New Study Details Arizona’s Work Comp System

October 15, 2004

According to a new study by the Workers Compensation Research Institute (WCRI), notable features of Arizona’s workers’ compensation system included a lifetime entitlement to medical and indemnity benefits – payments to replace lost wages – and the active role of the state agency in educating and assisting system participants and reducing litigation.

However, injured workers were subject to some of the lowest weekly benefit levels in the country.

At an estimated 57 percent of the statewide average weekly wage (SAWW), the maximum weekly amount for temporary total disability (TTD) benefit of $374.01 was next to the lowest in the country as of January 1, 2003. By contrast, in 22 states, the maximum weekly amount for TTD was 100 percent of the SAWW.

Arizona’s percentage has eroded steadily since 1999, when the equivalent maximum weekly amount for TTD was raised 14 percent from $327.95 to $374.01.

As a consequence of the benefit formula, nearly one-half of the workers receiving TTD benefits had them limited by the maximum TTD amount, said the report.

In 45 percent of the cases in 2003, the injured worker’s average monthly wage exceeded the $2,400 monthly maximum amount for computation purposes. This meant that workers earning $28,000 a year or more received the maximum monthly benefit. On the other hand, the remaining 55 percent were not affected by the maximum.

The report pointed out that while the low maximum monthly TTD benefit created economic hardship for some, it also created a powerful incentive to return to work. Most system participants said the low maximum served as a significant motivator for higher wage earners to remain on the job or return to work as soon as they can.

The study pointed out that the Arizona system placed no time limits on reopening a claim, and settlement agreements did not close out liability for future indemnity or medical benefits. This lifetime entitlement to benefits provided a safety net for workers.

Under these provisions, a worker who experienced a new, additional or previously undiscovered condition that causally related to the workplace injury could reopen a claim, which would then be processed as a new injury claim.

TTD benefits were paid until the worker again reached maximum medical improvement and the right to permanent disability benefits was assessed. In this way, indemnity claims could go though several cycles of disability benefits.

In addition, settlement agreements did not close liability for future medical and indemnity benefits. The effect of these system features was that once an insurer or self-insurer accepted a claim, liability for indemnity and medical benefits continued for life.

The study reported that most system observers in Arizona gave high marks to the active role played by the Industrial Commission of Arizona (ICA) in educating and assisting system participants, monitoring claims and impartially determining key benefit amounts.

The actions of the agency helped reduce litigation in cases involving the more serious injuries – called permanent partial disabilities – that often are disputed in other states.

For example, after a physician assessed that a worker’s condition had reached maximum medical improvement, a specialist at the ICA examined information supplied by the worker and the insurer or self-insurer and collected additional information.

Based on the review of this material, the specialist issued a written determination or award indicating whether the injured worker had no loss, permanent partial loss or total loss of earning capacity. If the loss was partial or total, the award specified the monthly amount of the entitlement.

Representatives of workers and employers said ICA awards were impartial determinations that were either regarded as fair by both sides or were not worth disputing because the amounts in disagreement were small.

The study found that when disputes occur, delays in adjudication resulted from the combined effects of the state’s serial-style hearing process and the reliance on live doctor testimony to introduce medical evidence.

In 2003, the average interval from the date a case was assigned to a judge to the judge’s award was 7.7 months, placing Arizona in the middle of the states studied by WCRI in the past ten years.

Judges and attorneys from both sides agreed that the need for multiple hearings resulted from the use of “dueling doctors” who testify in person at hearings, according to the study.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, health care and disability issues. Its members include employers, insurers, and governmental entities, insurance regulators and state administrative agencies, as well as several state labor organizations.

To purchase the report, visit WCRI’s web site at www.wcrinet.org.

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