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Core Characteristics of US Workers’ Compensation Programs

Distribution of Workers’ Compensation Cases with Cash Benefits, U.S., 2002* Temporary Disability 64% Permanent Partial Disability 35 Permanent Total and Fatalities 1 *Excludes Medical only cases, privately insured, 38 states. Source: NCCI.

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Core Characteristics of US Workers’ Compensation Programs

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  1. Distribution of Workers’ Compensation Cases with Cash Benefits, U.S., 2002*Temporary Disability 64%Permanent Partial Disability 35Permanent Total and Fatalities 1*Excludes Medical only cases, privately insured, 38 states.Source: NCCI

  2. PPD Rates for Claims with Disability More than 7 Days, 6 State Study (1996-99)California 54%Texas 54Connecticut 43 Florida 45Georgia 44Wisconsin 29Source: Barth (WCRI Data)

  3. Benefits Paid Workers’ Compensation, U.S., 2002*Temporary Disability 17% Permanent Partial Disability 59Permanent Total and Fatalities 24*Excludes medical only cases, privately insured, 38 states.Source: NCCI Data

  4. Proportion of Claims Awarded Impairment Benefits- Selected Canadian Provinces (Permanent Disability) 2005*BC 8.0% ON 10.8 QC 15.2 Low 3.4 High 15.2 Canada 9.3New claims reported in the accident year with at least a day’s lost time paid, (typically pay beginning the day after injury)Source: Canadian AWCBC

  5. Core Characteristics of US Workers’ Compensation ProgramsState run, state administeredCoverage compulsory, 49 states (not TX)-scores of exemptionsWC is the exclusive remedy (aside from 3rd party actions)Generally highly litigiousPrivate insurance in 45 of the 50 states

  6. Core Characteristics of US Workers’ Compensation Programs State insurance funds in (approximately) 22 States Self insurance by employer in 48 states (not WY, ND) (Group self insurance in 37 states) Hundreds of private insurance carriers No universal health cars No direct linkage to health and safety laws

  7. U.S. Workers’ Compensation, Snapshot, with and without California, 2005, (All States) Covered Workers 128.1 millionw/o CAIncluding CACovered Wages $4,539 (billion) $5,210 (billion) WC Benefits Paid 44.5 55.5 Medical Benefits Paid 21.0 26.1 Cash Benefits Paid 23.5 29.4Employer Costs for WC 68.6 89.0Amounts per $100/covered payrollWC Benefits Paid $0.98 $1.06 Medical Benefits Paid 0.46 0.50 Cash Benefits Paid 0.52 0.56Employer Costs for WC 1.51 1.71Source: NASI

  8. State WC Benefits per $100/covered payroll, 20055 Lowest5 HighestAZ $.58 WV $3.81MA .58 MO 2.11AR .62 WA 1.72IN .63 AK 1.70NY .67 CA 1.59Source: NASI

  9. Workers’ Compensation Premium Rate-Making, Selected States 2006RankStatePremiumPercent of Median1 AL $5.00 2012 CA 4.13 1666 FL 3.32 13410 NY 3.15 12726 TN 2.48 10048 AR 1.59 64 50 IN 1.24 5051 ND 1.10 44Source: Oregon Premium study.

  10. Approaches to Compensating PPD Cases, USScheduled Losses (43 states) (Table of Maims)Unscheduled Losses* Impairment (19 states) Loss of Wage Earning Capacity (13 states) Wage Loss (10 states) Bifurcated (9 states)*Examples include spinal injuries, internal body organs, occupational diseases, psychological disorders.Source: Barth and Niss (WCRI)

  11. Some Alternative Approaches to Compensating PPD CasesJapan14 Grades of impairmentGrades 1-3 Lump sum plus periodic pension 4-7 Periodic pension only1-7 Pension is for period of disablement, rates decline as grade .8-14 Lump sum only, amounts decline as grade increases.

  12. GermanyBenefit tied to impairment in most casesPension paid only where a decline in earning capacity of at least 20 percentPension tied to degree of loss of earning capacityPension can be modified (increased) where a material change in condition (5% or more)Full pension is 2/3’s of average weekly wage, and paid where earning capacity reduced by 100%. Worker retains pension for 3 years, even where return to workAfter 3 years, one-half of pensions become permanent

  13. ChinaA new schemeDisability rating is tied primarily to impairmentDual benefits are availableGrade 1 rating, lump sum is 24 months salary---Grade 10 rating, lump sum is 6 months salary, paid by insurance fundGrade 1 rating, pension is 90% salary—Grade 4, pension is 75% salaryGrades 1-4 paid by insurance fundGrades 5-6, if suitably re-employed, no pension. If not suitably re-employed, the pension is 70% or 60% respectively, and must bepaid by the employer and not the insurance fundGrades 7-10 no pension

  14. VictoriaStep-down of temporary disability benefit after 13 weeks provides incentives both to employer and to worker to return to work.After 104 weeks, if there is a current work capacity, an incentive for the worker as well as the employer to have a return to work. Recognizes that return to work depends upon both the worker and the employer.

  15. Evaluating Permanent Disability ProgramsIncome replacement criterion:Studies:Studies in WI, CA, WA, NMIdentify workers with PD benefits and a comparison groupUsing pre-injury and post-injury earnings, create earning profilesEstimate earnings losses and add back compensationEvaluate net impact of injury, and consider injury types that are outliers.Difficulties with the approach:Available data (And national vs. state)Zero earnings (Out migration, uncovered employment)How many years post injuryPre and post injury injuriesLosses due to disability vs. losses due to work separation

  16. Efforts to Change Permanent Disability Compensation ProgramsDifficulties:Core issues (common law and disability evaluation approach)Inertia by the adjudicatorsToo many stakeholdersBreaking in periodCourt challengesWarning-Eliminating benefits for certain injuries or illnesses.California Case StudyProblems:Costs high, benefits low-“The worst of all worlds”Litigation and other transactions costs, delaysInconsistent awards, uncertainty

  17. Measures taken:Use of the AMA Guides as one of the bases for the award for greater consistency and certaintyUse of the AMA Guides to deny permanent benefits where a zero rating for impairmentImproved quality of medical ratingsIncentives for employers to offer to re-employ via a reduction the size of benefits (or increase where no job offer) A reduction in amount of PPD benefits for those with ratings below 15% and an increase for those with rating above 70%.Change apportionment to limit current rating to disability caused by current injury.

  18. Modifying the Permanent Disability Compensation ProgramCompensation Benefits:Bifurcated benefit approachesStep-downs during temporary disability periodBenefits only for those with return to work, if a capacity to workThe small employer problemRe-employment Programs:Employment quotas for the disabledAnti-discrimination lawsSubsidies for workplace modificationsProtection from second injuries that affect experience modifiersWage subsidies through vouchers, reduced insurance premiums

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