BASIC (09-08)

DI 52120.001 Introduction to State Specific Workers’ Compensation (WC) Procedures

Citations:

Section 224(a) – Reduction of benefits based on disability

Social Security Ruling 71-34c – Disability Insurance Benefits – Reduction for Workmen’s Compensation – Longshoremen’s and Harbor Worker’s Compensation Act

Workers’ compensation (WC) is the nation’s oldest social insurance program. There is virtually no federal role in the state WC programs. As a result, the state WC programs provide widely different coverage, disparate benefits with different rules, and administrative practices that can be vastly dissimilar. Note that the greatest variability is how the jurisdictions compensate workers for permanent disability, particularly permanent partial disability.

A. How employers obtain WC coverage

Employers obtain WC coverage in one of the following ways:

  1. Employers can self-insure, subject to gaining the necessary approval from the State. Typically larger-scale employers or those who participate in a group can self-insure.

  2. Employers may purchase insurance from carriers, either private firms or competitive State-operated insurance companies (where they exist).

    NOTE: In some States, employers can purchase insurance only from a State-operated insurance company.

B. List of WC payers

There are generally four payers of WC in the States:

  1. State agency

  2. Insurance carrier (licensed by the State to transact WC)

  3. Self-insured employer

  4. Third-party administrator (service organizations hired by self-insured employer)

C. Types of WC payments

Unless the individual State entry specifies otherwise, all WC payments shown under this heading are offsettable.

Social Security generally refers to four main types of WC payments:

1. Temporary Total (TT)

  • Some states refer to this type of payment as time loss. Most compensation cases that involve cash payments are for TT disability where the worker is totally disabled now, but may medically recover to return to work. In these cases, the worker is temporarily precluded from performing the pre-injury job or another job with the employer that the worker could have performed before the injury. When workers’ lost time exceeds the waiting period (3 to 7 days, depending on the state), they receive a percentage of their weekly wages—typically two-thirds—up to a maximum weekly amount. The maximum is generally set at some percentage of the States' average weekly wage, ranging from 66 2/3 percent to 200 percent, but typically 100 percent.

  • TT disability benefits cease when the worker returns to employment at or near the pre-injury wage level. Those benefits can be terminated when the worker is found medically able to return to work. Alternatively, if the worker's medical condition stabilizes and is unlikely to change, the temporary benefit will also end. State laws describe this stage as one in which the worker's condition has reached “maximum medical improvement” (MMI) or has become “permanent and stationary” (P&S).

    Some jurisdictions set a ceiling on the amount of time for which these benefits need to be paid and, in a few cases, on the amount of the payment. When temporary benefits have ended, the worker may be entitled to receive benefits for permanent total or permanent partial disability.

2. Temporary Partial (TP)

In some cases, workers return to work before they reach maximum medical improvement and have reduced responsibilities and a lower salary. In these cases, they receive TP disability benefits.

3. Permanent Total (PT)

If a worker has very significant impairments that are judged to be permanent after the worker reaches maximum medical improvement, the worker receives PT disability benefits. Few WC cases have PT disabilities.

4. Permanent Partial (PP)

PP disability benefits are paid when the worker has impairments that, although permanent, do not completely limit the worker’s ability to work. The system for determining benefits in these cases is complex and varies across jurisdictions. Some States provide benefits based on an impairment rating scheme. The level of impairment, often expressed as a percentage of total disability, is used to determine the benefit amount. Some states provide benefits on the basis of loss of earning capacity. They use impairment ratings with modifications based on vocational factors, such as the worker's education, job experience, and age. Other States use systems that attempt to compensate workers for actual lost wages.

5. Scheduled and unscheduled WC payments

Some States use classifications of “scheduled” and “unscheduled” payments or awards, which are types of permanent partial (PP). However, not all PP payments are designated as scheduled or unscheduled.

A worker receives permanent partial (PP) if the accident causes a permanent impairment. In some States, if the injury is not on the list known as the “schedule”, permanent partial disability is “unscheduled” and any benefits are based on each State’s approach.

a. Scheduled WC payments

Scheduled means a disabling injury, usually of the extremities (arm, leg, etc.), for which permanent compensation benefits are set by state law for a specific length of time. Some States use the term of “specific loss”.

NOTE: WC scheduled awards are offsettable based on Social Security Ruling 71-34c. The treatment of scheduled awards is not limited to any particular State. SSA’s position on scheduled awards has not changed since the 1971 Ruling. If there is a change in a State’s law that may affect WC offset, contact the appropriate Regional Office General Counsel (OGC) for an opinion. See DI 52140.015 - Field Office (FO)/Processing Center (PC) Request for WC/PDB Policy Decision Regarding Workers’ Compensation/Public Disability Benefit (WC/PDB).

Generally, the most common types of scheduled or specific loss awards are disfigurement and scarring and disfigurement:

  • Disfigurement and scarring refers to permanent, significant disfigurement of, or permanent, significant scarring on the face, head, neck, or any other part of the body which handicaps a worker with a compensable work-related injury or occupational disease in obtaining or continuing to work.

  • Disfigurement refers to impairment of or injury to the beauty, symmetry, or appearance of a worker that renders the worker unsightly, misshapen, imperfect, or deforms in some manner or otherwise causes a detrimental change in the external form of the worker.

Disfigurement payments are offsettable, unless the Regional OGC issued an opinion stating the disfigurement payments are not offsettable.

Disfigurement benefits generally represent permanent partial WC and can be paid as periodic benefits or a lump sum (if paid as a lump sum, see DI 52150.060D.2.).

Some States pay disfigurement benefits in addition to other WC, and some pay disfigurement benefits concurrently with other WC. The award may not specify the start date for these payments. Refer to State Specific Workers’ Compensation (WC) Procedures in DI 52120.001 and Federal Employees’ Compensation Act (FECA) in DI 52115.010 for possible specific state/federal instructions regarding disfigurement.

Use the following order of priority for determining the offset start date for periodic disfigurement payments if the start date is not specified in the award and no specific state/federal instructions apply:

  • If the award states the disfigurement benefits are paid concurrently with other WC, the start date for offset of the disfigurement benefits is the same start date used for the other WC benefits paid (i.e., offset is based on the total of both types of WC).

  • If disfigurement benefits are paid in addition to other types of WC payments, but the award does not specify whether or not the disfigurement benefits are paid concurrently, develop for clarification. If not paid concurrently, offset disfigurement benefits effective the day after the day the periodic payments end. If periodic payments are not ending, offset the disfigurement benefits effective the date of the award.

The following States do not have a statute for disfigurement benefits under the State’s WC law: Alaska, Florida, Georgia, Kentucky, Michigan, Nebraska, Nevada, Washington, and West Virginia. In New Jersey there is no specific statute for disfigurement benefits; however, awards for permanent disability are based upon extent of disfigurement.

b. Unscheduled WC payments

If the injury is not recognized by State law as scheduled, the benefits are based on different approaches by the States.

For unscheduled conditions, the approaches used by the States can be categorized into four methods:

  • Impairment-Based Approach. The most common approach can be categorized as impairment based. About 19 States use this approach to compensate for an unscheduled permanent partial disability. In approximately 14 of those States, the worker with an unscheduled permanent partial disability receives a benefit based entirely on the degree of impairment. Any future earnings losses of the worker are not considered. Some States use the term permanent partial impairment (PPI).

  • Loss-of-Earning-Capacity Approach. Roughly 13 States use this approach to determine the permanent partial disability benefit for an unscheduled impairment. This approach links the benefit to the worker's ability to earn or to compete in the labor market, that is, it involves a forecast of the economic impact that the impairment will have on the worker.

  • Wage-Loss Approach. In the 10 or so States that use this method, benefits are paid for the actual or ongoing losses that a worker incurs. In some States, the permanent partial disability benefit begins after it has been determined that maximum medical improvement (MMI) has been achieved. In States that use this approach, permanent disability benefits can simply be the extension of temporary disability benefits until the disabled worker returns to employment.

  • Bifurcated (divided into two parts) Approach. In nine jurisdictions, the benefit for a permanent disability depends on the worker's employment status at the time that the worker's condition is assessed, after the condition has stabilized. If the worker has returned to employment with earnings at or near the pre-injury level, the benefit is based on the degree of impairment. If the worker has not returned to employment, or has returned but at lower wages than before the injury, the benefit is based on the degree of lost earning capacity.

6. State terminology for disability payments

Be alert to State terms for disability payments. For example, in some States:

  • Temporary total (TT) is called temporary total disability (TTD).

  • Temporary partial (TP) is called temporary partial disability (TPD).

  • Permanent total (PT) is called permanent total disability (PTD).

  • Permanent partial (PP) is called permanent partial disability (PPD).

In those States, we use the Social Security terms, temporary total (TT), temporary partial (TP), permanent total (PT), and permanent partial (PP).

D. Variances in WC terminology for individual States

Not all States pay the same types of WC and the terms they use for their different types of WC vary from State to State. For example, you’ll see terms such as:

  • disfigurement

  • disfigurement and scarring,

  • PT supplemental allowance,

  • supplemental earnings benefit (SEB),

  • healing period (HP) benefit,

  • retraining incentive benefit, and others.

Review the State’s entry for information about State specific types of WC.

E. Cost-of-living adjustments (COLAs)

Cost-of-living adjustments (COLAs) information provided under this heading for each State entry includes true COLAs, as well as increases in the State WC rate based on other factors, i.e., a State legislative action, or an increase in the State average wage. Consider the information provided under this heading to determine when you may need to develop for an expected adjustment in the WC payment rate. Prepare a diary to develop for the next expected adjustment.

F. Retirement insurance benefit (RIB) considerations

Some States offset their WC payments if a worker becomes entitled to SSA RIB. This could affect whether a worker receiving SSA disability insurance benefits (DIB) with WC/PDB offset should file for RIB when eligible. Consider the information provided under this heading for each State entry when contacting a DIB beneficiary about the possibility of electing a more advantageous RIB. See DI 52150.030 – Considering the Retirement Insurance Benefit (RIB) Option.

G. Verifying WC

To verify WC, follow the procedures in DI 52145.001 – Verification/Proof of Workers’ Compensation/Public Disability Benefit (WC/PDB). Use the Workers’ Comp Resource Page website for current information on carrier contacts and State online access.

H. State and territory abbreviations

See RM 00499.003 - Standardized Abbreviations of States and Outlying Areas of the United States.

I. WC glossary

  1. Addendum – (plural Addenda or Addendums): Additional text not included in the main text of a WC settlement award which may contain additional specifications, provisions, or other information.

  2. Annuity: A prepaid investment that returns periodic (usually monthly) payments for a set period.

  3. Augmentation: making greater.

  4. Average Weekly Wage (AWW): The basis of the average weekly wage is the average of the injured worker’s pre-injury earnings for a set period of time (usually the 6 months or year prior to the injury). The AWW determines the worker's weekly WC rate.

  5. Commutation - Payment of workers' compensation benefits in a monthly, quarterly, or single lump sum payment, rather than in weekly or biweekly payments.

  6. Competitive State Fund: Several States operate a State fund in competition with private insurance carriers. Employers in these States may choose to purchase WC insurance from a private insurer or from the State fund.

  7. Compromise and release (C&R): A type of settlement in which a worker receives a lump sum payment, eliminating the need for payments over time.

  8. Continuance: Adjournment or postponement of a hearing or other proceeding to a subsequent day or time.

  9. Cost-of-Living Adjustments (COLA): Cost of living adjustment in a worker's basic WC rate. Not all states provide COLAs.

  10. Date of Injury (DOI): Date a work-related injury occurs or, for occupational disease, the date of total or partial incapacity to work due to the disease. Note that this may not be the same date as our date of disability onset (DOO).

  11. Defendant: The person against whom a lawsuit is filed. In some States, or in certain types of actions, the defendant is called the respondent.

  12. Disfigurement: Impairment of or injury to the beauty, symmetry, or appearance of a person that renders the person unsightly, misshapen, imperfect, or deforms in some manner or otherwise causes a detrimental change in the external form of the person.

  13. Disfigurement and Scarring Benefits: Benefits paid to an employee with a compensable work-related injury or occupational disease for a compensable disfigurement or scar. This type of WC is offsettable.

  14. Escalation: An increase in WC that is not tied to the cost of living. Some States that do not give COLAs have escalations in some of their WC rates. Example: West Virginia.

  15. Final order: A decision or award made by a workers' compensation judge.

  16. Findings & award (F & A): A written decision by a workers compensation administrative law judge about a case, including payments and future care. This decision is final unless an appeal is filed. 

  17. Inchoate payments: These are payments made to a dependent of the injured worker when a lump-sum settlement is made. These payments are in lieu of the future rights to payments that the dependent would have received after the death of the injured worker.

  18. Indemnity Benefits (Wage replacement benefits): Disability income payments made to compensate the worker for loss of income. WC benefits generally consist of both indemnity and medical benefits (although some States provide additional types of benefits). Indemnity benefits are offsettable.

  19. Light Duty: Work prescribed by a worker's attending physician that falls within certain physical restrictions while the worker continues to heal from a compensable work-related injury or occupational disease. Some States pay temporary partial WC when the worker is able to perform this type of work.

  20. Lien: A right or claim for payment against a workers' compensation case.

  21. Lump Sum Payment: Payment of a WC award of benefits or other sum as one or more partial or total payments, instead of the more common weekly, biweekly, or monthly payments. A lump sum payment may result from a commutation or a settlement.

  22. Maximum Compensation Rate: Highest WC benefit rate allowed (usually shown as a weekly rate). The maximum rate varies from state to state and also from employee to employee, depending on the date of an employee's injury and the type of WC paid.

  23. Maximum Medical Improvement (MMI): The point at which the worker’s physician determines that he has healed from a compensable work-related injury or occupational disease to the fullest extent expected. At this time the physician determines whether or not the claimant has sustained a permanent disability and the degree of such impairment. The terms “permanent and stationary” and “medically stationary” also describe this point.

  24. Medically Stationary: The status of a worker when no further material improvement can be expected from further medical treatment or the passage of time. The terms “maximum medical improvement” and “permanent and stationary” are also used.

  25. Minimum Compensation Rate: Lowest weekly workers' compensation benefit rate allowed. Not all States provide for a minimum WC rate, and the minimum rate varies from State to State. The minimum rate may also vary from employee to employee, depending on the date of an employee's injury and the type of WC paid.

  26. No-fault” or “No-liability” stipulations or awards - these terms describe any type of insurance that financially protects the insured for losses, regardless of fault. In addition, “no-fault” or “no-liability” may also restrict the right to seek additional recovery for losses. The employer/insurance carrier and the employee/claimant do not agree, nor is it proven, that the injury/illness is work-related, i.e., the employer does not accept liability for the employee’s alleged injury/illness (“No-liability”), and there is no final agreement or proof regarding fault (i.e., “No-fault”). These terms merely assert that fault or liability is not conclusively established, but WC is awarded anyway in order to finalize and terminate the dispute, thereby avoiding expensive litigation. “No-fault” or “No-liability” awards are WC and subject to offset, unless otherwise prohibited by a State's reverse offset provisions.

  27. Occupational Disease (OD): A disease peculiar to a worker's occupation and due to causes in excess of the ordinary hazards of employment. Example: occupational pneumoconiosis is an occupational disease of coal miners.

  28. Occupational Injury: An injury causally connected with the injured worker's employment, or is the direct result of repetitive trauma or repetitive acts connected with his employment.

  29. Permanent and Stationary (P & S): see Maximum Medical Improvement (MMI) and Medically Stationary.

  30. Permanent disability advance (PDA): Payments of permanent disability benefits a worker may be entitled to in the future. PDAs are payable as either periodic payments or as lump sums.

  31. Permanent Partial Disability (PPD): Permanent partial disability benefits are paid when the worker has impairments that, although permanent, do not completely limit his ability to work. The systems for determining benefits in these cases are often complex, and there is substantial variability in how the different States provide benefits to workers who have a permanent partial disability.

  32. Permanent Total Disability (PTD): This is when a worker has very significant impairments judged to be permanent after a worker has reached maximum medical improvement. Very few workers' compensation cases involve permanent total disabilities.

  33. Petitioner: see Plaintiff.

  34. Plaintiff: The person, corporation, or other legal entity that initiates a lawsuit. Certain States and some types of lawsuits use the term “petitioner” instead of “plaintiff”.

  35. Relapse or Recurrence: Situation in which a worker who received WC for an injury or occupational disease improved and returned to work but then had a return of some medical problem caused by the injury or disease that resulted in another period of incapacity from work. Additional WC may be paid under the same claim number in these cases.

  36. Respondent: see Defendant. Employer or its WC insurance carrier in a WC case. The term “respondent” can also designate the person responding to an appeal.

  37. Schedule of Injuries: Most States use a “schedule”, which is a list of body parts that are covered, and determine compensation for the physical impairment of that certain body part. Typically, a schedule appears in the State’s WC law and lists the maximum number of weeks of WC benefits paid for specific losses, for example, the loss of a hand. The terms “scheduled injuries” and “scheduled payments” refer to the use of a State’s schedule of injuries.

  38. Second Injury: A work-related injury to a worker with a previous disability.

  39. Second Injury Fund: Many States limit the liability of the employer in second injury cases to payment of WC benefits for just the increase in the worker’s disability. Then State’s Second Injury Fund pays the additional WC. These Funds sometimes pay other types of WC (such as payments for uninsured or bankrupt employers). You’ll see Second Injury Fund abbreviated as SIF. Be aware that some States use that abbreviation for their own State Insurance Fund. Example: Puerto Rico.

  40. Self-Insured Employer: An employer that provides WC insurance coverage by insuring itself instead of purchasing WC insurance coverage from a private insurance carrier.

  41. Settlement: The term used for an agreement as to the final close-out of a workers' compensation case, or a type of WC benefit.

  42. Specific Injury: An injury to one or more of a worker's specific body parts due his compensable work-related injury or occupational disease.

  43. State Average Weekly Wage (SAWW): The average weekly earnings of all (or almost all) of the workers in the state. Usually the state minimum and maximum WC rates are based on a percentage of the SAWW.

  44. Stipulation: Process whereby a worker with a compensable work-related injury or occupational disease and the employer (and/or its workers' compensation insurance carrier) close a workers' compensation case. This happens when a worker is paid a sum of money and/or provided certain medical treatment(s) and, in return, signs away any future right to benefits for the stipulated injury or disease. Some stipulations close out all aspects of a case (i.e., benefits AND medical treatment) while other stipulations close out portions of available benefits (i.e., benefit payments OR medical treatment), leaving the remaining benefits “open.”

  45. Stipulation with award: A settlement of a case where the parties agree on the terms of an award. This is the document the judge signs to make the award final. 
    Stipulations with request for award (Stips): An agreement that has the same effect as a judge’s order guaranteeing that a set sum of money will be paid out on a periodic basis to the claimant.

  46. Summary rating: The percentage of permanent disability. 

  47. Temporary Partial Disability (TPD): Temporary, but only partial, incapacity from work. In some cases, workers return to work before they reach maximum medical improvement and have reduced responsibilities and a lower salary. In those cases, they may receive temporary partial disability benefits.

  48. Temporary Total Disability (TTD): Some states refer to this type of payment as time loss. Most compensation cases that involve cash payments are for temporary total disability where the worker is totally disabled now, but may medically recover to return to work. In these cases, the worker is temporarily precluded from performing the pre-injury job or another job with the employer that the worker could have performed before the injury. When workers’ lost time exceeds the waiting period (3 to 7 days, depending on the state), they receive a percentage of their weekly wages—typically two-thirds—up to a maximum weekly amount. The maximum is generally set at some percentage of the States' average weekly wage, ranging from 66 2/3 percent to 200 percent, but typically 100 percent. Temporary total disability benefits cease when the worker has returned to employment at or near the pre-injury wage level. Those benefits can be terminated when the worker is found medically able to return to work. Alternatively, if the worker's medical condition stabilizes and is unlikely to change, the temporary benefit will also end. State laws describe this stage as one in which the worker's condition has reached “maximum medical improvement” (MMI) or has become “permanent and stationary” (P & S). Some jurisdictions set a ceiling on the amount of time for which these benefits need to be paid and, in a few cases, on the amount of the payment. When temporary benefits have ended, the worker may be entitled to receive benefits for permanent total or permanent partial disability.

  49. Third Party: A party other than the injured worker or his employer/carrier who is or may be responsible in some way or to some degree for the compensable work-related injury or occupational disease. Payments from a third party are not WC.

  50. Third Party Administrator: A claims administrator or insurance company that manages WC claims for a self-insured employer. The administrator is a third party because it is neither the self-insurer nor an insured (claimant or payee). Services may include processing claims, negotiating settlements, and record keeping.

  51. Time loss: see Temporary Total Disability (TTD)

  52. Tort: A private or civil wrong or injury for which the courts will provide a remedy in the form of an action for damages. Generally, the plaintiff must show that the defendant owed some duty to the plaintiff, that the defendant breached that duty, and that as a result the pl