. Bills for service go directly to the workers’ compensation carrier and payment is made directly to the healthcare provider; the employee’s only responsibility is to follow the doctor’s orders.
Although the medical care provided, and the billing, are handled exclusively by the treating physician and the workers’ compensation carrier, states differ regarding physician choice. Twenty-one states require the employee to use the physician picked by the employer from among a list of “authorized” physicians. The twenty-nine remaining states plus the District of Columbia allow the employee to choose the physician, with some requiring periodic consultation with an insurer-chosen physician. But nineteen of the “employee-choice” states limit the employee’s options to physicians within a managed care type network.
Basic medical benefits are treated the same in every state. All statutes require medical costs, surgical fees, nursing care expense and medication costs necessary to “effect a cure and give relief” be fully paid by the workers’ compensation insurer. Additional medical benefits are the same in every state, but with jurisdictional nuances. Rehabilitative services are a prime example. Every state provides some form of rehabilitation benefit, but not necessarily to the same extent or in the same amount.
Rehabilitative service benefits can include medical rehabilitation, vocational rehabilitation and psychological rehabilitation. Some states include the cost of rehabilitation services within the auspices of the medical benefits making coverage unlimited, where other states provide a sub-limit in the form of a dollar amount (as a specific benefit limit or based on the percentage of disability) or as a time limit (maximum number of weeks or visits, etc).
Qualifying for rehabilitation services benefits requires the employee suffer “catastrophic injury” as defined by each state. Generally, a “catastrophic injury” requires some form of permanence. Rehabilitation services benefits pay, subject to any applicable sub limits:
- The cost of occupational rehabilitation necessary to return to maximum mobility and performance the injury will allow;
- For necessary modifications to the employee’s home allowing for maximum self-sufficiency;
- For modifications to the employee’s vehicle, such as the cost to affix a wheel chair lift, etc.; and
- The cost to modify the employee’s work space if able to return to work at the same employer.
If the employee is unable to return to work with his previous employer due to the unavailability of an accommodating position or the inability to offer a job to accommodate the employee’s limitations, vocational rehabilitation benefits are extended to cover:
- The costs of aptitude and interest tests to customize an education/training program to the employee;
- The costs necessary for the employee to learn new skills or enhance existing skills;
- The cost necessary to provide job search and interview skills; and
- The cost of job placement services.
Travel expenses to and from medical treatments are also paid under the medical benefit. Some states reimburse all mileage driven in the pursuit of medical treatment for work-related injury; others require the mileage to exceed a certain threshold (for example, North Carolina requires the round trip to be greater than 20 miles before mileage is reimbursed).
Injured employees may be totally unable to work or to garner the same pay as was earned prior to the injury, subjecting them to either a complete loss of income or a diminished lifestyle. Medical benefits coverage pays any and all medical bills arising out of an occupational injury or illness, but loss of income is a separate benefit paid at the direction of and in amounts mandated by workers’ compensation statutes.
Disability/indemnity benefits are subject to statutory minimum and maximum weekly payments, a maximum period of payments and/or a maximum amount of payments. These statutorily-defined limits are based on the severity of the injury and the expected term (length) of the resulting condition.
Injury severity is classified as either partial or total. The term of the injury is assigned to either temporary or permanent status. Benefit payments are based on the combination of these conditions as per the following examples:
- Temporary Partial: Defines an injury from which the employee is expected to completely recover in some period of time with no or only minor long-term effects. A broken arm is an example if this type of injury. Employees suffering temporary partial injuries can generally return to work under “light-duty” assignments until the “temporary” condition heals. Benefits for employees within this category of injury include medical benefits, lost wages and/or differential pay if income is lower due to light-duty assignment;
- Temporary Total: A full recovery from the injury is expected, but for a period of time the employee is completely unable to work due to the injury. These types of injuries might require bed rest or hospitalization while the employee heals. All medical bills are paid as are lost wages subject to minimum and maximum amounts once any required waiting period (discussed below) has been satisfied. Duration of benefits: Thirty-three states pay temporary total disability benefits for the duration of the disability; one limits payment to the point of “maximum medical improvement;” and the rest cut off payment at a specified number of weeks ranging between 104 and 500 weeks;
- Permanent Partial: The employee has suffered an injury from which he will never recover, but one that will not prevent him from returning to some type of work. Amputation of a finger or leg and the loss of an eye or ear are examples of this injury classification. Benefits paid include all medical costs, statutorily scheduled benefits based on the injury (i.e. 40 weeks for the loss of a thumb) and potentially rehabilitative service benefits. Duration of benefits: Nine states pay for the duration of the disability (which seems unusual since it is “permanent”); six limit payment to 500 weeks; three base the length of benefit payments on the percentage of impairment; and the remainder limit payment to a specified number of weeks ranging between a low of 200 weeks to a high of 1,500 weeks (almost 29 years); and
- Permanent Total: Recovery is not predicted; the employee is not expected to ever be able to return to work. Benefits paid will include medical bills to maximum cure and/or relief and lost wages. Duration of benefits: Although the injury is permanent and total, disability benefits are not necessarily paid for life. Many states pay for the “duration of the disability,” others specify that payment is for the rest of the injured employee’s life. A few states end benefits at specified ages; some end payment at “age 65,” others at “age 67” or some at “retirement age.” Two of the more restrictive states limit payment to 400 or 500 weeks and one state limits total disability benefits to $125,000.
Benefit payments are calculated based on the employee’s “average weekly wages” (AWW) for the most recent 12 month period and are limited by minimum and a maximum benefit amounts. Injured employees whose AWW is below the maximum limit still do not receive 100 percent of their average weekly wage during the period of disability, rather they receive a percentage of the AWW specified by the state. Two reasons benefits are lower than the employee’s AWW are: 1) benefits are not taxable; and 2) to encourage injured employees to return to work — a moral hazard is created when the employee makes just as much out of work as he does while at work. Most states pay two-thirds (66 2/3 percent) of the employee’s average weekly wage, but the benefit ranges anywhere between 60 percent and 80 percent of the employee’s AWW. Disability benefits are usually adjusted annually to account for inflation and expected changes in income.
Maximum disability benefits are based on a percentage of the statewide average weekly wage (SAWW) across all industries. For example, one state bases its maximum average weekly wage benefit on 200 percent of the state’s average weekly wage; where several other states use 66 2/3 percent of the state’s average weekly wage to limit its maximum benefit. All other states fall somewhere in this range.
Injured employees must satisfy waiting periods before they are eligible to receive disability/indemnity benefits. “Elimination periods” range between three and seven days with each state incorporating a retroactive provision allowing the elimination period to be indemnified should the period of disability exceed a specified threshold. North Carolina, for example, has a seven day waiting period before disability benefits are paid; however, if the period of disability goes beyond 21 days, the policy goes back and retroactively indemnifies the employee for the first seven days, effectively providing coverage from the date of injury.
Although workers’ compensation is a no-fault system intended to be the sole remedy, there are activities in which employees can participate that can potentially eliminate or reduce disability benefits. Employees who intentionally inflict injury on themselves or whose injury can be directly attributable to the use or abuse of alcohol or drugs may see their disability benefits eliminated. Employees in some states who fail to wear required safety equipment risk seeing their benefits reduced by a specified percentage.
Death benefits are the last of the three benefit classes dictated by workers’ compensation statutes; this benefit extends a limited amount towards funeral expenses plus a weekly benefit to eligible dependents. To collect death benefits from the workers’ compensation policy: 1) death must occur within a certain period of time following the work-related injury to be considered a work-related death; and 2) a request for death benefits must be made within a specified period following death (to avoid long-tail death claims).
Dependent benefits are also limited by statute. Some states pay benefits based on the employee’s average weekly wages for the remainder of the surviving spouse’s life, others limit payment to a specified number of weeks. Provisions in other states pay until the spouse remarries or until a certain dollar amount is paid; there is truly no “standard” provision regarding spouses.
Benefits paid to or for surviving children are somewhat more uniform. Most states pay some specified amount until the child is 18. Some states provide additional benefits based on the child’s education or ability status.
Death benefits, like the other workers’ compensation benefits, are not nationally uniform so individual state laws must be studied to completely understand the specific state allowances.
Every state pays basic medical benefits essentially uniformly. However, each state takes a different path towards the satisfaction of additional medical benefits, disability benefits and death benefits. Resource information can be found on each state’s workers’ compensation/industrial commission Web site, from the Bureau of Labor Statistics (BLS) and on the AFLCIO Web site.
Academy of Insurance Workers’ Comp Month
April 2015 is Workers’ Compensation Month for the Academy of Insurance. During the month the Academy hosts an in-depth, four-part webinar series focused on workers’ compensation. The topics are:
- The Course and Scope Rule and its Gray Areas (April 2)
- Employees, Independent Contractors, General Contractors and Contractual Risk Transfer in Work Comp (April 9)
- When to Add Additional States – Extraterritorial Jurisdiction Problems (April 16)
- The Surprising Importance of Employers’ Liability Protection (April 23)
Register now to assure a spot. Invite everyone in your office to attend (everyone in your office is welcome, only one registration required).
Workers’ Compensation Series
This is the second in a series of articles on workers’ compensation. The series is taken from the book, “The Insurance Professionals’ Practical Guide to Workers’ Compensation: From History through Audit.” The articles in this series are:
- Workers’ Compensation History: The Great Tradeoff
- Benefits Provided Under Workers’ Compensation Laws
- Second Injury Funds: Are They Still Necessary or Just a Drain On the System?
- Employees Exempt from Workers’ Compensation
- Nonemployee ‘Employees:’ The Borrowed Servant Doctrine
- Work Comp for PEOs and Their Client/ Employers
- Combinability of Insureds
- Audit Rules and Guidelines
- Audit Problems Leading to Additional Premiums
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