A COMPARISON OF SYSTEM FEATURES: 14 STATES

Transcription

1 A COMPARISON OF SYSTEM FEATURES: 14 STATES CAROL A. TELLES RUI YANG RAMONA P. TANABE With the Assistance of Stacey O Brien February 2007 WORKERS COMPENSATION RESEARCH INSTITUTE CAMBRIDGE, MASSACHUSETTS

2 COPYRIGHT 2007 BY THE WORKERS COMPENSATION RESEARCH INSTITUTE ALL RIGHTS RESERVED. NO PART OF THIS BOOK MAY BE COPIED OR REPRODUCED IN ANY FORM OR BY ANY MEANS WITHOUT WRITTEN PERMISSION OF THE WORKERS COMPENSATION RESEARCH INSTITUTE. PUBLICATIONS OF THE WORKERS COMPENSATION RESEARCH INSTITUTE DO NOT NECESSARILY REFLECT THE OPINIONS OR POLICIES OF THE INSTITUTE S RESEARCH SPONSORS. ii

3 TABLE OF CONTENTS List of Tables iv Introduction 1 Workers Compensation Law / 2 Administrative Organization / 3 Medical Benefits and Medical Management Tools / 3 MEDICAL BENEFITS / 3 MEDICAL COST CONTAINMENT STRATEGIES / 3 Indemnity Benefits / 6 TEMPORARY TOTAL DISABILITY BENEFITS / 8 PERMANENT DISABILITY BENEFITS / 9 Vocational Rehabilitation Benefits / 13 Initiating a Claim / 13 Initiating Payment / 14 Terminating Temporary Total Disability Benefits / 15 Dispute Resolution / 15 Attorney Fees / 16 References 17 iii

4 LIST OF TABLES 1 Coverage under the Workers Compensation Act, 2006 / 24 2 Administrative Organization, 2006 / 26 3 Medical Benefits, 2006 / 28 4 Medical Cost Containment Strategies, 2006 / 30 5 Maximum and Minimum Temporary Total Disability Benefits, / 34 6 Temporary Disability Benefits, 2004 / 38 7 Maximum and Minimum Permanent Partial Disability Benefits, / 40 8 Permanent Partial Disability Benefits, 2004 / 44 9 Determining Permanent Partial Disability Benefits, 2006 / Vocational Rehabilitation Benefits, 2004 / Claim Initiation and Reporting Requirements, 2006 / Initiating Payments, 2006 / Terminating Temporary Total Disability Benefits, 2006 / Dispute Resolution Mechanisms, 2006 / Attorney Fees, 2005 / 61 iv

5 INTRODUCTION This report describes the structures and practices in the 14 workers compensation systems we studied in the seventh edition CompScope multistate benchmarking series. 1 The states in the study are Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin. In this report, we focus on structures and practices that are closely related to the system performance measures presented in the individual CompScope state reports and in the companion statistical reference book. Those measures cover a number of areas, including time from injury to notice and first payment, average total cost per claim and average payments per claim for medical and indemnity benefits (and the components of each), vocational rehabilitation use and costs, benefit delivery expenses and defense attorney involvement, and duration of disability and indemnity payments. This report provides a context for understanding and interpreting the findings of those studies, particularly when states show large variation on a particular measure. It is also useful by itself to policymakers and others who want to examine similarities and differences in state structures and processes. There is a lot of information here, but statistical tables alone cannot reflect all the nuances of a particular jurisdiction. For a more comprehensive examination of each state s workers compensation system, please refer to WCRI s series of Administrative Inventories and other studies noted in the References section or to the statutes for each state. 1 The seventh edition of the CompScope benchmarking study comprises a series of separate publications, including 11 individual state reports (for California, Florida, Illinois, Louisiana, Maryland, Massachusetts, Michigan, North Carolina, Pennsylvania, Tennessee, and Wisconsin); a reference book of statistical tables (CompScope Benchmarks, 7th Edition: The DataBook [ and the Technical Appendix (CompScope Benchmarks: Technical Appendix, 7th Edition [

6 Generally, we describe the state systems as of mid However, because we want to tie in the system features to trends in system performance from 1999 to 2005 in the CompScope studies, we also note major changes in state processes during that time frame. In some cases, we also note very recent legislative changes that will become effective in the near future. For the most part, the tables are self-explanatory. We have divided the material into short sections by topic, each containing brief descriptions of the contents of the tables and a summary of the points that are particularly noteworthy. WORKERS COMPENSATION LAW The workers compensation statutes in the 14 states were enacted between 1910 and Table 1 shows the scope of coverage in each state. Scope of coverage can affect the frequency of claims and/or cost per claim and thus can influence system costs. Workers compensation insurance is compulsory for private employers in all the states studied except Texas. 3 As of 2003, Florida required that all construction employers with one or more employees purchase workers compensation coverage a more restrictive requirement than in previous years. 4 Tennessee requires coverage for employers with five or more employees and for all employers in construction, regardless of the number of employees. Coverage for most public employment is also compulsory. Several states do allow exemptions from mandatory coverage for farm laborers, domestic workers, and casual workers, but if employers of those workers elect to buy workers compensation insurance, the workers are limited to remedies under the workers compensation law. 2 See the References section for the citation for each statute. 3 According to estimates by the Texas Department of Insurance, approximately 38 percent of employers in Texas elected not to buy workers compensation coverage in Employees of nonsubscriber employers represented approximately 24 percent of the workforce that year (Texas Department of Insurance, 2004). 4 Previously, coverage was required for employers with four or more workers and for all employers in the commercial construction trade. In accordance with Senate Bill 108, effective July 1, 2002, employers in commercial construction were exempt from workers compensation coverage when the job was valued at less than $250,000; residential construction contractors continued to be exempt. Effective October 1, 2003, the exemption for projects valued at less then $250,000 was repealed. 2

7 ADMINISTRATIVE ORGANIZATION In general, the agency with primary responsibility for administering the workers compensation law in each state functions as (1) a division or other subsidiary of a department-level state agency with an administrative director or (2) a freestanding multimember commission or board with a chair and an executive director. Table 2 describes the structure of the administrative agency in each state we studied. MEDICAL BENEFITS AND MEDICAL MANAGEMENT TOOLS MEDICAL BENEFITS In general, the states we studied pay medical benefits to workers who sustain an occupational injury, disease, or disability (Table 3). Statutory benefits are similar across the states, covering medical, surgical, hospital, and other treatments, as well as medicines and supplies. Most of the states pay medical benefits as long as they are reasonable and necessary. No state places a dollar limit on total medical benefits, but fee schedules set reimbursement levels for individual services and are reviewed and adjusted periodically. MEDICAL COST CONTAINMENT STRATEGIES All 14 states use multiple strategies to contain medical costs. Table 4 describes those strategies. The following are the major points in the table: Managed care: Managed care is allowed in 13 states and regulated in 5. Public officials in Pennsylvania note that the statute is silent on the issue of managed care and that silence does not assume authority. No state in the study currently mandates managed care for all injured workers. 5 Choice of provider: The initial choice of a treating provider and the worker s ability to change providers can play critical roles in the claim process, particularly when the treating physician s opinion is the basis for benefit-related decisions. The worker 5 Effective October 1, 2001, the use of managed care in workers compensation was made voluntary in Florida, rather than mandated. 3

8 chooses the treating provider without employer or insurer limitation in five states (Illinois, Louisiana, Maryland, Massachusetts, and Wisconsin), although in Massachusetts, when an insurer has entered into a preferred-provider arrangement, the worker s first scheduled appointment may be required to be with a provider in the plan. In Florida, the employer or insurer has the initial choice for non-managed-care arrangements; within managed care, the worker has the right to choose within the managed-care network. In California, the employer can direct care for the first 30 days unless the worker has predesignated a treating physician or unless the employer or insurer has established a medical provider network. 6 Recent legislation in Texas (House Bill 7) allowed insurers and self-insured employers to establish health care networks; workers are required to receive medical care within the network if their employer or insurer has contracted with a certified network. The Texas Department of Insurance began accepting applications for certification of health care networks beginning January 1, If no certified network is in place, the worker can choose the treating provider, as was the case before the legislation. In Michigan, the employer has the initial choice of medical provider for ten days after the inception of medical care, after which the worker can choose. In two other states (Pennsylvania and Tennessee), the employer may post a panel of health care providers from which the worker chooses. Pennsylvania allows a limited period of directed care (90 days), after which the worker can change treating providers. In Arkansas, Indiana, and North Carolina, the employer selects the treating provider. Medical fee schedules: As of 2006, all CompScope states except Indiana and Wisconsin use medical fee schedules and some form of hospital payment regulation to set reimbursement levels for medical services. 7 Tennessee enacted a fee schedule 6 Medical provider networks were first permitted in California effective January 1, 2005; previously, predesignation was allowed only for injured workers whose employers provided nonoccupational group health care through a health management organization, health care plan, health care organization, or other such entity. If a worker did not predesignate a treating provider, the employer could direct care for the first 30 days. 7 For a detailed discussion of medical fee schedules, hospital payment regulations, and other medical cost containment programs, see Managed Care and Medical Cost Containment in Workers Compensation: A National Inventory, (Tanabe and Murray, 2001). Under managed-care arrangements, medical fee schedules often are used as benchmarks in setting reimbursement rates with providers. 4

9 effective July 1, 2005, and recent legislation in Illinois created a fee schedule effective February 1, Since 1992, Wisconsin has relied on division-certified databases that list formula amounts for medical reimbursement. Fees below formula amounts are considered reasonable. 8 Utilization review: Nine study states mandate some form of utilization review, most within managed-care arrangements or under specific circumstances. Florida and Massachusetts mandate utilization review for all workers compensation claims. In states where utilization review is not mandated (Illinois, Indiana, Maryland, Texas, and Wisconsin), it is often conducted in disputed cases or at the request of the employer, the insurer, or the worker. Medical bill review: Review of medical bills is mandated in Arkansas, Florida, Louisiana, Michigan, and Texas. It is authorized but not mandated in Indiana, Massachusetts, North Carolina, Pennsylvania, and Tennessee. 9 In those states and in California, Illinois, Maryland, and Wisconsin, payors commonly review bills voluntarily to determine compliance with the fee schedule or reasonableness of the charges under a usual and customary standard. Treatment guidelines: Three of the study states (California, Florida, and Massachusetts) have developed treatment guidelines or use established treatment guidelines. In Arkansas and North Carolina, treatment guidelines are authorized for managed-care organizations. Illinois, Indiana, Louisiana, Maryland, Michigan, Pennsylvania, Tennessee, and Wisconsin neither require nor endorse treatment guidelines. 10 Recent legislation in Texas requires the commissioner of the Division of Workers Compensation (for nonnetwork care) and medical provider networks to 8 Interested readers can turn to the WCRI study Benchmarks for Designing Workers Compensation Medical Fee Schedules: (Eccleston, Laszlo, Zhao, and Watson, 2002) for more information on how workers compensation fee schedules compare among 40 states and how those fee schedules compare with the Medicare fee schedule. 9 On request, the North Carolina Industrial Commission reviews medical bills for proper charges in cases in which there is more than one day of lost time or more than $2,000 in medical bills. Effective February 1995, employers and insurers can apply the fee schedule themselves (nonhospital), subject to specific requirements. 10 Texas House Bill 2600, Article 6, effective June 17, 2001, abolished mandatory treatment guidelines. If treatment guidelines are adopted, the statute requires that they be nationally recognized, scientifically valid and outcome-based. The statute allows the adoption of guidelines that are not nationally recognized if there are no guidelines available that meet that criteria, but any guidelines have to be scientifically valid and outcome-based. 5

10 select treatment and return-to-work guidelines; treatment guidelines must be evidence-based, scientifically valid, and outcome focused. INDEMNITY BENEFITS When a covered worker suffers a work-related injury or disease, he or she is entitled to specific income benefits (known as indemnity benefits) as specified in the statute of each jurisdiction. Indemnity benefits are paid to an injured worker or to dependents of a diseased worker whose claim meets statutory requirements. Generally, that means the claim has been deemed compensable, and the worker has lost time from work beyond the specified waiting period for benefits. The amount of these benefits and the period over which they may be paid differ significantly from state to state. Common terms used for indemnity benefits are temporary disability, which includes both temporary total disability and temporary partial disability; permanent partial disability, which includes both permanent partial disability and permanent total disability; fatality benefits, which includes funeral benefits and dependency benefits paid when a worker dies from a work-related injury or occupational disease; and vocational rehabilitation benefits (also known as maintenance benefits) paid while an injured worker is participating in a formal vocational rehabilitation plan to provide training or skills needed for return to work. The payment for lost wages resulting from to an occupationally related injury or disease usually begins with the payment of temporary total disability (TTD) benefits, paid when the injured worker cannot work at all while recovering from the injury. TTD benefits are paid as a portion of the worker s preinjury wage (the TTD benefit rate), subject to maximum (and often minimum) weekly benefit amounts. Some states also limit the number of weeks over which TTD benefits can be paid. Temporary partial disability (TPD) benefits are paid when a worker is able to return to work following a workplace injury but with some physical limitations and loss of earnings, often because 6

11 the worker is working fewer hours, has returned to a different job that pays less, or is looking for work within the physical restrictions. TPD benefits are generally calculated as a percentage of the difference between the preinjury wages and what the worker is able to earn with the physical limitations. TTD and TPD benefits typically continue until the worker is released to work without restrictions, the worker is earning the same as the preinjury wage, the worker has received benefits for the number of weeks allowed by statute, or there is an administrative or judicial determination that the worker is no longer eligible for these benefits. After an injured worker returns to work, reaches the maximum temporary disability benefits payable, or a physician has determined that the worker s physical condition is stable and not likely to improve, he or she may be eligible for permanent disability benefits. Permanent disability benefits are paid when a worker has a permanent loss of physical function or, in some states, a loss of future earning capacity. There are two types of permanent disability benefits: permanent total disability (PTD) benefits and permanent partial disability (PPD) benefits. PTD benefits are typically paid when a worker has suffered a very severe injury that precludes an expectation that the worker will be able to return to work. State statutes often specify conditions that create a presumption of entitlement to PTD benefits (e.g., loss of two body members, paralysis, or severe head injury). PTD benefits are generally paid for life or until the worker returns to work. PPD benefits are paid to compensate an injured worker for a permanent but partial loss of physical function or disability or, in some states, partial loss of future earnings. Thus, PPD benefits are more complicated and diverse than PTD benefits, both in design and application. Like temporary disability benefits, PPD benefits are often paid as a percentage of the worker s preinjury wage, subject to a maximum weekly amount and paid for a limited number of weeks. In some states, the benefit rate and/or maximum weekly benefit for PPD benefits is the same as for TTD benefits; in other states, weekly PPD benefits may be lower. There are two types of PPD benefits: scheduled and unscheduled. Scheduled PPD benefits typically involve body members and are listed in the statute, with a specified number of weeks of benefit payments for each total loss or loss of use (e.g., 200 weeks 7

12 for the loss of an arm). Payments for partial loss of use are based on the degree of impairment, as determined by a physician. Unscheduled PPD benefits typically involve injuries not specified in the statute, often including back and soft tissue injuries. The states use various approaches to unscheduled PPD benefits: Impairment approach: considers only the actual physical and psychological loss caused by the injury or illness, rated by a medical provider using a rating guide such as the American Medical Association Guides to the Evaluation of Permanent Impairment (AMA Guides) or similar guide. Loss-of-earning capacity approach: attempts to estimate the injured worker s future wage loss using factors such as the worker s age, education, training, skills, and degree of impairment, and labor market conditions. Wage-loss approach: calculates the worker s actual weekly wage loss, based on the difference between the worker s preinjury wage and what the worker is able to earn with the permanent disability. Combination of the above approaches, typically depending on whether or not the worker has returned to work: under many state systems that use this approach, workers who have returned to work at or near the preinjury wage receive PPD benefits based on impairment only; workers who do not return to work receive benefits based on a loss of earning capacity. Tables 5 and 6 focus on TTD benefits, and PPD benefits are covered in Tables 7, 8, and 9. TEMPORARY TOTAL DISABILITY BENEFITS Table 5 reports the benefit rates and levels for temporary total disability benefits from 1996 through With the exception of Michigan, each study state applies a benefit rate, which ranges from 60 percent to 70 percent, to the worker s gross preinjury average weekly wage (AWW). In Michigan, the benefit rate is 80 percent of the worker s spendable (after-tax) income. The maximum statutory weekly benefit in mid-2004 ranged from $429 in Louisiana to $1,020 in Illinois. The benefit rate, the maximum benefit (and 8

13 the percentage of the statewide average weekly wage that the maximum benefit represents), and the worker s preinjury AWW are the key variables in the calculation of weekly TTD benefits across states. Table 6 shows several other dimensions of TTD benefits in In 11 states, benefits automatically go up each year, usually with increases in the state average weekly wage. In Illinois, the maximum benefit is adjusted semiannually. In California, Indiana, and Texas, benefit levels are set by legislation. 11 In all states, TTD benefits are paid for the duration of the total disability or incapacity or until some other event triggers termination: (1) the statutory limit (in weeks of benefits) has been reached, (2) a medical report indicates the worker has reached maximum medical improvement or is able to work with or without restriction, or (3) the worker has been released to work but has refused gainful employment. 12 Illinois, Louisiana, Maryland, Michigan, North Carolina, and Wisconsin do not limit the duration of benefits. Duration of disability caps vary from 104 weeks in California (except for specified injuries), Florida, and Texas to 500 weeks in Indiana. 13 PERMANENT DISABILITY BENEFITS In most study states, the PPD rate is the same as the TTD rate (see Table 7). An exception is Massachusetts, where the statute sets dollar amounts for scheduled benefits. We find greater variation across states in the maximum weekly PPD benefit payments relative to the TTD maximum weekly benefit. In Illinois (for amputation and enucleation of an eye), Indiana, Louisiana, Michigan, North Carolina, Pennsylvania (for scheduled benefits), and 11 Beginning in 2006, the weekly maximum TTD benefit in California will be indexed to the statewide average weekly wage. In Texas, the statewide average weekly wage for workers compensation purposes was set by legislation for fiscal years beginning from September 1, 2003, and through September 1, In addition to a 500-week limit on income benefits, Indiana imposes a maximum dollar amount, which is increased annually by statute. 13 In Pennsylvania, since June 24, 1996, a worker who has received benefits for 104 weeks can be evaluated for permanency. If the worker is found to have a permanent impairment of less than 50 percent, his or her eligibility for total disability benefits ends, but the worker may be entitled to up to 500 additional weeks of partial disability benefits. If the worker s permanent impairment is greater than 50 percent, benefits can continue for the period of disability without limitation. In practice, however, the use of the American Medical Association Guides to the Evaluation of Permanent Impairment to assess impairment in Pennsylvania is rare, with parties apparently preferring compromise-and-release settlements to formal evaluations. 9

14 Tennessee, the maximum weekly benefit for permanent partial disabilities is the same as the TTD maximum. 14 In the other states, the maximum weekly PPD benefits as a percentage of the TTD maximum range from 15 percent (in Maryland, for the lowest benefit tier) to 70 percent (in Texas) as of The relationship between TTD and PPD benefit levels may be important. 15 When TTD benefits are higher than PPD benefits, the system may be creating incentives for workers to continue collecting TTD benefits and for employers and insurers to contest those benefits, increasing litigation and its attendant expenses. Another source of litigation is workers efforts to increase and payors efforts to contain the amount of PPD benefits. Another possible response is that workers may return to work sooner, with the PPD benefit becoming a supplement to, rather than a replacement for, earnings. The maximum number of weeks that PPD benefits can be paid (under a state s schedule or the body as a whole concept) is also an important factor in PPD payments. Table 8 shows other dimensions of PPD benefits in Several states set a time frame for initiating PPD benefits at maximum medical improvement, for example, or when TTD benefits end. Louisiana, Massachusetts, Michigan, and Pennsylvania pay PPD benefits only for injuries listed in the states schedules (generally, loss or loss of use of a body member or disfigurement). Workers in those four states are compensated for unscheduled impairments only if they actually experience a wage loss or a loss of wageearning capacity. Michigan and Pennsylvania further limit PPD benefits by paying compensation only for total loss or loss of use; those states have no provision for partial losses. In Louisiana, PPD benefits are reduced by the number of weeks of TTD, TPD, and PTD benefits paid. The ten non-wage-loss study states represent several different approaches to permanency benefits for unscheduled injuries: Some states base benefits on impairment only (Florida, Indiana, and Texas); other states use a disability concept, based on a loss of earnings capacity (California and Illinois); and some states use a bifurcated or dual 14 For 2004 and 2005, Tennessee s maximum weekly PPD benefit remained at 100 percent of the statewide average weekly wage, but the maximum weekly TTD benefit was set at 105 percent and 110 percent of the statewide average weekly wage for those years, respectively. 15 We use the term PPD benefits generically to describe permanency benefits for a worker who is not permanently and totally disabled. 10

15 approach (Arkansas, Maryland, Tennessee, and Wisconsin). North Carolina is unique among these 14 states in that it has attributes of both a PPD system and a wage-loss system. Workers who do not return to work at maximum medical improvement can receive PPD benefits or ongoing TTD benefits, yet North Carolina also pays PPD benefits for workers with permanent impairments who have returned to work. Table 9 describes the processes the states used in 2006 to determine PPD benefits. Here too we find considerable variation. All study states except Florida and Texas base the amount and duration of permanent disability benefits on a schedule. Florida uses its own rating guide, titled the Florida Impairment Rating Guide, to assign ratings for specific impairments; Texas uses the AMA Guides. In Texas (and Florida until 2003), the number of weeks of PPD benefits is three times the impairment rating. Under 2003 legislation in Florida, the number of weeks of PPD benefits varies from two to six for each impairment rating point, according to a graduated schedule. In California, North Carolina, and Tennessee the schedules are comprehensive, covering almost all conditions and impairments. The California permanent disability schedule was recently revised and impairment ratings are now based on the fifth edition of the AMA Guides, as required under legislation passed in Medical impairment alone is the basis for ratings in most study states except California, Illinois, and Tennessee. In California and Illinois, the nature of the injury and the worker s age and occupation are also considered. California takes into account the worker s diminished future earning capacity. Legislation passed in 2004 made major revisions to the PPD benefit structure and determination process in California, as listed in the notes for Tables 8 and 9. In Tennessee, ratings are based on medical impairment plus the worker s age, education, training, occupation, loss of present and future wage-earning capacity, and local labor market conditions. Twelve states require the use of rating guides (the exceptions are Illinois and Michigan), and all except Pennsylvania use them extensively. Michigan does not use medical impairment ratings. Florida, North Carolina, and Wisconsin have developed their own rating guides; the other states use one or more editions of the AMA Guides The 2004 legislation in California requires use of the AMA Guides; previously California used its own guide. 11

16 In all the study states, impairment ratings are issued by a physician, generally the treating physician but sometimes an independent medical examiner or impartial physician. In Texas, an independent physician from the agency s list performs evaluations. 17 Disability ratings in California are determined by staff members in the Disability Evaluation Unit of the Division of Workers Compensation, by the parties, or by private raters. In all states except California, Indiana, Massachusetts, Maryland, Pennsylvania, and Texas, the treating physician s rating is given special weight when multiple ratings have been made. All study states except Michigan authorize the use of medical panels or neutral doctors in disputes over impairment ratings. Panels and neutral doctors must be used in Massachusetts, Pennsylvania, and Texas when medical issues are disputed. In California, if the worker is not represented by an attorney, a panel-qualified medical examiner must be used; the 2004 legislation extended this requirement to represented workers as well. The amount of PPD benefits often is resolved through a lump-sum settlement, particularly when an impairment rating is in dispute. Texas prohibits lump-sum settlements but allows lump-sum payments under certain circumstances. In Massachusetts, Tennessee (under some circumstances), and Texas, lump-sum settlements cannot terminate future liability for medical benefits. In California (before 2003), future liability for rehabilitation benefits could not be closed out. 18 No other state has similar limitations. 17 In accordance with House Bill 2600, Section 5, effective June 17, 2001, when the insurer requests an examination related to maximum medical improvement (MMI) or the impairment rating, or if MMI or the impairment rating is disputed by either party, an injured worker is sent to an independent doctor. The doctor is selected from the Texas Workers Compensation Commission s list of designated physicians for assignment of an impairment rating or determination of attainment of MMI. Treating doctors often provide impairment ratings. 18 The 2002 legislation in California permitted a compromise and release of the mandatory vocational rehabilitation obligation with a $10,000 one-time cash grant for self-directed vocational rehabilitation. The 2003 legislation repealed the existing vocational rehabilitation statute and implemented a new supplemental job displacement benefit for injuries occurring on or after January 1, The 2004 legislation restored vocational rehabilitation for pre-2004 injuries. 12

17 VOCATIONAL REHABILITATION BENEFITS In several of the states we studied, an injured worker may be entitled to vocational rehabilitation benefits under some circumstances; in others, the payor provides vocational rehabilitation services voluntarily (Table 10). The workers compensation agency often plays a critical role in identifying workers who might benefit from vocational rehabilitation services and in monitoring the provision of those services. In most study states, workers continue to receive indemnity benefits, often at the weekly TTD rate, while undergoing vocational rehabilitation. Rehabilitation benefits are limited in duration, ranging from 26 weeks in Florida and Louisiana (both with a possible extension to 52 weeks) to 104 weeks in Maryland and Massachusetts. In the CompScope multistate benchmarking studies, the expenses of providers services for vocational rehabilitation are reported separately; the costs of ongoing indemnity benefits while a worker is receiving services are included in indemnity costs. INITIATING A CLAIM Table 11 shows claim initiation and reporting requirements. In all 14 states, once a workplace injury or illness occurs, the worker must notify the employer. The notification period varies from immediately to 90 days. A worker s failure to notify the employer within the required period generally does not bar a claim unless the employer has been prejudiced. However, the worker must file a claim within the statutory period, which varies from one to four years in the states we studied. The duration of a state s reporting and claim-filing periods can influence the volume and nature of claims in a system. Once an employer has been notified of a workplace injury or illness, usually it must complete a First Report of Injury and file it with the workers compensation agency within a specified period. Some states require that all injuries be reported. Other states require that only injuries with so many days of lost time be reported. In many states, the First Report of Injury triggers the agency s involvement. A claim file is opened, and the agency may begin monitoring the claim. In California and Maryland, however, the worker must file a separate claim for compensation. Some states set specific notice 13

18 requirements from the employer to the insurer. Generally, however, insurers set reporting guidelines for their policyholders. INITIATING PAYMENT The statute in each state spells out the requirements for initiating the payment of indemnity benefits (Table 12). The waiting period for benefits ranges from three to seven days. The retroactive period ranges from seven days to six weeks. A worker who is unable to work throughout the retroactive period receives benefits for the waiting period. Clearly, the duration of the waiting period and the retroactive period can have a significant effect on the volume and costs of indemnity claims in a state: some portion of claims that would qualify for indemnity benefits in a state with a three-day waiting period would not be eligible in a state with a seven-day waiting period. By statute in the 14 states that we studied, the payor must begin payment within a specified period or deny the claim. A payor that fails to take action within that period can be assessed a penalty and sometimes interest on the amount due. In most of the states we studied, payment must start within 14 to 21 days of the employer s knowledge or notice of a workplace injury or disability. Six study states allow payment without prejudice for a specified period; the exceptions are Arkansas, Illinois, Maryland, and Indiana, which do not allow payment without prejudice, 19 and Louisiana, Michigan, Tennessee, and Wisconsin, which allow it without specified time limits. In Wisconsin, the first payment or denial is required within 14 days of injury. Wisconsin payors can voluntarily begin payment without accepting liability for the claim pending a decision on compensability. Payment of a claim in Louisiana, Michigan, and Tennessee does not constitute acceptance of the claim. The pay-without-prejudice period varies from 60 days in Texas to 180 days in Massachusetts. A payor can terminate benefits at any point within the pay-withoutprejudice period by issuing a denial. Claims that are not denied within the pay-without- 19 In Indiana, an employer or insurer has 30 days after the employer has knowledge of a claim to pay or deny the claim; on request, the Indiana Workers Compensation Board may allow another 30 days. 14

19 prejudice period usually are deemed accepted. To use the pay-without-prejudice option, a payor must begin payment within the statutory period. Each of the 14 states penalizes late payments, but there is considerable variation in both the amount of penalties and the mechanisms in addition to hearings by which they are imposed. In addition, the state can impose penalties when an audit indicates late payments or when a judge determines that payments were delayed unreasonably. Some state agencies monitor payments and routinely assess penalties administratively. In other states, penalties are addressed most often at hearings. TERMINATING TEMPORARY TOTAL DISABILITY BENEFITS The termination of TTD benefits can influence benefit payments and costs per claim significantly, particularly when the termination is contested and litigation time frames are an issue. In Table 13, we compare the TTD termination process in the 14 states. In all states, TTD benefits end when the injured worker has returned to work. In states where the statute limits the duration of TTD benefits, length of the benefits is a factor. In all states, a physician s report indicating that the worker s condition has stabilized or that the worker is able to work may be reason for terminating benefits. Payors can unilaterally suspend or terminate TTD benefits without a hearing, at least under certain circumstances, in all states except Massachusetts. Generally, the worker must be notified of the proposed action and must be given a time frame to object to it. In all states, generally when a worker contests the benefit change (and under other specified circumstances), TTD benefits cannot be terminated until the issue is resolved at a hearing. Some states do allow the suspension of benefits pending a hearing and decision on termination. To relieve the burden on the worker, several states expedite the hearing process. DISPUTE RESOLUTION Table 14 compares the dispute resolution processes in the 14 states. Although we do not report dispute resolution measures in CompScope benchmarks, the methods and time frames for resolving disputes can affect benefit payments and the costs and duration of 15

20 claims. 20 In Tennessee, formal hearings on workers compensation disputes are conducted in civil court, not within the workers compensation agency. ATTORNEY FEES In the 14 states we studied, the workers compensation statute usually spells out the basis of attorney fees and maximum fees (Table 15). Generally, workers pay claimant attorney fees out of their weekly benefits or lump-sum settlements. Several study states limit fees to a scheduled amount, either a percentage of the total award or a tiered percentage. In Texas, workers attorneys are paid an hourly fee set by rule that cannot exceed 25 percent of the worker s payable income benefits. Massachusetts is the only state that distinguishes between awards and settlements in the process for setting attorney fees; it uses a schedule for awards and a percentage for settlements. In most of the states, claimant attorney fees must be reviewed and approved by an adjudicator. In Texas, defense attorney fees are also subject to an adjudicator s approval, as they are in Tennessee when the fee exceeds a maximum amount. 21 In Texas, rates are limited to $150 per hour for both claimant and defense attorneys and guidelines specify the maximum number of hours allowed for various legal services. In the CompScope multistate benchmarking studies, we report payments to defense attorneys; we are unable to report payments to workers attorneys because of data comparability concerns and other data limitations. 20 An analysis of dispute resolution outcomes requires data that generally are not available in automated form. In future CompScope reports, we plan to supplement the data we currently collect with information from claim files and litigation databases. 21 The amount is adjusted annually on July 1, according to changes in the statewide average weekly wage. The threshold for the period July 1, 2005, to June 30, 2006, is $13,

21 REFERENCES American Medical Association. Multiple years. Guides to the evaluation of permanent impairment. Chicago, IL. Arkansas Workers Compensation Commission Biennial report for the fiscal years 2003 and Little Rock, AR. Ballantyne, D Workers compensation in North Carolina: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute Revisiting workers compensation in Pennsylvania: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute Dispute prevention and resolution in workers compensation: A national inventory, Cambridge, MA: Workers Compensation Research Institute Workers compensation in Louisiana: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute Workers compensation in Tennessee: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute Workers compensation in Arkansas: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute. Ballantyne, D., and K. Joyce Workers compensation in Illinois: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute. Ballantyne, D., and L. Shiman Revisiting workers compensation in Michigan: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute. Ballantyne, D., and C. Telles Workers compensation in Wisconsin: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute. Barth, P Workers compensation in Florida: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute. 17

22 Barth, P., and S. Eccleston Revisiting workers compensation in Texas: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute. Barth, P., and M. Niss Permanent partial disability benefits: Interstate differences. Cambridge, MA: Workers Compensation Research Institute. California Commission on Health and Safety and Workers Compensation (February). Workers compensation in California: A guidebook for injured workers, second edition. San Francisco, CA. California Department of Industrial Relations California Department of Industrial Relations biennial report. San Francisco, CA. Department of Labor, Office of Workers Compensation Administration Louisiana Office of Workers Compensation Administration: 2001 annual report. Baton Rouge, LA Louisiana Office of Workers Compensation Administration: 2002 annual report. Baton Rouge, LA Louisiana Office of Workers Compensation Administration: 2003 annual report. Baton Rouge, LA Louisiana Office of Workers Compensation Administration: 2004 annual report. Baton Rouge, LA. Eccleston, S., A. Laszlo, X. Zhao, and M. Watson Benchmarks for designing workers compensation medical fee schedules: Cambridge, MA: Workers Compensation Research Institute. Fanning, R Worker s compensation handbook, third edition: A comprehensive guide to worker s compensation in Indiana. Indianapolis: Indiana Chamber of Commerce. Florida Division of Workers Compensation Annual report. Tallahassee, FL a. Annual report. Tallahassee, FL b. Statistical supplement to the 1999 annual report. Tallahassee, FL Annual report. Tallahassee, FL Annual report. Tallahassee, FL Annual report. Tallahassee, FL. 18

23 Herlick, S California workers compensation handbook: A practical guide to the workers compensation law of California. 19 th ed. Charlottesville, VA: Lexis Law Publishing. Illinois Industrial Commission Illinois Industrial Commission fiscal year 2000 annual report. Chicago, IL Illinois Workers Compensation Commission fiscal year 2004 annual report. Chicago, IL Illinois Workers Compensation Commission fiscal year 2005 annual report. Chicago, IL. Maryland Workers Compensation Commission Annual report, fiscal year Baltimore, MD Annual report, fiscal year Baltimore, MD Annual report, the eighty-sixth edition, July 1, 2000 June 30, Baltimore, MD Annual report, the eighty-seventh edition, July 1, 2001 June 30, Baltimore, MD Annual report, the eighty-eighth edition, July 1, 2002 June 30, Baltimore, MD th Anniversary , Annual report fiscal year 2004, July 1, 2003 June 30, Baltimore, MD. Massachusetts Department of Industrial Accidents Fiscal year 1998 annual report: The Massachusetts workers compensation system, working towards the 21st century. Boston, MA. Massachusetts Workers Compensation Advisory Council The state of the Massachusetts workers compensation system: Annual report fiscal year Boston, MA The state of the Massachusetts workers compensation system: Annual report fiscal year Boston, MA The state of the Massachusetts workers compensation system: Annual report fiscal year Boston, MA. 19

24 The state of the Massachusetts workers compensation system: Annual report fiscal year Boston, MA The state of the Massachusetts workers compensation system: Annual report fiscal year Boston, MA. Michigan Department of Labor and Economic Growth (April). An overview of workers compensation in Michigan. Lansing, MI Workers compensation agency, 2004 annual report. Lansing, MI Workers compensation agency, 2005 annual report. Lansing, MI. Pennsylvania Bureau of Workers Compensation Pennsylvania work injuries and illnesses, Harrisburg, PA Pennsylvania work injuries and illnesses, Harrisburg, PA Pennsylvania work injuries and illnesses, Harrisburg, PA Pennsylvania work injuries and illnesses, Harrisburg, PA Pennsylvania work injuries and illnesses, Harrisburg, PA Pennsylvania work injuries and illnesses, Harrisburg, PA. Pennsylvania Department of Labor and Industry Pennsylvania workers compensation and workplace safety, annual report fiscal year 2003/2004. Harrisburg, PA Pennsylvania workers compensation and workplace safety, annual report fiscal year 2004/2005. Harrisburg, PA. Tanabe, R., and S. Murray Managed care and medical cost containment in workers compensation: A national inventory, Cambridge, MA: Workers Compensation Research Institute. Telles, C., and S. Fox Revisiting workers compensation in California: Administrative inventory. Cambridge, MA: Workers Compensation Research Institute. Telles, C., A. Laszlo, and T. Liu CompScope benchmarks: Multistate comparisons, Cambridge, MA: Workers Compensation Research Institute. 20

25 Telles, C., T. Liu, A. Kowalczyk, and R. Tanabe CompScope benchmarks: Multistate comparisons, Cambridge, MA: Workers Compensation Research Institute. Telles, C., D. Wang, and R. Tanabe CompScope benchmarks: Multistate comparisons, 4th edition. Cambridge, MA: Workers Compensation Research Institute a. A comparison of system features: 12 states. Cambridge, MA: Workers Compensation Research Institute b. CompScope benchmarks for California, 5th edition. Cambridge, MA: Workers Compensation Research Institute c. CompScope benchmarks for Florida, 5th edition. Cambridge, MA: Workers Compensation Research Institute d. CompScope benchmarks for Louisiana, 5th edition. Cambridge, MA: Workers Compensation Research Institute e. CompScope benchmarks for Massachusetts, 5th edition. Cambridge, MA: Workers Compensation Research Institute f. CompScope benchmarks for North Carolina, 5th edition. Cambridge, MA: Workers Compensation Research Institute g. CompScope benchmarks for Pennsylvania, 5th edition. Cambridge, MA: Workers Compensation Research Institute h. CompScope benchmarks for Tennessee, 5th edition. Cambridge, MA: Workers Compensation Research Institute i. CompScope benchmarks for Texas, 5th edition. Cambridge, MA: Workers Compensation Research Institute j. CompScope benchmarks for Wisconsin, 5th edition. Cambridge, MA: Workers Compensation Research Institute a. A comparison of system features: 13 states. Cambridge, MA: Workers Compensation Research Institute b. Baselines for evaluating the impact of the reforms in California: CompScope benchmarks, 6th edition. Cambridge, MA: Workers Compensation Research Institute. 21

26 . 2006c. Baselines for evaluating the impact of the 2003 reforms in Florida: CompScope benchmarks, 6th edition. Cambridge, MA: Workers Compensation Research Institute d. CompScope benchmarks for Louisiana, 6th edition. Cambridge, MA: Workers Compensation Research Institute e. CompScope benchmarks for Maryland, 6th edition. Cambridge, MA: Workers Compensation Research Institute f. CompScope benchmarks for Massachusetts, 6th edition. Cambridge, MA: Workers Compensation Research Institute g. CompScope benchmarks for North Carolina, 6th edition. Cambridge, MA: Workers Compensation Research Institute h. CompScope benchmarks for Pennsylvania, 6th edition. Cambridge, MA: Workers Compensation Research Institute i. Baselines for evaluating the impact of the 2004 reforms in Tennessee: CompScope benchmarks, 6th edition. Cambridge, MA: Workers Compensation Research Institute j. Baselines for evaluating the impact of the 2005 reforms in Texas: CompScope Benchmarks, 6th edition. Cambridge, MA: Workers Compensation Research Institute k. CompScope benchmarks for Wisconsin, 6th edition. Cambridge, MA: Workers Compensation Research Institute. Tennessee Workers Compensation Advisory Council. August Annual report calendar year Nashville, TN. Texas Department of Insurance Employer participation in the Texas workers' compensation system: 2004 estimates. Austin, TX. U.S. Chamber of Commerce analysis of workers compensation laws. Washington, DC analysis of workers compensation laws. Washington, DC analysis of workers compensation laws. Washington, DC analysis of workers compensation laws. Washington, DC analysis of workers compensation laws. Washington, DC. 22