Tag Archives: work injury


Time to Focus on Injured Workers

When WorkCompCentral released a report, The Uncompensated Worker, I wrote about how a work injury affects family finances. I applied several realistic work injury scenarios to each state. In 31 states, workers receive a reduction in take-home pay of 15% or more when they’re injured on the job. In half the states, households with two median wage earners—one on work disability and the other working full time—cannot afford to sustain their basic budget.

These findings confirmed what workers’ comp claims adjusters, attorneys and case managers already know: Many injured workers live on the edge of financial collapse.

But the findings are by no means conclusive.  The research done for “The Uncompensated Worker” was too limited. I know, because I did it. To really understand the financial experience of being on workers’ comp benefits, one should run not a handful but thousands of scenarios through a statistical analyzer and then compare the data results with actual cases researched through interviews.

The research agendas of the workers’ comp industry rarely involve looking at the worker her or himself.

Instead, the industry has funded research mainly to understand the drivers of claims costs, specifically medical care. This focus can be explained. Over the past 25 or so years, the workers’ comp industry has absorbed a huge rise in medical costs, more and more layers of regulation relating to medical treatment and even more specialties needed to deliver or oversee medical care.

To illustrate the extent of this industrial-medical complex: Nationwide spending on “loss adjustment expense,” a proxy for specialist oversight of claims, has grown annually on average by 9.4%  since 1990, while total claims costs have risen on average by 2.5%.

The quality of industry-funded research has improved, because of better data and strong talent pools in places like the Workers’ Compensation Research Institute (WCRI), the California Workers’ Compensation Institute and the National Council for Compensation Insurance. Their research focuses on cost containment and service delivery. These two themes often intertwine in studies about medications, surgeries or medical provider selection.

It’s time to pay more attention to the worker. Close to a million workers a year lost at least one day from work because of injury.  We hardly know them. Bob Wilson of Workerscompensation.com predicts that, in 2016, “The injured worker will be removed from the system entirely. … Culminating a move started some 20 years ago, this final step will bring true efficiency and cost savings to the workers’ comp industry.” Industry research, one might say, has left the worker out the system.

An example of how the worker is removed can be seen in how the WCRI did an analysis of weekly benefit indemnity caps. These caps set a maximum benefit typically related to the state’s average weekly wage. (The methodology has probably not been critiqued by states for generations, despite better wage data and analytical methods.) The WCRI modeled different caps to estimate the number of workers affected. But it did not report on what this meant to workers and their families; for example, by how much their take-home benefits would change.

As it happens, Indiana is one of the worst states for being injured at work; it has close to the stingiest benefits for a brief disability. You are not paid for the first seven calendar days of disability. Benefits for that waiting period are restored only if you remain on disability for 22 calendar days. Take-home pay for someone who is out for two weeks or less will likely be 83% less than what it would have been without injury. An Indianapolis couple, both at the state’s median wage, cannot afford a basic month’s budget for a family of three when one is on extended work disability. These poor results are partly because of Indiana’s benefit cap, which is one of the lowest in the country. The weekly benefit cap used in the report, a 2014 figure, was $650.

Les Boden, a professor at Boston University’s School of Public Health, read a draft of “The Uncompensated Worker.” For years, he has studied the income of injured workers and the adequacy of workers’ compensation benefits. He told me, “Studies have shown that many people with work-related injuries and illnesses don’t receive any workers’ comp benefits. I don’t think that the problem is too little research. It’s political. Unfortunately, workers are invisible in the political process, and businesses threatening to leave the state are not.”

I am not sure how the politics of this issue can change until the strongest research centers in the industry begin to pay attention to the worker.

This article first appeared at workcompcentral.com.

5 Misperceptions About ‘Opt-Out’

The Oklahoma Option, which went into effect early in 2014, is ramping up. More employers and insurers are electing to participate. And more workers’ compensation professionals around the country want to understand the “opt-out” concept. They are thinking about their assets in Texas or Oklahoma or about the feasibility of introducing opt-out into other states.

Much of the discussion about opt-out is accurate but not complete. It is easy to absorb a part of the story. Consider the following five common ways in which it’s very easy to be half-right.

One:  For employers, opt-out is basically about saving money.

Conversations with corporate risk managers have shown me that saving on claims costs is usually not the only, nor even the leading, reason why employers choose to opt out.

Employers appear to have two complementary goals with opt-out. One is to reduce claims costs, with a target in the range of 30% to 50%.  The other is to simplify management headaches over a benefit program perceived to be excessively complicated and rife with risk of misbehavior.

Corporate risk managers, while not questioning the need for a separate work injury benefit system, are quick to say that injured employees can easily slack off in recovering from injury. They say doctors may not be motivated to get their patients back to work. Permanent partial disability benefits, in particular, are often cited as subject to gaming. In sum, risk managers see a lot of moral hazard that opt-out appears to them to severely curtail.

Brokers and risk advisers, on the other hand, appear to be more comfortable talking about reducing the cost of risk. It’s interesting to listen and respond to both messages.

Two: Employees of the opting-out employer benefit from better medical care.

Advocates of opt-out often make this claim. (There are NO pro-labor advocates of opt-out, at least yet.) The claim might be justified, were employers to measure quality of medical care and show, perhaps, that care under opt-out adheres more closely to evidence-based care guidelines.

The quality-of-care argument stems from opt-out employers negotiating service terms with well-regarded medical providers and avoiding providers and types of care they consider questionable. The employer might decide to ban chiropractic care, for instance, and use teaching hospital-based surgeons who otherwise may not treat injured workers.

Medical care quality can be in the eye of the beholder. especially along the dimension of doctor skills in listening to and communicating with her patients. What is not measured so judgmentally is the package of disability benefits accorded to opt-out employees. Inspection of the typical package in Texas ERISA plans suggests that the common opt-out benefit is superior to the workers’ compensation system when one compares after-tax income of a cohort of opt-out cases with the same cohort in the conventional system if (a big if) the injuries are well-managed for timely return to work.

Opt-out benefit packages in Texas ERISA plans typically pay indemnity benefits from the first day of disability. They do not impose caps on weekly benefits. The large majority of workers who use at least one day of disability return to work within a brief period. For them, these benefit features amount to real money. This assumes that the median duration of injury for all with at least one shift of lost time is about two weeks, and the median duration for all with disabilities lasting at least a week is about five weeks.

Compensation for injuries with long durations appear to be much less favorable to opt-out workers, if you assume that duration of disability will be the same in each system. However, one does not have to assume that durations will be the same.

Three: Opt-out claims management is a variant of workers’ comp adjusting.

A striking aspect of opt-out claims management is that some leading opt-out claims managers do not hire former workers’ compensation adjusters. Opt-out managers may even decide to not hire people with any claims experience, in any line of insurance. It’s useful to consider whether out-out claims management is more similar to absence or even productivity management than to workers’ compensation.

The opt-out claims adjuster has to have the skills and confidence to use a lot more discretion than that to which workers’ compensation adjusters are acculturated. She needs to understand the employer’s benefit plan, not workers’ compensation. She needs to act quickly and with initiative.

Over time, opt-out claims management may, at least for the larger employer, merge with absence benefit and ADA accommodation management, further removing it from affinity with workers’ compensation in the conventional sense.

Four: Negligence liability is a major stumbling block.

Opt-out employers in Texas are subject to negligence liability. An injured worker can seek economic and non-economic damages from her employer if the employer is found in any way negligent for the injury. As a defense attorney in Dallas told me, one will likely find in every severe injury some degree, however slight, of employer action or non-action that arrives in the courtroom dressed by the plaintiff attorney in negligence clothes.

Large Texas employers usually insure for this exposure and require their employees to sign mandatory arbitration agreements to cover negligence complaints. Some don’t; for instance, Ben E. Keith, a prominent member of the opt-out community incurred in 2012 an $8 million jury award over a severely scarifying injury a worker suffered on one of his first days with the company. The company had not adopted mandatory arbitration.

The Oklahoma Option extends the exclusive remedy protections of the workers’ compensation system. What will happen if the Oklahoma Supreme Court nullifies that protection? The answer depends in part on how one views the Texas experience with negligence liability. Many opt-out employers in Texas who know several jurisdictional systems appear to feel comfortable managing this exposure.

Five:  States can mandate minimum benefits for opt-out, as Oklahoma has.

The Oklahoma Option requires the employer to offer same or greater benefits than the workers’ compensation system. A lot of details need to be worked out, but there will remain a fundamental problem with the Oklahoma Option minimum benefit requirement. At first blush, it conflicts with a substantial body of court decisions that have confirmed the exemption of ERISA plans from state interference. At the very heart of ERISA plans is their immunity from state legislatures, regulatory agencies and courts.

Oklahoma law offers a means to opt-out without setting up an ERISA plan, but, given the success of ERISA plans in Texas, it is likely that employers, at least the large ones, will elect to go the ERISA route in Oklahoma.

Not being literate in legal discourse, I am the last person to suggest how this apparent conflict will be resolved, but resolved it must be and in federal court. And I expect to see some interesting arguments in favor of retaining Oklahoma’s requirement in its original or a revised form.

A California case, Golden Gate Restaurant Association v. City and County of San Francisco, offers a clue. As one commentator noted, in San Francisco, a city ordinance requires employers to make certain expenditures toward employee healthcare. Employers have a number of options for compliance, including paying a specified amount to a public insurance program that their uninsured employees can access at discounted premium rates or setting up an ERISA-governed health insurance plan of their own. At the last iteration of litigation, the local government prevailed.

The Oklahoma Option’s chances to withstand a court challenge over its benefit requirements may well depend on how the benefits are construed (this is not clear to me) and the manner in which Oklahoma employers are free to elect opt-out over the conventional system.

Getting the story right

The workers’ compensation community needs to prompt a full, transparent discussion of opt-out to get to a complete story, for which chapters are being written every day.

Obesity as Disability? Workers' Comp Effects

A federal district court ruled in April 2014 that obesity itself may be a disability, amounting to the first shot in a war of lawsuits on grounds of obesity discrimination and opening up additional liability for workers' compensation claims across the country.

The case is Joseph Whittaker v. America’s Car-Mart, in the federal district court for the Eastern District of Missouri. Although the case is pending in Missouri, the implications apply nationwide because the court is applying provisions of the ubiquitous Americans with Disabilities Act (ADA).

The plaintiff claims the company, a car dealership chain, fired him from his job as a general manager after seven years of employment even though he was able to perform all essential functions of his job, with or without accommodations. He alleges that “severe obesity … is a physical impairment within the meaning of the ADA,” and that the company regarded him as being substantially limited in the major life activity of walking.

Attorneys for the company had moved to dismiss the case, arguing that obesity was not a disability under the Americans with Disabilities Act, and citing language from the Equal Employment Opportunity Commission that, “except in rare circumstances, obesity is not considered a disabling impairment.”

The judge rejected the company’s position, noting: “Plaintiff has sufficiently pled a claim that he is disabled within the meaning of the ADA.”

The plaintiff’s argument could be seen as a legal extension of the medical policy change made by the American Medical Association in June 2013, when the AMA adopted a policy that recognizes obesity as a disease.

Application to workers' compensation

One of the main issues in many workers' compensation claims is whether the employee is able to return to work in the open labor market. If the employee can’t, there is a focus on whether the inability to return to work was caused by the work accident alone, or is caused by pre-existing conditions, or a combination of the pre-existing disabilities and the work-related injuries. Claims are then adjudicated based on the primary cause of the inability to return to work.

Although most states have statutes that limit an award for permanent total disability benefits to those situations where the work injury alone is the cause, the practice is must different. For example, if a claimant has pre-existing disabilities and is then injured at work and cannot return to the workforce, judges are often reluctant to award minimal benefits, knowing that the claimant cannot ever return to work. It is much easier for the judge to find that the work injury alone is the primary cause and to award permanent total disability benefits even if the work injuries are only part of the equation.

Once obesity is accepted as a valid disability, injured workers could more easily argue that their obesity is a permanent condition that impedes their ability to return to work, as opposed to a temporary life-choice that can be reversed.

Injured workers could more easily qualify for Social Security disability benefits and for permanent total disability benefits, as the work injury is usually the last event in a chain of events (including, now, a history of obesity).

Once again, employers are being asked to shoulder not only the responsibilities of a work injury but also the responsibility of dealing with issues that have little, if any, relationship to the work environment.

After the ADA became law in 1993, I remember hearing the Americans with Disabilities Act referred to as “The Lawyers Full Employment Act.” Unfortunately, that moniker is now coming closer to reality.

A Catch-22 on Hiring the Disabled

In the Missouri Court of Appeals' recent decision in Stewart v. Second Injury Fund, the facts were not in dispute: Ms. Stewart worked at Subway for a few months, suffered a moderately severe injury at work and could not return to any type of employment.

Here’s where the story becomes interesting: The claimant qualified for Social Security disability in 1997 — more than 10 years before she started working at Subway. 

Her Social Security disability was awarded based on confirmed medical conditions including arthritis, reflex sympathetic dystrophy, degenerative joint and bone disease and carpal tunnel syndrome. She continued to receive Social Security disability benefits even while she was working at Subway.

After her work injury in 2009, she filed for workers' compensation benefits, claiming that she was permanently and totally disabled.

Was the claimant permanently and totally disabled before her injury at Subway? Apparently not, because she was able to obtain that job and perform the duties associated with that job. In the absence of her injury, she would have presumably been able to continue working. 

Why would she be entitled to Social Security disability benefits if she was able to compete in the open labor market? If she was disabled in 1997, should she be entitled to more benefits when she was injured at a job that she should not have been able to obtain?

What if Subway had told the claimant during her initial job interview that she could not be hired because of her multiple disabilities? She could have sued Subway under the Americans with Disabilities Act, arguing that Subway was discriminating against her. Subway, not wanting to be sued, could have been forced to hire the claimant only to face the prospect of being liable for permanent total disability after only a few months of work.

I’m not attempting to disparage the claimant. She obtained benefits that are legally provided. My question is this: Is it fair to place employers in no-win situations where they face litigation if the employee is not hired, yet still face litigation if the employee IS hired?

This situation arises because of the myriad of state and federal laws that regulate every facet of the workplace. Every employer must wade through an alphabet soup of overlapping laws every single day (ADA, FMLA, COBRA, EFCA, EAD, ERISA, FLSA, FCRA, INA and a host of others). 

One cannot swing the proverbial dead cat without hitting five politicians giving a speech focused on creating jobs. Yet, can jobs be created by strangling the very companies that create these jobs?

Settlement of High-Exposure Workers' Comp Claims: Part One

In nearly every workers' compensation program, cases that are referred to as “legacy files,” “dog files” and a myriad of other names (some of which are not appropriate for print) represent high-exposure claims that drive costs. Identifying and resolving these cases early can reduce exposure and overall costs.

The first part of this three-part series will look at what can trigger those important cases. 


Generally speaking, a few cases represent the vast majority of the cost of a workers’ compensation program. Many are driven by the medical treatment necessary to cure or relieve the effects of the injury. While the indemnity aspect (permanent partial and permanent total disability) can be important, typically it is much easier to quantify these benefits than it is to determine the medical costs.

The high-exposure claims fall into two categories: acute and chronic.

Some examples of acute cases are quadriplegics, paraplegics, severe burns, amputations and head traumas. These injuries are severe and occur immediately as a result of the initial injury. In most instances, there is a significant initial cost, and the continuing care is substantial.

Chronic catastrophic cases, on the other hand, are much more difficult to identify. They typically start off in benign fashion (lumbar strain, knee strain, etc.) and deteriorate into multiple surgeries, lengthy periods of lost time and permanent disability. Chronic cases typically develop about five years after the injury.

A variety of metrics can be used to identify these cases and bring them to the forefront of a settlement initiative. 


A case review can reveal numerous medical conditions that affect potential future exposure, including hypertension, obesity, diabetes, nicotine usage and excessive alcohol consumption. In many instances, these conditions are considered non-industrial and are not identified as cost drivers for the workers’ compensation claim. They are, nonetheless, extremely important in the healing process.

For example, the failure rate of spinal fusions is 20% to 30% in cigarette smokers, nearly double that in non-smokers. The failure of a spinal fusion typically results in one or more additional procedures, including: 1) a repeat fusion; 2) trial/implantation of a spinal cord stimulator; or 3) trial/implantation of an intrathecal pump (commonly referred to as a morphine pump). The costs associated with a failed fusion are payable by the claim, significantly increasing its duration and the cost. 

Similarly, high glucose levels in diabetics can cause poor circulation, diabetic neuropathy and deficiencies in the immune system–all factors in recovering from injuries and surgeries. When an injured worker needs lower extremity surgery (foot, ankle, knee, etc.) and his diabetes is not well-controlled, significant medical problems can develop, including delayed recovery, infections and, in extreme cases, amputation. Again, whether or not the diabetes pre-dated the industrial injury, it can drive medical, indemnity and expense costs. Further, in some jurisdictions, a defendant may become liable for treatment of the diabetic condition if there is evidence that the condition was exacerbated or “lit up” as a result of the industrial injury.

These are just two examples of many nonindustrial co-morbid conditions that can have a significant impact on the cost and duration of a claim.

Life Expectancy and Inflation

In identifying cases that may become high-exposure claims, it is critical to determine the life expectancy of the injured worker. According to the Department of Labor, the median age of the workforce today is 42 years. Based on figures from the National Center for Health Statistics, that would result in a remaining life expectancy of 38 years, on average between men and women. So, it could be necessary to provide medical benefits for an extended period.

The rate of medical inflation is typically 8% a year, so the cost of medical care for an individual will double approximately every eight years.  We refer to this as The Rule of 8.  If an individual is consuming $5,000 a year in treatment today, a doubling every eight years would mean the medical cost would exceed $80,000 annually as he approaches the end of life (see Chart I below). The figures do not consider any deterioration in the medical condition.


Prescription and consumption of medications is escalating. In severe cases, the individual becomes dependent, and the physician is left with few other treatment options. We see instances where medications are prescribed, then additional prescriptions are viewed as necessary to counteract side effects.

New medications are approved by the FDA on a regular basis and are often prescribed in workers’ compensation claims.  More and more, a physician will prescribe an “off label” medication (one that has been approved by the FDA for a specific condition or purpose not consistent with the diagnosis).  Because of patents, there are no generics, and the medications can be costly. An example is Actiq.  This medication was approved by the FDA for the treatment of pain in Stage IV cancer patients.  But, in recent years, physicians have prescribed Actiq for the treatment of chronic spine pain.  The medication can cost upward of $4,000 to $6,000 a month. 

Addition of Body Parts

We all remember the old “Dem Bones” song: “The knee bone’s connected to the thighbone, the thighbone’s connected to the …”  Well, nothing could be more accurate in the world of workers’ compensation.  In catastrophic cases, additional body parts are almost universally alleged as part of the industrial injury. A cervical injury expands into the upper extremities. A knee injury expands to the back and ankle because of an altered gait.  Medications prescribed for chronic pain cause internal complaints.

Identification Process

These triggers, and others, can make a case spiral into a high-exposure claim.  Part II of this series will discuss, in detail, approaches that can be used to assess these types of cases and focus on strategies to mitigate the exposure and move the cases toward resolution.