Core Characteristics of US Workers’ Compensation Programs
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DESCRIPTIONDistribution of Workers Compensation Cases with Cash Benefits, U.S., 2002* Temporary Disability64% Permanent Partial Disability35 Permanent Total and Fatalities1 *Excludes Medical only cases, privately insured, 38 states. Source: NCCI. - PowerPoint PPT Presentation
Distribution of Workers Compensation Cases with Cash Benefits, U.S., 2002*
Temporary Disability64%Permanent Partial Disability35Permanent Total and Fatalities1
*Excludes Medical only cases, privately insured, 38 states.
PPD Rates for Claims with Disability More than 7 Days, 6 State Study (1996-99)
Source: Barth (WCRI Data)
Benefits Paid Workers Compensation, U.S., 2002*
Temporary Disability17% Permanent Partial Disability59Permanent Total and Fatalities24
*Excludes medical only cases, privately insured, 38 states.
Source: NCCI Data
Proportion of Claims Awarded Impairment Benefits- Selected Canadian Provinces (Permanent Disability) 2005*
BC 8.0%ON10.8QC15.2Low 3.4High15.2Canada 9.3
New claims reported in the accident year with at least a days lost time paid, (typically pay beginning the day after injury) Source: Canadian AWCBC
Core Characteristics of US Workers Compensation Programs
State run, state administered
Coverage compulsory, 49 states (not TX)-scores of exemptions
WC is the exclusive remedy (aside from 3rd party actions)
Generally highly litigious
Private insurance in 45 of the 50 states
Core Characteristics of US WorkersCompensation Programs
State insurance funds in (approximately) 22States
Self insurance by employer in 48 states (notWY, ND)
(Group self insurance in 37 states)
Hundreds of private insurance carriers
No universal health cars
No direct linkage to health and safety laws
U.S. Workers Compensation, Snapshot, with and without California, 2005, (All States)
Covered Workers128.1 million
w/o CAIncluding CACovered Wages$4,539 (billion)$5,210 (billion)WC Benefits Paid 44.5 55.5Medical Benefits Paid 21.0 26.1Cash Benefits Paid 23.5 29.4Employer Costs for WC 68.6 89.0
Amounts per $100/covered payrollWC Benefits Paid$0.98$1.06Medical Benefits Paid 0.46 0.50Cash Benefits Paid 0.52 0.56Employer Costs for WC 1.51 1.71
State WC Benefits per $100/covered payroll, 2005
5 Lowest 5 HighestAZ$.58WV$3.81MA .58MO 2.11AR .62WA 1.72IN .63AK 1.70NY .67CA 1.59
Workers Compensation Premium Rate-Making, Selected States 2006
RankStatePremiumPercent of Median
1 AL $5.002012CA 4.131666FL 3.3213410NY 3.1512726TN 2.4810048AR 1.59 6450IN 1.24 5051ND 1.10 44Source: Oregon Premium study.
Approaches to Compensating PPD Cases, US
Scheduled 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)
Some Alternative Approaches to Compensating PPD Cases
Japan 14 Grades of impairmentGrades 1-3Lump 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.
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 2/3s 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
A 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% salaryGrade 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 be paid by the employer and not the insurance fundGrades 7-10 no pension
Step-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.
Evaluating Permanent Disability Programs
Income 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
Efforts to Change Permanent Disability Compensation Programs
Difficulties: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 worldsLitigation and other transactions costs, delaysInconsistent awards, uncertainty
Use of the AMA Guides as one of the bases for the award for greater consistency and certainty
Use of the AMA Guides to deny permanent benefits where a zero rating for impairment
Improved quality of medical ratings
Incentives 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.
Modifying the Permanent Disability Compensation Program
Compensation Benefits:Bifurcated benefit approachesStep-downs during temporary disability periodBenefits only for those with return to work, if a capacity to workThe small employer problem
Re-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