A workers compensation policy affords benefits to injured employees as prescribed by the applicable state law. Virtually all states provide four types of benefits: medical coverage, disability benefits, rehabilitation, and death benefits. While the kinds of benefits injured workers receive are fairly consistent across the country, the amount of benefits provided and the manner in which they are delivered varies from state to state.
I. Medical Coverage
Most injured employees who file workers compensation claims receive medical coverage. This coverage pays the cost of treating workers for an occupational illness or injury. It includes fees charged for doctor visits, hospital treatment, nursing care, medications, medical diagnostic tests, physical therapy, and durable medical equipment (like crutches and wheelchairs).
Medical coverage isn't normally subject to dollar limits, deductibles or copays. Benefits are provided until the worker has fully recovered from the injury. However, state laws may impose restrictions on some types of treatments. For instance, the law may allow a maximum of say, 24 visits for physical therapy or chiropractic care. State laws also dictate whether so-called alternative treatments, like biofeedback or massage therapy, are covered. A treatment covered in one state may not be covered in another.
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.
Many 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. The laws governing managed care plans vary widely. Most plans have one or more of the following features:
- Provider Network. A group of doctors and other healthcare 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. Some states require injured workers to seek treatment from providers within the network.
- Utilization Management. A process designed to ensure that the type of medical care afforded to workers is necessary, appropriate, and cost-effective. Providers may be required to obtain pre-approval before performing certain medical procedures.
- Pharmacy Benefit Manager. An administrator of a prescription drug program whose purpose is to control costs. A PBM establishes formularies, negotiates discounts with drug manufacturers, contracts with pharmacies, and pays prescription drug claims.
- Medical Care Management. Overseeing care to ensure injured workers receive appropriate treatment so they can return to work as soon as possible.
Disability benefits are intended to replace a portion of the wages an employee loses while he or she is disabled due to a work-related injury. Each disability is classified into one of four categories:
- Temporary Total. The worker is completely disabled by the injury and is unable to work for a short period of time. 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 a short-term injury. For example, an employee breaks his arm on the job and subsequently works part-time while his arm heals.
- Permanent Total. The worker has sustained a permanent injury that cannot be cured. As a result, the worker cannot earn future income by performing the type of work he was doing when the injury occurred.
- Permanent Partial. The worker has sustained a permanent injury, such as hearing loss, that prevents him from earning as much income as he earned prior to his injury.
The amount workers receive for disabilities varies widely from state to state. If two workers sustain similar injuries but reside in different states, one may receive considerably more in disability payments than the other.
The amount a worker receives in state benefits depends on the nature of the disability. Benefits are usually calculated based on average weekly wage ( the worker's average weekly pay before the injury occurred). The calculated amount may be subject to minimum and maximum thresholds. No benefits are provided unless the disability extends beyond a specified waiting period (often seven days).
Temporary Total. Benefits are paid during the period of disablement. They are usually based on a percentage (such as 66 2/3) of the worker's average weekly wage. 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. A worker generally receives his reduced pay (for 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 cannot perform his usual job, which requires standing, due to a leg injury. 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 who is permanently and totally disabled typically receives 66 2/3 (or some other specified percentage) of his average weekly wage for the remainder of his life. In some states, benefits terminate when the worker reaches the official retirement age.
Permanent Partial. Some states divide permanent partial disabilities 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 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 an 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.