Workers’ Compensation and Other Disability Insurance Systems Involved in Occupational Musculoskeletal Disorders

State funds

North Dakota

Ohio

Washington

Wyoming

State funds and private insurance

Arizona

California

Colorado

Hawaii

Idaho

Kentucky

Louisiana

Maine

Maryland

Minnesota

Montana

New Mexico

New York

Oklahoma

Oregon

Pennsylvania

Rhode Island

Texas

Utah

West Virginia

Private insurance

Alabama

Alaska

Arkansas

Connecticut

Delaware

District of Columbia

Florida

Georgia

Illinois

Indiana

Iowa

Kansas

Massachusetts

Michigan

Mississippi

Missouri

Nebraska

Nevada

New Hampshire

New Jersey

North Carolina

South Carolina

South Dakota

Tennessee

Vermont

Virginia

Wisconsin

In 1972, the National Commission on State Workers’ Compensation Laws identified goals to address troubled State workers’ compensation systems:

“Compulsory rather than elective coverage, with no exceptions for small firms or government employment.

Employee’s choice of jurisdiction for filing interstate claims to be broadened.

Full coverage of work-related diseases, similar to that now provided for work-related accidents and injuries

Adequate weekly cash benefits for temporary total disability, permanent total disability and death cases.

No arbitrary limits on the amount or duration of benefits for permanent total disability or for death.

Full medical and physical rehabilitation services without statutory limits on dollar amount or length of time” (p. 31).

An area that remains controversial for the workers’ compensation system is the methods for determining PPD. As one can imagine, temporary total or temporary partial disability does not produce the amount of confusion or controversy due to their temporary status. As alluded to earlier, the majority of States have scheduled benefits or specific benefits that are established by rule or law and provide a certain amount of cash benefits based on a scheduled that typically includes a cost associated with the body part. For example, in Alabama, if a worker losses a hand, they are eligible for 170 weeks of benefits. Typically, it is not until after a period of temporary disability that a determination is made regarding the determination of the scheduled benefit (Barth, 2000).

As mentioned, temporary disability ends when a worker is either (a) able to return to work, (b) reached maximal medical improvement (i.e., their injury is determined by a physician to be permanent and stable), or (c) a fixed period of time has elapsed in which temporary disability automatically ceases. Although there is a wide discrepancy among State workers’ compensation systems, most reimburse two-thirds of the worker’s weekly wages. However, as there are “caps” on the amount that can be paid, many higher wage workers are not receiving anything close to two-thirds their pre-injury wage (Barth (2000)). As can be seen, although every worker is treated equally when scheduled benefits are used, the loss of a hand for a master carpenter is far more impactful from a potential earnings standpoint than the loss of a hand for a teacher. Most States utilize scheduled benefits, or plans that essentially resemble scheduled benefits, such as Texas that assigns points based on the American Medical Association’s Guides to the Evaluation of Permanent Impairment, which is now in its sixth edition. However, even with scheduled benefits, or a system of de facto scheduled benefits, difference among jurisdictions exists when handling partial losses. Jurisdictions may simply quantify the loss and provide a worker with a percentage of the number of week benefits. However, in other jurisdictions, disability is taken into account and the worker may receive up to the full amount for the loss of the entire limb (Barth, 2000).

In addition to scheduled benefits, most States also cover injuries that are not listed on their schedule. Once again, there is a wide array of differences among States regarding unscheduled benefits, but the four following approaches are described by Barth (2000):

Impairment basis

Loss of wage-earning capacity basis

Wage-loss basis

Bifurcated basis

The impairment basis for determining unscheduled benefits involves physicians determining the level of impairment rating. This determination is typically based on the American Medical Association’s Guides to the Evaluation of Permanent Impairment (Barth, 2000). However, as discussed elsewhere in this handbook, this method is beset by controversy. Oftentimes, supposed Independent Medical Examiners, who are hired by the insurance company or State, provide their expert opinion regarding the impairment rating of the worker. Unfortunately, it is hard to conclude that these physicians are “independent,” as often their livelihood is connected implicitly to providing insurance companies with conclusions that save money for the company that is paying the “independent” medical examiner’s fees. Conversely, treating physicians who have often established a working relationship with their patient may not view their patient from an objective standpoint and may be at risk for advocating for them rather than presenting an objective opinion. Furthermore, there may be less noble motivations for treating physicians or physicians’ hired by a patient’s attorney to rate the patient as more impaired than they actually are at the time of the evaluation.

The loss of wage-earning capacity is another approach to determining unscheduled benefits. In this approach, the cash benefits are determined by the presumed impact on future earnings Barth (2000). Again, States approach this matter differently, with some States looking at the impact of the injury on the workers’ competitiveness, while other States focus upon the loss of future earnings. As one can imagine, the amount of uncertainty that must be assumed and approximated presents challenges to this approach. Several factors are typically used to estimate the impact of the injury on future earnings or competiveness, including experience, language, economic conditions, impairment rating, age, and education (Barth, 2000).

The third method is considered the wage-loss basis, and it is similar to the loss of wage-earning capacity, but bases benefit determination on the actual earnings lost. In the States that take this approach, individuals are only provided PPD benefits if they are unable to return to work close to their earning capacity prior to their injury (Barth, 2000). In addition to the question of equitable benefits that a wage-loss system may violate, in practice, these systems are difficult to manage and can provide unintended perverse incentives. For instance, those workers with strong work ethics and who may not be ready to return to work may financially be disincentivized (Barth, 2000).

The fourth method is the bifurcated basis, which is essentially a combination of approaches with the hope that benefits of different approaches can be retained without the negative aspects. Typically, the approach that is used varies according to the injured worker’s work status when partial permanent disability is determined Barth (2000). An injured worker who is working may receive a benefit based on their impairment rating if they are at, or close, to their wage prior to their injury. However, if they are not working or close to the wage they were earning prior to their injury, a loss of wage-earning approach may be applied. As will be seen, the relationship between workers’ compensation insurance and disability insurance is closely intertwined. Furthermore, although the process of disability determination is complicated and varies by State, the initiation of workers’ compensation benefits is relatively straightforward than the multistep process involved in Social Security Disability Insurance Barth (2000).

Social Security Disability Insurance

Disability insurance protects an individual’s earned income from a disability that impacts a workers’ ability to perform the core functions of his/her job. Disability insurance is broadly categorized into short- and long-term benefits, as well as private and federal programs. However, most private disability plans require that beneficiaries who receive disability under their commercial plan to apply for Social Security Disability benefits. The Social Security Administration is responsible for covering the largest number of disabled citizens. Combined, the Social Security Disability Insurance program and the Supplement Security Income program paid approximately $90 billion in benefits to 11.2 million Americans. According to the Social Security Administration, disability is defined as, “…the inability to engage in substantial gainful activity based on a medically determinable impairment that is expected to last at least 12 months or result in death” (p. 3: Trends in the Social Security and Supplemental Security Income Disability Programs, 2006). Social Security Disability Insurance is a federal government program that provides income supplements through payroll tax funding on a temporary or permanent basis for individuals who are disabled. The program went into effect in 1956 and, originally, only covered workers who were aged 50 and above, as well as individuals who were disabled prior to age 18. The addition of dependent’s benefits occurred in 1958, and the age requirement (i.e., 50 and above) was dropped in 1960. In 1967, benefits were also provided to disabled widows or widowers (Trends in the Social Security and Supplemental Security Income Disability Programs, 2006).

The Social Security Disability program derives its funds from a 15.6 % payroll tax split evenly between employees and employers (self-employed individuals are responsible for the full amount) and is only applied to the first $110,100 of income (CEPR, 2012) (Census, 2012). The benefits workers receive are based on the individual’s earnings. According to the Social Security Administration, benefits are based on pre-disability earnings or average indexed monthly earnings (AIME) (Census, 2012). Once a worker becomes eligible for disability benefits, a 5-month waiting period begins before the individual receives monetary benefits. Furthermore, a disabled individual becomes eligible for Medicare 24 months after having been determined to be eligible for Social Security Disability Insurance. The average monthly benefit for workers classified as disabled was $1,130 according to Social Security Administration statistics for February, 2013. As mentioned, disabled individuals, as well as dependents, are eligible for this program. The Supplemental Security Income is a program started in 1974 that provides income to the elderly, blind, and individuals determined to be disabled. However, unlike Social Security Disability Insurance, the Supplemental Security Income program is a means tested, and a prior work history is not required. Supplemental Security Income is primarily a program that attempts to ameliorate poverty (Trends in the Social Security and Supplemental Security Income Disability Programs, 2006).

Similar to concerns regarding compensation, neurosis is the concern that Social Security programs provide a disincentive to work and promote disability. In fact, Marini and Stebnicki (1999) reviewed the common reasons that Social Security Disability and Supplemental Security beneficiaries provide for not working. For instance, many beneficiaries stated that they were afraid of losing their medical benefits, or their doctor told them that they should not work. In addition, they cited fear of losing their benefits for attempting to work at a job where they quickly discover that they are too disabled to maintain or that the job they could maintain pays less than their benefits Marini and Stebnicki (1999). Of even more concern is that, in one study by the General Accounting Office of the United Stated, less than 1 % (i.e., .25 %) of individuals who were receiving Social Security Disability Insurance or Supplemental Security Income returned to work through the vocational rehabilitation programs that are managed through the States (Marini article).

Only gold members can continue reading. Log In or Register to continue