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Permanent Disability (PPD) Benefits—Alternative Approaches . Peter S. Barth February 10, 2004. My Purpose. Introduce PPD—common footing Where it fits in workers’ compensation Describe alternative methods currently used. The Importance of PPD.

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Presentation Transcript
my purpose
My Purpose
  • Introduce PPD—common footing
  • Where it fits in workers’ compensation
  • Describe alternative methods currently used
the importance of ppd
The Importance of PPD
  • Nationally, 63% of costs in indemnity cases (NASI, 2003)
  • In California, 54% of claims with over 7 days of disability result in PPD
  • High transactions costs
medical legal expenses 12 states
Medical/Legal Expenses, 12 States

% where med/legal used

Avg exp. where used

% where med/legal used

Avg exp. where used

State

State

CA 22 $1,268 NC 2 $539

CT 11 825 PA 14 1,268

FL 8 528 TN 2 579

GA 4 598 TX 11 646

IL 15 699 WI 12 1,083

IN 3 581 Median 11 632

MA 14 618 - - -

Source: Telles et. al., 2003, WCRI

1997/2000 Claims with More Than 7 Days of Disability

workers compensation is a system don t consider ppd in a vacuum
Workers’ Compensation Is a System—Don’t Consider PPD in a Vacuum
  • Permanent partial disability linkages with TTD
  • Permanent partial disability linked to return to work
  • Permanent partial disability linked to health care costs
ppd in california the perfect storm
PPD in California—The Perfect Storm
  • Paid claims that extend beyond 7 days
  • Long duration of TD claims in California
  • Duration of TD correlated with PPD incidence
  • California permanent partial disability claims are costly relative to other states (Telles, 2003 WCRI)
  • Return-to-work performance is poor
    • 10% never return to work predominantly due to injury (Victor, Barth 2003 WCRI)
california has high rate of paid claims that run longer than 7 days
California Has High Rate of Paid Claims that Run Longer than 7 Days

Percent of all paid claims* that have more than 7 days lost time

Ratio of all paid claims* to those with more than 7 days lost time

State

CA 26.2 2.8

CT 24.2 3.1

FL 19.7 4.1

GA 15.3 5.5

TX 26.4 2.8

WI 20.2 4.0

*Paid claims are those where medical or indemnity benefits have been paid. For claims with

more than 7 days of disability or where a PPD, a permanent total or a death benefit was paid.

Source: Barth, Helvacian, Liu, 2002, WCRI.

td duration rates for claims with more than 7 days of lost time
TD Duration Rates (%) for Claims with More than 7 Days of Lost Time

Duration of Temp Disability

WI

CA

FL

GA

TX

CT

8<Days>13 20 21 11 13 12 21

14<Days>27 16 21 24 21 17 25

28<Days>89 25 32 31 30 27 33

90<Days>119 5 6 6 6 7 6

120<Days>179 7 6 7 7 10 5

180<Days>359 12 8 10 9 14 6

360<Days>719 11 4 7 7 9 2

Days> 720 4 2 3 7 4 1

Total 100 100 100 100 100 100

For claims with 7 days or more of disability or where a PPD, a permanent total or a death benefit was paid. 1996 claims with experience through June 1999.

Source: Barth, Helvacian, Liu, 2002, WCRI.

ppd rates and duration of td
PPD Rates (%) and Duration of TD

Duration of Temp Disability

CA

CT

FL

GA

TX

WI

8-13 days 13 12 10 6 9 5

14-27 days 19 19 16 14 19 10

28-89 days 36 43 30 27 38 28

90-119 days 60 60 53 47 59 48

120-179 days 72 72 65 60 69 59

180-359 days 86 77 78 74 78 74

360-719 days 93 84 79 77 83 83

Days> 720 82 68 73 48 87 75

All Cases 54 43 45 43 54 29

For claims with 7 days or more of disability or where a PPD, a permanent total or a death benefit was paid. 1996 CLAIMS WITH EXPERIENCE THROUGH 1999.

Source: Barth, Helvacian, Liu, 2002, WCRI.

there is considerable commonality in state approaches apart from ppd
There Is Considerable Commonality in State Approaches Apart from PPD
  • Linked to AWW
  • Wage replacement rates
  • Maxima and minima
  • Survivor benefits
commonality in ppd is in the goals
Commonality in PPD Is in the Goals
  • Adequate benefits/horizontal equity
  • Prompt, efficient delivery
  • Return to work
  • Costs in line
when do ppd benefits begin
When Do PPD Benefits Begin?
  • Return to work
  • MMI
  • Expiration of TD benefits
approaches to delivering ppd benefits
Approaches to Delivering PPD Benefits
  • Unscheduled benefits
    • Impairment
    • Wage loss
    • Loss of wage earning capacity
    • Two tiered (bifurcated)
  • Scheduled benefits
19 states use impairment approach
19 States Use Impairment Approach
  • Solely medically determined (15)
  • Impairment—age modified (2)
  • Impairment—adjusted (hybrid) (2)

Source: Barth and Niss, 1999, WCRI.

10 states use wage loss approach
10 States Use Wage-loss Approach
  • Actual and ongoing earnings losses
  • 7 States have a maximum duration
  • States may or may not use MMI

Source: Barth and Niss, 1999, WCRI.

13 states use loss of wage earning capacity
13 States Use Loss of Wage Earning Capacity
  • Anticipated earnings losses
    • e.g., “the diminished ability…to compete in an open labor market”
  • Other factors include age, education, occupation
  • Difficult to administer

Source: Barth and Niss, 1999, WCRI.

9 states use two tiered bifurcated approach
9 States Use Two-Tiered (Bifurcated)Approach
  • Impairment or loss of wage earning capacity
  • Impairment sets lower bound for loss of wage earning capacity

Source: Barth and Niss, 1999, WCRI.

43 states have scheduled benefits
43 States Have Scheduled Benefits
  • Schedules substitute or complement above approaches
  • Rarely schedule the spine
  • For total loss: impairment approach
  • For partial loss: impairment and/or loss of wage earning capacity