California: Study shows temporary disability outcomes are improving

Temporary disability outcomes in California's workers' compensation system have continued to improve since the state enacted comprehensive legislative reforms in 2004.

A recent study by the California Workers' Compensation Institute found ongoing reductions in both the cost and duration of temporary disability with only a marginal increase in the percentage of claims involving amputations, severe burns, chronic lung disease, and other serious injuries that are exempt from the state's two-year cap on temporary disability payments.

The CWCI analysis updated two earlier studies on post-reform temporary disability outcomes by reviewing data from nearly 300,000 California workers' comp temporary claims with 2002 through March 2008 injury dates. The study compared pre- and post-reform data on the amount of temporary disability paid and the duration of temporary disability at 12 and 24 months following the initial payment, as well as the percentage of claims involving long-term injuries that the 2004 reform bill exempted from the two-year cap on temporary disability payments.

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After adjusting for the statutory benefit increases that took effect in 2003, 2004 and 2005, researchers said the results showed that the average amount of temporary disability paid in the first year after the initial payment declined 6.1 percent (from $6,212 to $5,836) between the pre- and post-reform periods. While at the two-year benchmark, the average amount of paid temporary disability was 8.2 percent less ($8,396 vs. $7,707). The analysis also confirmed reductions in temporary disability duration, as the post-reform claims averaged 8.4 fewer days of paid temporary disability one year after the first payment and 3.2 fewer days at the two-year valuation.

The study also noted that the proportion of temporary disability claims involving any of the nine injury categories that are exempt from the two-year cap has shown little change since the reforms were implemented in 2004. These cases, researchers said, accounted for only 5.8 percent of all post-S. 899 temporary disability claims versus 5.1 percent of the pre-reform temporary disability cases, with most of the exempt claims involving amputations, severe burns and lung disease.

Wage drop and benefits. In a second study, the CWCI examined new data from the U.S. Department of Labor that found that California's State Average Weekly Wage edged down from $984.83 to $979.90 in the 12 months ending March 31, 2010 -- a decline of about 0.5 percent. As a result, researchers said there will be no change in minimum and maximum temporary total disability and permanent total disability rates for 2011 work injuries, or in several other workers' comp benefits that are tied to increases in California's State Average Weekly Wage.

The study noted that the 2009-10 decline in wages also means annual cost-of-living adjustments to life pension and permanent total disability payments on existing claims with injury dates on or after Jan. 1, 2003 will not apply next January, and the maximum rate for death benefit installment payments, which are paid in the same manner and amount as temporary total disability, will remain unchanged.

Read more at the WorkersComp Forum homepage.

August 19, 2010

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