The Basics of Workers Compensation Impairment Ratings

We often hear the phrase “impairment rating” when there is a discussion of an employee's workers compensation claim. Most people understand impairment means the employee was hurt and unable to work, but do not fully understand how impairment impacts a workers compensation claim.
 
 

Impairment
is a problem in the function of a body part. It can be either temporary or permanent. When it is temporary, the employee is unable to work while recovering from the injury. When the impairment is permanent, the employee retains a residual of the injury after the medical treatment has ended. (WcxKit) A permanent impairment's impact on the employee's life can range from a very mild impact to a life altering impact.
 
 
In a workers compensation claim impairment can be defined as:
1.     An inability of the employee to use his musculoskeletal system – his limbs, joints, muscles, bones, tendons and ligaments – at the level of use the employee had prior to the injury, or
2.     An inability of the employee to control his/her neurological functions – the brain, spinal cord, and peripheral nerves – at the level of use the employee had prior to the injury.
 
A medical provider treating an injured employee will utilize various medical approaches and treatments until the medical provider believes the employee's medical condition will not improve further. Either the employee has fully recovered from the injury, or the employee's medical improvement has stopped and the employee has reached his/her maximum medical improvement. When the medical provider believes there is nothing more that can be done medically for the employee, the medical provider will assess whether or not the employee has lost any functional ability.
 
 

If the employee
has any decrease in functional ability, the medical provider will assign an impairment rating, also known as a disability rating. In 42 states the medical providers will use one of the various editions of the American Medical Association Guides to the Evaluation of Permanent Impairment to establish the level of impairment. In 8 states – Florida, Illinois, Minnesota, New York, North Carolina, Oregon, Utah, and Wisconsin – the medical providers use a state specific guide for the establishment of an impairment rating.
 
 

In workers compensation
there are two types of benefits, medical and indemnity. The indemnity benefit is divided into four categories (in most states). While the terminology for the types of disability will vary by state, the four categories are:
 
1.     temporary total disability (TTD),
2.     temporary partial disability (TPD),
3.     permanent partial disability (PPD), and
4.     permanent total disability (PTD).
 

Impairment is normally not associated with TTD. If the employee fully recovers from the injury and has no impairment, the employee returns to work and TTD ends.

 
 

In some situations,
the impairment will prevent the employee from returning to full duty, but the employee is able to work either reduced hours or at a less demanding job. If either occurs and causes the employee to earn less than the employee was earning before the injury, the employee will receive TPD indemnity benefits to make up for a portion of the lost income caused by the impairment.
 
 

When the employee
has a permanent impairment, but is able to return to work, the employee is compensated for the permanent impairment by the payment of a PPD reward. The statutes of each state establish how much the employee will be compensated for the permanent impairment. In 36 states, there is a table (also referred to as a schedule) that list how much an employee will be paid in PPD indemnity benefits for the impairment of an arm, hand, thumb, finger, leg, foot, toe, vision or hearing. In the other 14 states – Alaska, Florida, Maine, Maryland, Massachusetts, Minnesota, Montana, Nevada, New Mexico, North Dakota, Rhode Island, Texas, Vermont and Wyoming – there are statutes that outline how the employee will be compensated for an impairment.
 
 

When an employee
is injured to the point that the employee can never return to work, the employee is paid PTD indemnity benefits for the severe or total impairment. Impairment this severe will drastically alter the course of the employee's life. (WcxKitz)
 
 

The employer
needs to take time to understand the employee's level of impairment and work with the employee to return the employee to work within the restrictions caused by the impairment.

Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. See www.LowerWC.com for more information. Contact:RShafer@ReduceYourWorkersComp.com or 860-553-6604.

 
 
 

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.
 

© 2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact
Info@ReduceYourWorkersComp.com.

Know the Difference Between Permanent Partial Disability and Permanent Total Disability

When an employee reaches maximum medical improvement (MMI) but still has medical issues from his/her on the job injury or occupational disease, the employee will normally be eligible for permanent disability benefits. Most of the states recognize two types of permanent disability benefits. While the names vary by state, the most common used names are:
1.      Permanent partial disability (PPD)
2.      Permanent total disability (PTD)
Independent Medical Evaluation:
In most jurisdictions when the treating physician states the employee has reached MMI, the workers compensation adjuster reviews the medical report and evaluates the disability rating assigned by the treating physician. If the disability rating is high, or if the adjuster has any reason to suspect it is not correct (for example – the treating physician has a history of providing high disability ratings), the adjuster will request an independent medical evaluation (IME) [also known as an independent medical examination].   The IME doctor reviews the medical records and performs an examination of the employee. The IME doctor then provides a disability rating based upon the results of the examination. (WCxKit)
Employment:
If the medical providers – the treating physician and the IME doctor – agree the employee has recovered enough to return to some type of employment, but will always be partially disabled, the employee is classified as PPD and will be paid PPD benefits per the state statutes. If the medical providers both agree the employee is unable to return to any type of employment, the employee will be considered PTD and will be paid PTD benefits per the limitations in the state workers comp statutes.
Permanent Partial Disability:
PPD benefits are paid to employees who have a permanent physical impairment but can return to some type of work. The amount of PPD benefits can be either a percentage of a body part, a percentage of the body as a whole, or a set scheduled amount.   The calculation of the benefit amount will depend on which of these three types of ratings is given.
When a percentage of a body part or a percentage of the whole body is used by the physicians to give their opinion of the disability rating, in most jurisdictions they use the American Medical Association (AMA) Guide to the Evaluation of Permanent Impairment. The physician will review the employee’s disability and compare it to the description provided in the AMA Guide. An example – the physician following the AMA Guide determines the employee has a 15% loss of use of a leg. [When the employee is given any rating to a body part, as opposed to a whole body rating, the employee will be classified as permanent partial disabled.]
The adjuster will then take the disability rating for the leg and multiply it by the number of weeks the state statutes allow for a leg. If the state law states a leg is worth 200 weeks, a 15% rating for the leg would equal 30 weeks (200 X .15). The adjuster would then multiply the number of weeks by the PPD compensation rate. (Most states set the PPD compensation rate at the same level as they set the temporary total disability rate paid to the employee before the employee reached MMI). If the PPD rate is $500, then the amount paid for PPD would equal $15,000 ($500 x 30).
In about 40 states, the statutes have a schedule for the lost of a body part. Examples of body parts listed on the state schedule would include an eye, an ear (hearing), a finger, a hand, an arm, a toe, a foot and a leg. The complete loss of the body part is still considered as PPD as the employee will still be able to return to some type of employment. An example would be the complete loss of a finger. Per the state schedule the finger is worth 10 weeks. With the PPD rate of $500, the PPD benefit paid to the employee would be $5,000 (10 x $500).
Permanent Total Disability:
When the treating physician and the IME doctor agree the employee will never be able to return to any type of employment, the employee is given a disability rating of 100%. With a 100% whole body disability rating, a PTD rating is almost automatic. (WCxKit)
The adjuster will take the 100% disability rating for the whole body and multiply it by the number of weeks the state statutes allow for whole body. If the statutes states the whole body is worth 400 weeks, a 100% rating equals 400 weeks. The adjuster would then multiply the number of weeks by the PTD compensation rate. (Most states set the PTD compensation rate at the same level as they set the temporary total disability rate paid to the employee before the employee reached MMI, but some states have a lower PTD rate then the rate for temporary disability). If the PTD rate is $500, then the amount paid for PTD would equal $200,000 ($500 x 400). [It should be noted that some states do not put a cap on the maximum number of weeks a PTD person may receive. The employees in those states receive their disability payments for life].
It is not unusual for the treating physician to give a higher rating than the IME doctor (especially in states where the employee selects the treating physician). If the treating physician rates the employee as 100% disabled, but the IME doctor (reviewing the same medical records and AMA Guide) rates the employee at 60% disabled, it becomes a question for the Workers Compensation Board (also known as the Industrial Commission in some states) to determine whether or not the employee is PTD. The Workers Comp Board will often have a doctor they select examine the employee and give a third opinion as to the level of disability before making a final decision.
Another area where disagreement arises about PTD is when the employee has suffered severe injuries and is unable to return to work for your company, but is not classified by the doctors as 100% disabled.   A number of issues will come into play in determining PTD. The nature and degree of physical impairment, the educational level of the employee, the age of the employee, the ability of the employee to be retrained for other suitable work, and the availability of suitable work, are all factors in a determination of PTD.

Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing.  Contact:  RShafer@ReduceYourWorkersComp.com

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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.
 
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.

Understanding Indemnity Benefits (Lost Wages) in Workers Compensation

Approximately half of all the dollars spent on workers compensation claims are used to pay indemnity benefits. These are the benefits paid to an injured worker to replace part of the worker’s lost income. The indemnity benefits vary in name among the various workers compensation jurisdictions, but can be separated into two basic types — temporary benefits and permanent benefits
 
Temporary Benefits
Temporary benefits are further divided into two types — temporary total disability (TTD) and temporary partial disability (TPD) [with different names for the temporary indemnity benefits in different states]. TTD is paid to the injured employee when the employee is unable to return to work of any type while recovering from the injury. WCxKit When the employee is partially recovered from an injury, but not fully recovered, the medical provider may allow the employee to return to work part time. The employee is paid regular wages for the hours does worked and TPD is paid to the employee to cover the hours each day the employee is unable to work. 
 
Permanent Benefits
Permanent benefits are also divided into two types — permanent total disability (PTD) and permanent partial disability (PPD) [with different names for the permanent indemnity benefits in different states]. When the employee reaches maximum medical improvement, the medical provider evaluates the employee's ability to return to work. If the medical providers (the treating physician and an independent medical evaluator) both agree that the employee is unable to return to any type of employment, the employee is consider PTD and paid PTD benefits per the limitations in the state workers comp statutes. If the medical providers agree the employee has recovered enough to return to some type of employment but will always be partially disabled, the employee is classified as PPD and is paid PPD benefits per the state statutes.
 
Indemnity Benefits Calculation
The amount of the employee's indemnity benefit is based on the employee's prior pay history and the average weekly wage (AWW) earned by the employee. Most jurisdictions use two-thirds (66.67%) of the gross AWW as the amount to pay in indemnity benefits, but a few jurisdictions use 70% of the gross AWW. Also, a few jurisdictions use 75% or 80% of the employee's net wages after taxes to calculate indemnity benefits. WCxKit
 
The jurisdictions vary in the time frame used to calculate the AWW. Most jurisdictions use the previous 52 weeks as a time frame, but some states use the prior 13 weeks or the prior 26 weeks as the time frame. 
 
An example using the AWW to calculate the TTD: The employee made $52,000 in the 52 weeks prior to the injury causing the disability. The AWW would be $1,000 with the TTD rate being $666.67 (two-thirds X $1,000).
 
An employee's AWW in most jurisdictions includes all compensation, not just the wage or salary. The adjuster includes overtime pay, bonuses, commissions or any other form of compensation in determining the AWW.   Also, some jurisdictions include the value of benefits if the employer suspends paying for those benefits during the time the employee is off work.
 
The amount of TTD has an upper limit cap and a minimum amount. The jurisdictions vary in the dollar amount for the upper limit and the lower limit. A jurisdiction might by statute state the maximum amount of TTD is $800.00 per week and the minimum amount of TTD is  $100. 00 per week. An executive making $2,000.00 per week would not receive two thirds of his AWW of $2,000.00, or $1,333.34. The executive's TTD would be capped at $800.00 per week. A part-time fast food worker making $120.00 would not be limited two-thirds of his AWW, or $80.00. His TTD rate would be the state minimum rate of $100.00. WCxKit
 
When Paid
The states vary in their requirements as to when indemnity benefits are paid. Some states require the payment of weekly indemnity benefits while other states require the indemnity benefits to be paid every two weeks. Some states require the first indemnity check to be issued on the 15th day after the injury (if the compensability of the claim is not being disputed) and subsequent checks to be issued on the same day of each of the following weeks as long as the employee is unable to work. Other states allow the insurer to determine what day the initial indemnity benefit check will be issued, with subsequent checks following weekly or every other week.
 
Issuance of the Indemnity Check
At most insurance companies and third party administrators, after the adjuster determines the amount of the weekly or bi-weekly indemnity check, the actual issuance of the check becomes a clerical function. The clerical person enters the information into the company computer for the first indemnity check to be issued. Most claim management systems are now automated to the point that the computer system takes over issuing and printing the subsequent indemnity checks until the computer is told to stop.
 
Delivery of the Indemnity Check
The two primary ways the indemnity checks reach the employee is the U.S. Mail or through direct deposit into the employee's checking account.   Some insurance companies have started the practice of putting a fraud notice on the back of indemnity check which states the check is for the payment of disability benefits and anyone cashing the check who is not disable is committing an act of fraud. This is of value only if the indemnity benefits check is mailed to the employee, requiring their endorsement. It is of no value if the check is being direct deposited into the employee's checking account. WCxKit
 
In a recent audit of a large self-insured Midwestern university, a third way of delivering the indemnity check to the employee was used. Unless the employee was hospitalized, the employee was required to come to the claims office each week to pick up the check. This allowed the workers comp adjuster to make personal contact with the employee weekly and allowed the claims department to visually evaluate the employee's physical condition.  
 
Account Instructions
The client instructions for most self-insured programs are silent on the requirements for the TPA when it comes to issuing indemnity payments. If the employer has had any issues with the TPA over the payment of indemnity benefits, the client instructions should be amended to include directions on when and how indemnity benefits will be paid. (WCxKit)
 
For More Information
This brief synopsis does not cover all the information you may need to know about indemnity benefits. The websites of most state bureaus of workers compensation or industrial commissions will often have a discussion of indemnity benefits for their state. Another excellent source of information is the annual Analysis of Workers Compensation Laws guide published by the U.S. Chamber of Commerce. Of course, we are always glad to answer your questions about workers compensation. Please contact us for more information.
  \
Author Rebecca Shafer,
J.D. President, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing.  Contact: Info@ReduceYourWorkersComp.com 
  
 
WC Calculator:  http://www.LowerWC.com/calculator.php
TD Calculator:  http://www.LowerWC.com/transitional-duty-cost-calculator.php 

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.
  
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact
 Info@ReduceYourWorkersComp.com 

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