Types of Workers Compensation Benefits
The types of benefits injured employees receive under workers compensation laws are relatively consistent from state to state. Most states provide medical coverage, disability benefits, rehabilitation, and death benefits. As this article will explain, however, the manner in which benefits are provided and managed varies widely.
A basic element of workers compensation insurance is medical coverage. This coverage applies to all medical costs. It includes fees charged for doctor visits, hospital care, nursing care, medications, medical diagnostic tests, physical therapy, and durable medical equipment (like crutches and wheel chairs). Medical coverage is typically unlimited with no deductibles or copays. Benefits are provided until the worker has fully recovered from the injury. In many states, providers are reimbursed for medical services based on a fee schedule.
The schedule lists the most a provider will receive for each type of treatment.
Most states allow employers or their workers compensation insurers to provide benefits under a managed care plan. A few states require insurers to offer employers such a plan. Managed care plans vary widely, but most include one or more of the following features:
- Provider Network A group of doctors and other health care providers who have contracted with an insurer or employer to provide medical services at a discount. The providers are (or should be) skilled in occupational medicine.
- Utilization Management A process designed to ensure that the type of medical care afforded to workers is necessary, appropriate and cost effective. Many plans that include UR require providers to obtain preapproval before performing certain medical procedures.
- Pharmacy Benefit Manager An administrator of a prescription drug program whose purpose is to control costs. A PBM contracts with pharmacies and drug manufacturers to obtain discounts.
- Medical Care Management Overseeing care to ensure injured workers receive appropriate treatment so they can return to work as soon as possible.
Some states regulate managed care plans, while others do not. Where regulations apply, plans used by insurers or employers must meet state requirements. For example, state law may require that all managed care plans include treatment guidelines, utilization review, and care management.
Some states require injured workers to seek treatment from providers within the network, if the employer has instituted a managed care plan. Other states allow workers to seek treatment from providers outside the network.
Disability benefits are intended to replace wages an employee loses during the time he or she is disabled due to a work-related injury. The worker receives only a portion of lost wages, not the full amount.
Types of Disability
Disabilities are classified into four categories:
- Temporary Total The worker is completely disabled by the injury and is unable to work at all. The disability is short-term. For example, a worker injures her back and is unable to perform any work for six weeks. She returns to full duties after a six-week disability.
- Temporary Partial The worker is only partly disabled by the injury. The disability is short-term. For example, a worker breaks his arm on the job. The worker can work part-time or perform a lower-level job while his arm heals.
- Permanent Total A worker is unable, due to the injury, to earn future income by performing the type of work he or she was doing when the injury occurred.
- Permanent Partial A worker's ability to earn income is partly impaired due to a permanent injury, such as hearing loss.
The amount a worker receives in disability benefits depends on the nature of the disability. Most disabilities are temporary. Temporary disability coverage is generally subject to a waiting period (often seven days). No benefits are provided unless the disability extends beyond the waiting period.
Temporary Total Payments for temporary total disabilities are usually based on a percentage (such as 66 2/3%) of the workers average weekly wage (the worker's pay before the injury). For instance, a worker who normally earns $1,000 per week is disabled for two months by a broken leg. He receives $667 each week for the eight-week period.
Temporary Partial For a temporary partial disability, a worker generally receives his reduced pay (for the work he or she can perform) plus a percentage of the difference between the worker's normal pay and his or her reduced pay. For example, a worker injures his leg. He cannot perform his usual job, which requires standing. He normally earns $1,000 per week. He performs clerical work for two months while his leg heals. That work pays only $500 per week. The difference between his normal pay and his current pay is $500 per week.
During his two-month disability, he earns $500 plus $333 (66 2/3% of $500) or $833 per week.
Permanent Total A worker may be eligible for permanent disability if he or she is unable to work due to an on-the-job injury that cannot be cured. The worker is generally required to submit a physician's report to the employer's insurer. The insurer's claims personnel review the report and decide whether the worker is eligible for benefits. The manner in which benefits are calculated varies from state to state. In some states, a worker may receive payments for the remainder of his or her life.
Permanent Partial In some states, permanent partial disabilities are divided into two categories: schedule and non-schedule. Schedule injuries involve a particular body part such as a finger, hand or eye. A worker who permanently injures a body part listed in the schedule is eligible for a specified number weeks of disability payments. For example, a worker who loses a finger may receive, say 45 weeks of disability pay (based on 66 2/3 of his average weekly wage).
If an employee has incurred a permanent partial injury not listed on a schedule, his or her disability benefits are calculated according to state law. Depending on the state, benefits may be based on the extent of the worker's impairment, loss of earning capacity, loss of wages, or some other factor.
Most states provide some type of vocational rehabilitation to workers who are unable to return to their previous job due to an on-the-job injury. Some also provide psychological rehabilitation if a worker has suffered a work-related mental injury.
If any employee dies due to a work-related injury, death benefits are paid to the worker's spouse, minor children and other dependents. Burial costs are also covered.