Skip to main content

New NCCI Report on Effect of Increasing Workers’ Comp Benefits

By December 4, 2009Commentary

While much of the focus in workers’ compensation has been on its health care component, which now accounts for more than half of overall costs, indemnity benefits are still substantial.  And in the case of both health care and indemnity benefits, a common goal is to get the employee back to work as soon as possible.  A recent National Council on Compensation Insurance study looked at the relationship between the structure and amount of indemnity benefits and how long the employee stayed away from work.  (NCCI Report)

NCCI looked specifically at benefits for total temporary disability, in which the employee is not able to work at all for some period of time, but is able to return to the job eventually.  The analysis examined the effect in statutory changes to this benefit in New Mexico and Oregon.  In both states, a worker can collect “temporary” benefits for a very long time, in Oregon, indefinitely.  Both states substantially increased the weekly benefits for total temporary disability in the early 2000s.  This increase obviously has a direct impact on the cost for the same amount of time off before and after the change, but NCCI was interested in looking at  whether the change had an impact on how long the worker stayed away from work.

The study results showed that in both states workers had a longer length of disability after the payments were raised.  The effect was significant, for each additional dollar of weekly payment, another 50 cents or more was added in additional payments due to longer time away from work.  One lesson is that employers and workers’ comp insurers need to take this into account when estimating the cost of these statutory changes.  Other lessons are less clear.  It may be that workers were going back to their jobs too soon because they weren’t getting enough in disability payments to make up for lost wages.  Or it may be that when they get paid amounts closer to their lost wages, they have no incentive to get back to work.   In any event, the results indicate the importance of aggressive back-to-work programs, particularly in high-benefit states.

Leave a comment