Increasing Benefits Lengthens Workers’ Compensation Claim Duration: Study

By | December 20, 2009

States that increase the maximum weekly benefit for workers compensation can expect to see injured workers with temporary total disability making claims for longer, almost a week longer, according to a new study released by the National Council on Compensation Insurance, Inc.

States can end up being unpleasantly surprised, according to study author Frank Schmid, an NCCI economist.

“Higher benefits mean lower opportunity costs of being away from work,” said Schmid.

Schmid looked at data from Oregon and New Mexico and what happened after each increased its maximum benefit.

Oregon increased its benefit from 100 percent of the average weekly wage to 133 percent in 2002. The increase resulted in an increase in temporary total disability indemnity payments of about 4 percent, and 31 percent of that was due to persons making claims longer. The average duration increased by 3-4 days.

New Mexico raised its benefit from 85 percent to 100 percent in 2000 which resulted in a rise in temporary total disability payments of about 5 percent, and 29 percent of the increase was due longer payment duration. The average duration increased by 2-3 days.

Schmid wrote that other studies have found a similar effect. He said it is a maxim that a 20 percent increase in benefits creates a 10 percent increase in utilization.

Bob Young, a spokesperson for the California Workers’ Compensation Institute, said that while he was not familiar with Schmid’s study specifically, he thought that the relationship might not always be true.

California has tied workers’ compensation benefits to the average weekly wage automatically since the 1990s.

A January report he published found that duration of benefits declined even while weekly payments increased, Young said.

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