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Permanent Impairment Income Benefits in the Texas Workers’ Compensation System

Permanent Impairment Income Benefits in the Texas Workers’ Compensation System. Texas Department of Insurance Workers’ Compensation Research and Evaluation Group April 2008. Five types of income benefits are payable under the Texas Workers’ Compensation Act.

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Permanent Impairment Income Benefits in the Texas Workers’ Compensation System

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  1. Permanent Impairment Income Benefits in the Texas Workers’ Compensation System Texas Department of Insurance Workers’ Compensation Research and Evaluation Group April 2008

  2. Five types of income benefits are payable under the Texas Workers’ Compensation Act • Temporary Income Benefits (TIBs) – paid during the period of temporary disability (lost time from work) while the worker is recovering from an on-the-job injury; • Impairment Income Benefits (IIBs) – paid to injured workers for permanent impairment (impairment evaluations are currently based on the Guides to the Evaluation of Permanent Impairment, 4th Edition, published by the American Medical Association); • Supplemental Income Benefits (SIBs) – paid to injured workers for ongoing disability after IIBs have been exhausted, with all eligibility for SIBs ending at 401 weeks after the date of injury; Only workers with a 15 percent impairment rating and who are unemployed or underemployed as a result of their work-related injuries are eligible to receive SIBs; • Lifetime Income Benefits (LIBs) – paid for the life of the injured worker for specific catastrophic injuries as set forth in Section 408.161 of the Texas Labor Code; and • Death Benefits (DBs) and Burial Benefits – paid to the deceased workers’ spouse or eligible beneficiaries as a result of a death from a compensable injury.

  3. Purpose of This Analysis This study aims to provide basic descriptive information regarding the frequency and amount of Impairment Income Benefits (IIBs) and Supplemental Income Benefits (SIBs) received by injured workers in the Texas workers’ compensation system from 1996 to 2005. This analysis focuses on IIBs and SIBs since these benefits are paid to severely injured workers who generally have the hardest time going back to work after an injury.

  4. Data Sources • REG utilized the following data sources for this analysis: • Claim, benefit and impairment rating data collected by the Division of Workers’ Compensation; and • Quarterly wage data collected by the Texas Workforce Commission

  5. Caveats • In Texas, injured workers must exhaust the previous benefit type prior to moving to the next level of benefits. • As such, there is a time lag in the REG’s ability to accurately report information on IIBs and SIBs recipients in the most recent injury years since workers injured recently will not have started receiving IIBs and SIBs. • Unless noted otherwise, this analysis focuses on injury years 1996-2005 for IIBs recipients and 1996-2004 for SIBs recipients.

  6. Key Findings • The total number of injured workers receiving IIBs and SIBs and average IIBs duration per claim has declined over time, with most of the decline beginning after 2001; • Multiple factors may be affecting these declines, including: • Declining injury rates in Texas and fewer employees covered by WC (an estimated 16% of the Texas year-round workforce was not covered by WC in 2001 compared to 23% in 2006); • Improved return-to-work rates since 2001 (approximately 70% of TIBs recipients went back to work within 6 months of their injuries in 2001, compared to 75% in 2005); and • Statutory changes to the way impairment ratings are assigned (using the 4th edition of the AMA Guides) and disputed (impairment ratings become final if not disputed within 90 days), as well as changes to the qualifications for doctors who assign impairment ratings (all doctors assigning impairment ratings must be trained and tested in the use of the AMA Guides now when no training or testing was required prior to 2001).

  7. Key Findings • While IIBs and SIBs recipients only represent a small percentage of the total injured worker population (i.e., 25% of workers receiving medical care), these claims represent a disproportionate percentage of medical costs in the system (i.e., 57% of medical costs) due to the severity of their injuries; • Most IIBs and SIBs recipients are between the ages of 25-54 years old at the time of their injury (81-82%); • The industries with the highest percentage of IIBs and SIBs recipients are: Wholesale/Retail Trade and Transportation; Manufacturing; Public Administration; Professional Services; and Mining/Utilities and Construction; • Overall, impairment ratings have declined over time for injured workers (63% of IIBs recipients injured in 2005 received a 1-5% impairment rating most recently compared to 47% of IIBs recipients injured in 2001). • The reasons for these lower impairment ratings isn’t completely clear, but may be attributed to statutory changes in the way impairment ratings are assigned or changes to injury severity over time; • Lower impairment ratings result in shorter IIBs durations since the number of weeks a worker may receive IIBs is directly associated with that worker’s impairment rating (workers receive 3 weeks of IIBs for every percentage point of whole body impairment assigned) • Lower impairment ratings also result in fewer workers qualifying for SIBs since workers must have at least a 15% impairment rating to become eligible to receive SIBs

  8. Key Findings • As of 2006, approximately 19-21% of workers receiving IIBs or SIBs were capped at the statutory maximum weekly benefit rate; • However, statutory changes made by HB 7 in 2005 to the calculation of the statutory maximum weekly benefit increased the maximum weekly IIBs and SIBs payments from $378 in FY 2006 to $498 in FY 2008, which should result in a lower percentage of workers being capped at the statutory maximum in future years; • Although the statute allows injured workers to receive up to 401 weeks of income benefits, few workers receiving SIBs (approximately 10 percent) reach the 401 week threshold; • In terms of specific injuries, a significant percentage of workers reaching the 401 week threshold tended to have low back nerve compression injuries (i.e., herniated discs) and low back soft tissue injuries (i.e, strains and sprains). • These workers also tended to work Wholesale/Retail Trade and Transportation; Manufacturing; Public Administration; Professional Services; and Mining/Utilities and Construction industries.

  9. History of Key Legislative Changes Affecting IIBs and SIBs • 1999 – 76th Legislature, HB 2510 passes which allowed TWCC to adopt the 4th Edition of the AMA Guides for the calculation of impairment ratings (effective for exams conducted after 10/15/01); More recent versions of the AMA Guides may be adopted by rule; Impairment rating exams conducted prior to 10/15/01 are based on the 3rd Edition, Second Printing of the AMA Guides; • 2001 – 77th Legislature, HB 2600 passes and contains the following changes: • All doctors who assign impairment ratings are required to be trained and tested in the use of the AMA Guides (Previously only the agency’s Designated Doctors had training and testing requirements); • Insurance carriers who wanted to dispute an impairment rating or seek an impairment rating were required to request a rating from a Designated Doctor (i.e., an independent doctor assigned by the agency); Carriers were allowed to request an exam from their own doctor to rebut the Designated Doctor’s findings; however, by statute, Designated Doctor exams have presumptive weight in agency dispute proceedings; • Allowed injured workers with more than one job to use their total IRS-reportable income for the purpose of calculating their average weekly wage for income benefit purposes; Allowed insurance carriers to be reimbursed for additional benefits paid out as a result of multiple employment from the Subsequent Injury Fund.

  10. History of Key Legislative Changes Affecting IIBs and SIBs • 2003 – 78th Legislature, HB 1574 passes which temporarily freezes the State Average Weekly Wage (SAWW), which is used as the basis for calculating the statutory maximum and minimum amount of income benefits that injured workers receive, at 2003 levels ($537 for FY 04, $539 for FY 05 and $540 for FY 06) until the 79th Legislature decides on a new SAWW calculation method. This change is necessitated by a change in the industrial classification system used by TWC, which prevented the old method for calculating the SAWW to continue. • 2003 – 78th Legislature, HB 2198, HB 3168 and SB 820 pass which provide a maximum 90 day limit on the timeframe for a party to dispute an injured worker’s determination of maximum medical improvement (MMI) or impairment rating. This statutory change resulted from a court decision in March 2002 (Fulton vs. Associated Indemnity), in which a previous TWCC rule specifying a 90-day limit to disputes over the first MMI or impairment rating was struck down due to lack of statutory authority. • 2005 – 79th Legislature, HB 7 passes, which changes the calculation of the SAWW to be 88 percent of the average weekly wage of all unemployment insurance (UI) covered employment as calculated by TWC effective October 2006. This raises the SAWW for WC purposes from $540 in FY 06 to $674 in FY 07.

  11. Impairment Income BenefitsInjury Years 1996-2005

  12. Impairment Income Benefits (IIBs) • Workers may receive IIBs once TIBs have ended (either as a result of the worker reaching maximum medical improvement or going back to work); however, workers may receive IIBs (unlike TIBs) while back at work. • IIBs are generally paid weekly and are equal 70 percent of the worker's average weekly wage. • An injured worker becomes eligible for IIBs the day after the worker reaches maximum medical improvement (MMI). • IIBs are currently calculated based on the injured worker’s impairment rating, which is assigned by a doctor using the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition. • Workers receive three weeks of IIBs for every percentage point of impairment assigned. For example, if an injured worker has an impairment rating of 6 percent, the worker would receive 18 weeks of impairment income benefits.

  13. Total Number of Injured Workers Who Received IIBs* Injury Years 1996-2005 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  14. Percentage of Workers Receiving Medical Services in 2003 Who Also Received IIBs or SIBs Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note: Medical services include professional and hospital services rendered during 2003. Pharmacy services are excluded from this analysis since pharmacy data was not available for 2003.

  15. Distribution of IIBs Recipients by AgeInjury Years 2001-2005 Combined Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  16. Distribution of IIBs Recipients by Industry Injury Years 2001-2005 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Industry comparisons for injury years 1996-2000 are difficult since a different industrial classification system was utilized. Note 3: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation or a valid industry code were excluded from this analysis.

  17. Distribution of IIBs Recipients by Injury Type Injury Years 2001-2005 Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis. Note 3: “Other injuries” include “Reflex Sympathetic Dystrophy,” “Intevertebral Disc Disorders,” “Amputations,” “Crushing Injuries,” “Intracranial Injuries,” “Spondylolisthesis,” among others.

  18. Average IIBs Duration Per Worker Injury Years 1996-2005 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  19. Median Weekly IIBs Payment and Pre-Injury Weekly Wage Received Per Worker, Injury Years 1999-2005 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note1 : Injury year 2005 data should be interpreted with caution since data may not be complete. Median pre-injury wage data was not available for injury years 1996-1998. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis. Note 3: Prior to 2003, the statutory method for calculating the maximum weekly IIBs payment allowed by statute was based on70% of the “average weekly wage of manufacturing production workers” by TWC. However, the industry classification codes used by TWC to calculate these wages changed and in response, the 78th and the 79th Legislatures froze the maximum weekly IIB payment allowed for fiscal years 2004 , 2005 and 2006 at 2003 levels to allow the legislature additional time to consider a new calculation method. In 2005, HB 7 based the calculation on 70% of 88% of the State Average Weekly Wage as determined by TWC.

  20. Distribution of Most Recent Impairment Rating Received by IIBs Recipients, Injury Years 1996-2005 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  21. IIBs Recipients Who Received Statutory Maximum and Minimum Weekly IIBs • The statutory maximum IIBs benefit payable to injured workers is 70% of the State Average Weekly Wage (SAWW) • The SAWW for WC purposes is based on 88% of the average weekly wage for all covered employment as calculated by the Texas Workforce Commission (TWC) • As of 2006, approximately 21% of workers receiving IIBs were capped at the statutory maximum weekly IIBs rate – currently $498/week • As of 2006, approximately 2% of workers receiving IIBs received the statutory minimum weekly IIBs rate – currently $107/week • Statutory changes made by HB 7 in 2005 to the calculation of the statutory maximum weekly benefit increased the maximum weekly IIBs payment from $378 in FY 2006 to $498 in FY 2008, which should result in a lower percentage of workers being capped at the statutory maximum in future years

  22. Percentage of IIBs Recipients Went on to Received SIBs with 15% or More Impairment Rating, Injury Years 1996-2004 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2004 data should be interpreted with caution since data may not be complete. Injury Year 2005 was excluded from this analysis since few workers injured in 2005 have exhausted their IIBs and are eligible to receive SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  23. Supplemental Income BenefitsInjury Years 1996-2004

  24. Supplemental Income Benefits (SIBs) • An injured worker may receive SIBs if: • the worker has an impairment rating of 15 percent or more; and • the worker has not returned to work because of the impairment, or has returned to work but is earning less than 80 percent of his pre-injury average weekly wage because of the impairment; and • the worker did not take a lump sum payment of impairment income benefits; and • the worker has tried to find a job that matches his or her ability to work. • Injured workers must meet SIBs eligibility requirements on a quarterly basis (the first quarter the DWC makes the SIBs eligibility determination; all subsequent quarters, the injured worker must apply to the insurance carrier for eligibility, but may dispute to DWC if denied). • SIBs are paid on a monthly basis and equal 80 percent of the difference between 80 percent of the worker's average weekly wage and the weekly wage after the injury. • An injured worker becomes eligible for SIBs the day after IIBs end.

  25. Total Number of Injured Workers Who Received SIBs* Injury Years 1996-2004 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2004 data should be interpreted with caution since data may not be complete. Injury Year 2005 was excluded from this analysis since few workers injured in 2005 have exhausted their IIBs and are eligible to receive SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  26. Distribution of SIBs Recipients by AgeInjury Years 2001-2004 Combined Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1:Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  27. Distribution of SIBs Recipients by IndustryInjury Years 1996-2004 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2004 data should be interpreted with caution since data may not be complete. Injury Year 2005 was excluded from this analysis since few workers injured in 2005 have exhausted their IIBs and are eligible to receive SIBs. Note 2: Industry comparisons for injury years 1996-2000 are difficult since a different industrial classification system was utilized. Note 3: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation or a valid industry code were excluded from this analysis. *

  28. Distribution of SIBs Recipients by Injury Type Injury Years 2001-2004 Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2004 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis. Note 3: “Other injuries” include “Reflex Sympathetic Dystrophy,” “Intevertebral Disc Disorders,” “Amputations,” “Crushing Injuries,” “Intracranial Injuries,” “Spondylolisthesis,” among others.

  29. Median Monthly SIBs and Pre-Injury Wage Received Per Worker in Injury Year 1999-2004 Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note1 : Injury year 2004 data should be interpreted with caution since data may not be complete. Median pre-injury wage data was not available for injury years 1996-1998. Injury Year 2005 was excluded from this analysis since few workers injured in 2005 have exhausted their IIBs and are eligible to receive SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis. Note 3: Prior to 2003, the statutory method for calculating the maximum SIBs payments allowed by statute was based on 70% of the “average weekly wage of manufacturing production workers” by TWC. However, the industry classification codes used by TWC to calculate these wages changed and in response, the 78th Legislature in 2003 (SB 1574) froze the maximum weekly SIBs payment allowed for fiscal years 2004 and 2005 at 2003 levels to allow the legislature additional time to consider a new calculation method. In 2005, HB 7 based the calculation on 70% of 88% of the State Average Weekly Wage as determined by TWC. *

  30. SIBs Recipients Who Received Statutory Maximum SIBs • The statutory maximum SIBs benefit payable to injured workers is 70% of the State Average Weekly Wage (SAWW) • The SAWW for WC purposes is based on 88% of the average weekly wage for all covered employment as calculated by the Texas Workforce Commission (TWC) • As of 2006, approximately 19% of workers receiving SIBs are currently capped at the statutory maximum weekly SIBs rate – currently $498/week • There is currently no minimum weekly SIBS rate payable to injured workers • Statutory changes made by HB 7 in 2005 to the calculation of the statutory maximum weekly benefit increased the maximum weekly SIBs payment from $378 in FY 2006 to $498 in FY 2008, which should result in a lower percentage of workers being capped at the statutory maximum in future years

  31. Estimated Number and Percent of SIBs Recipients Who Reached 401 Weeks Statutory Benefit Maximum Duration, Injury Years 1996-2000 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2000 data should be interpreted with caution since data may not be complete. Injury Years 2001-2004 was excluded from this analysis since workers injured in 2001-2004 have not had the opportunity to receive 401 weeks of SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

  32. Distribution of SIBs Recipients Who Reached 401 Weeks Statutory Benefit Maximum Duration by Injury Type, Injury Years 1996-2000 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2000 data should be interpreted with caution since data may not be complete. Injury Years 2001-2004 was excluded from this analysis since workers injured in 2001-2004 have not had the opportunity to receive 401 weeks of SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis. Note 3: “Other injuries” include “Reflex Sympathetic Dystrophy,” “Intevertebral Disc Disorders,” “Amputations,” “Crushing Injuries,” “Intracranial Injuries,” “Spondylolisthesis,” among others.

  33. Distribution of SIBs Recipients Who Reached 401 Weeks Statutory Benefit Maximum Duration by Industry, Injury Years 1996-2000 * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2008. Note 1: Injury year 2000 data should be interpreted with caution since data may not be complete. Injury Years 2001-2004 was excluded from this analysis since workers injured in 2001-2004 have not had the opportunity to receive 401 weeks of SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation or a valid industry code were excluded from this analysis.

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