Evaluate Workers Compensation Claim Offsets and Deductions When Settling Claims

Medical Issues: Offsets and Deductions

As most plaintiff attorneys know, an injured employee can collect both workers’ compensation benefits and social security benefits. To prevent employees from collecting excessive combined workers’ compensation indemnity benefits and social security disability benefits, the statutes normally define a maximum benefit wage or earnings amount the employee can receive. In most states, the amount of social security disability is offset by the amount paid under workers’ compensation indemnity.

For example, the injured employee is drawing Permanent Partial Disability (PPD) at the rate of $300 per week, or for four and one-third weeks in a month, $1,300 per month. The employee applies for Social Security Disability (SSD) and is approved. Based on prior earnings, the employee is eligible to draw $1,500 per month from the Social Security Administration. With the workers’ compensation offset, the Social Security Administration will pay the employee $200.00 per month, ($1,500 SSD minus $1,300 PPD). When the employee’s PPD is exhausted, the SSD will revert back to $1,500 per month.

A few states have statutes calling for a reverse offset allowing the workers’ compensation carrier to take a credit for the amount paid in social security disability benefits. Be sure your adjuster is experienced enough to know if the state allows a reverse offset for workers’ compensation indemnity benefits paid to an employee who is also drawing social security disability. In the above example, if there is a reverse offset, the workers’ compensation carrier would pay nothing further on the PPD as the SSD is greater than the PPD.

Example for a reverse offset: The employee is drawing PPD of $1,300 per month and is approved for SSD of $1,000 per month. The employee is paid $300 per month ($1,300 PPD minus $1,000 SSD) by the workers’ compensation carrier. When the PPD is exhausted, the employee would then draw $1,000 SSD per month.

A substantial deduction sometimes overlooked is the pre-existing permanent partial disability rating the employee has from a prior injury, often at a different employer. For example, the employee injured his back fifteen years ago while working for another company. He settled his back claim with the prior work comp carrier based on a 10% permanency rating.

A year ago, he reported he had injured his back while working for your company. The treating physician and your IME doctor both now give the employee a 25% permanency rating which includes the pre-existing condition. Most states will allow you to deduct the prior permanency. This allows the adjuster to settle the claim for the value of a 15% rating (25% minus the prior 10% rating).

Don’t count on the employee or his attorney disclosing the prior injury and prior settlement. The adjuster’s best bet to uncover the prior settlement is with the ISO Central Index Bureau or through a proper evaluation by your IME doctor. Thorough investigation should be made to determine whether there are other exposures to be considered.

In those states allowing subrogation by the workers’ compensation carrier, and the employee has filed a lawsuit against a third party such as a product manufacturer or owners of the premises where they were injured, make sure the amount of the judgment or settlement is offset against your settlement.

Pre-existing Conditions/Second Injury Funds

In the twenty or so states with a Second Injury Fund, it is imperative the employer convey to the adjuster what is known of the pre-existing condition, whether the condition is from a prior work injury or some other medical issue.

The Risk Management Department in conjunction with the Human Resources Department should identify every new hire with a pre-existing condition that may impact the cost of a workers’ compensation claim. For example, in Ohio, an employer is entitled to reimbursement for payments to a handicapped employee if the employer notified the board prior to the injury it employed a person with an existing handicap. Ohio Statute 4123.343 Handicap Reimbursement. (workersxzcompxzkit)

At the time the report of the new claim is sent to the adjuster, the adjuster should be made aware of the employee pre-existing work injury or other medical condition possibly affecting the employee’s ability to recover from a new workers’ compensation injury. This allows the adjuster to calculate the appropriate settlement value of the claim and/or file with the Second Injury Fund the necessary paperwork to be reimbursed the additional cost of the claim created by the pre-existing condition.

Author Robert Elliott,executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

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By: Private investigator with 25 years experience.

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers’ comp issues.

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