Workers' Compensation

Workers’ compensation is a no-fault benefit system put in place by your state government covering employees who are injured at work. Every state system is unique, but all employers are required to provide workers’ compensation coverage for their employees. The original test for whether a claim was work related was whether the injury “arose out of” the employment, occurred “in the course of” the employment and happened “by accident”. In the mid-1970s, most states removed the by accident test.  So, today the test in simple terms requires the injury happened at work and because of the work.  This coverage also applies only to those who have an employer-employee relationship. It does not cover independent contractors, sub-contractors, or other similar work arrangements. It is a no-fault system meaning, fault or negligence are not considerations.

Generally, an employee claiming workers’ compensation is entitled to two distinct benefits. They receive indemnity benefits that replace lost wages. These benefits are tax free and are usually calculated as a percentage of an injured workers’ average weekly wage at the time of injury. Medical benefits are also provided. These cover the cost of the medical care that are necessary as a result of the injury. They usually cover hospital, doctor, pharmacy, and other medical expenses related to the injury. Some states provide other benefits.  Because workers’ compensation is state mandated, individual states have different requirements. These can be found at a state’s workers’ compensation web site.

After workers’ compensation was well established for work injuries caused by events, questions began to arise concerning injurious exposures, or situations where an employee may have received an injury due to harmful exposures, such as a dangerous chemical exposure at work. These inquiries evolved into the adoption of an adjunct to state Workers’ Compensation Acts—Occupational Disease Acts. These are now part of the legislation designed to protect workers injured by harmful exposures while working. Examples of the kinds of claims covered range from black lung claims to asbestos exposure.

For historical context, in the early 1900s during the second industrial revolution, if you were injured at work, your remedy was to sue your employer, or in some instances, your co-worker. Employers usually did not have insurance coverage for these claims and if a claim were successful, it was difficult to collect on a final judgement. If collection were successful, it put the employer at risk for financial ruin. These cases were contentious; they caused ill-will and were not seen as a good way to make the injured worker whole. It is generally believed that the concept of developing a no-fault work-related injury system had its origin in Germany. In 1911 in the United States, the state of Wisconsin enacted the first comprehensive Workers’ Compensation Act. Several states followed soon thereafter. Mississippi was the last state to make workers’ compensation mandatory. Texas is currently the only state that does not require employers to have this coverage. Employers in Texas can elect to be covered and most do.

There is an old saying in American jurisprudence that anyone can sue almost anyone for almost anything. The more important question is: would my suit be successful?

Workers’ compensation is sometimes called the “grand bargain.” This is the case because employers provide no fault benefits to injured workers and by doing this, they are granted immunity from lawsuits. You cannot successfully sue your employer if you sustain an injury that arose out of and occurred in the course of your employment; your exclusive remedy is workers’ compensation. Some states allow lawsuits against employers under certain very limited egregious circumstances. These circumstances are few and far between. The general and almost universal rule is employers are immune from suit if an employee is injured at work and the employer has workers’ compensation coverage. Learn how workers’ compensation settlements work and the benefits you are entitled to here.

There are two things you should do as soon as you can. The first is to seek appropriate medical treatment. Your health and safety should be the most important considerations. In some states, you are obligated to seek treatment with a health care provider chosen by your employer. In certain emergency situations when that is not possible, you can treat with an appropriate available health care provider. In other states, you can be seen, evaluated, and treated by a physician of your own choosing. Employers usually inform employees of their treatment options at an initial employee orientation or in an employee personnel policy manual.

The second is to give notice of the injury to your supervisor or another individual responsible for injury reports. This is usually someone in the personnel office. All states have a time limit for giving notice. These usually run from 30 to 90 days after the date you are injured. If you fail to give notice of an injury or if your report is not given in a timely manner, your claim could be denied. If you provide your notice in writing, make sure to retain a copy for your records.

After being made aware of an injury, employers in many states are required to report the injury to the workers’ compensation board. In some states, your employer is only required to report the injury if you lose a certain number of days from work. A copy of this official filing should be provided to you. The form is called a first report in most states. If you fail to receive a copy, request one. Check to ensure the information on the form is accurate and consistent with the report you provided. If inaccurate, you should request it be amended to accurately reflect the claim details.

Employers have a right to contest the payment of both indemnity and medical benefits. Medical treatment can be contested for reasons ranging from incomplete paperwork, to the treatment being inappropriate for the injury, or to the doctor not being approved. In some states, they have what is known as utilization review (UR). During UR, an employer or insurance carrier can remove certain medications or treatments from your treatment plan, meaning they would no longer be covered.

 If you are looking for treatment inconsistent with a UR recommendation, your request may be challenged. Usually when treatment is contested, your employer must inform your state’s workers’ compensation agency of the challenge and explain why. All states have formal procedures allowing an injured worker to contest the denial and explain why the treatment should be allowed. If your claim is settled and some of the settlement proceeds are earmarked for future medical treatment, your post-settlement treatment is at your discretion and that of your physician. If you settle your claim with a Medicare Set Aside (MSA), you will need to ensure all treatment the MSA funds pay for is related to your initial injury, and are an expense Medicare covers, in accordance with the Centers for Medicare and Medicaid Services’ (CMS) guidelines. You can find out more about Medicare Set Asides here.

Most state Workers’ Compensation Acts provide an answer to this question. There is not a “one size fits all” answer. In some states your employer has a right to choose the doctor who treats you. There are exceptions but they are very limited. Some states give the employer the right to choose the doctor for a certain period of time, for example, the first ten days of active medical treatment. Finally, some allow an injured worker to pick and choose a treatment provider from the beginning. There is a variation of this question that is important, and it is: Can I change doctors if I am unhappy or dissatisfied with the doctor who is treating me? If it is a state where the employer has the right to choose, a change can only be made with their approval or with the agency’s approval. If you become dissatisfied with a doctor you personally selected, many states allow you to change once without agency approval. Changing doctors more than once is seen as “doctor shopping,” a disfavored practice. Changing more than once could result in you having to pay the health care provider personally. It is always wise to ask about payment for medical treatment before incurring bills.

A Workers’ Compensation Settlement is an agreement between an employer/insurance carrier and an injured worker for a set amount of money, either a lump sum or an annuity, that will cover the injured workers’ lost wages, future earnings, and medical expenses for the rest of his life. A full and final settlement of all rights under your state Act is an option in most jurisdictions. Some states do not allow full and final settlements. Neither party to a claim, the employer (and its insurance company) or the employee, can compel the other to settle a case. It is always voluntary. Settlement should never be taken lightly. When you settle, you agree to relinquish all rights under your state Workers’ Compensation Act for a sum of money either in a single payment or in a structured settlement where you receive periodic payments. Settling is a serious step. If contemplating settlement, you should seek the advice and guidance of someone who has expertise settling cases. Learn more about the settlement resources available to you here.

A Workers’ Compensation Settlement is an agreement between an employer/insurance carrier and an injured worker for a set amount of money, either a lump sum or an annuity that will cover the injured workers’ lost wages, future earnings, and medical expenses for the rest of his life. Settling is a major life decision and it should not be taken lightly. You should consider what you are giving up by settling and weighing that against what you will be securing in return. Some of what you give up and of what you receive are intangible. For example, some injured workers think there is real value in not having to seek prior approval for certain medical treatment, including Utilization Review (UR), something that occurs regularly pre-settlement. After a case settles, medical decisions do not have to be pre-approved. You can treat consistently with your health care provider and make your own decisions. In the case of a Medicare Set Aside, there are a few rules and regulations that must be followed to properly manage your medical funds. These payments must be made in accordance with The Center for Medicare & Medicaid’s (CMS) guidelines. You can learn more about these guidelines here. Settlement means you will have control of your indemnity (lost wages) settlement proceeds. You will no longer receive a weekly check from your employer or the company insurance carrier. Some people enjoy the security of regular payments. Managing settlement proceeds on your own can be challenging. Many settling parties elect to reduce this challenge by settling with a structured settlement, an arrangement that provides security and pays on a periodic schedule. If considering settling, be sure to consider the pluses and minuses of doing so.

All but a few states allow for a full and final settlement. What this means is a case is fully resolved with the employer paying the injured worker a sum of money in a lump sum or through a structured settlement arrangement. Once you settle, the employer or carrier will no longer pay for any ongoing medical treatment, and you will need to use your medical settlement funds for these expenses.

There are two benefits whose value is part of the settlement calculation. They are past and future indemnity benefits (wage replacement benefits) and future medical benefits (Some states provide injured workers other benefits that are typically not valued at settlement because their value is intangible, for example the right to be transferred to suitable work or vocational rehabilitation).

Performing the calculations estimating a settlement value is not difficult in some cases and when the future medical treatment is expected to be extensive could be complex. Future indemnity considers the present value of your indemnity payments. Your life expectancy or rated age is a factor. If benefits have a durational limit, that is considered. Does your state provide periodic cost of living adjustments (COLAs)? If so, they are a consideration in the value of the settlement.

Future medical costs are then valued. Some employers and carriers retain the services of expert medical personnel to perform this calculation. Others perform the calculation themselves using prior medical treatment and health care provider opinions on what future care can be anticipated. After these foundational numbers are established, it is a common practice to reduce the indemnity to present value and inflate the medical based on when treatment will likely be rendered. Once the employer or carrier is comfortable with a value, the parties usually negotiate the settlement.

After a settlement agreement has been reached by the parties, the state Workers’ Compensation agency needs to review and approve it. This usually involves filing documents with the agency. In some jurisdictions a hearing is scheduled where an Administrative Law Judge, Commissioner or Hearing Officer  hears testimony, reviews medical records and other documents. That person will then issue an order approving or denying the settlement. In most jurisdictions, the standard or test is whether the settlement is in the best interest of the parties, specifically the injured worker.

There are two major value elements to settling a workers’ compensation claim. The first is the value of the indemnity benefits. Usually those are only the future benefits, but in some cases if lost time was contested from the beginning of the case these would include back owed and future benefits. These could be for the life of the injured worker or if the state has durational limits, they would be for a fixed period. Usually the future indemnity benefits are reduced to present value on the idea money owed in the future but paid today should be discounted. This calculation could be unnecessary if your state has periodic cost of living adjustments applied to these benefits.

Next you calculate the value of future medical expenses. This is frequently accomplished with the assistance of a medical professional who specializes in doing this work. In some cases, counsel representing a settling party will do the calculation if experienced in doing so. It is not uncommon for an employer or an employer’s insurance carrier to initiate settlement discussions. If they do, they will either solicit a demand or send a settlement offer. A settlement offer is usually a beginning point in the settlement process. It will provide a sense of what they are thinking the claim value might be. Arriving at a settlement value is not an exact science. There are intangibles that add to the value of a claim or detract from its value. If thinking about settling a claim, an injured worker would be well served retaining the services of someone who has had a wealth of experience negotiating workers’ compensation settlements.

We will begin this answer by explaining the purpose of a Medicare Set-Aside Account (MSA). Medicare functions as a health insurance carrier for individuals who are eligible for traditional Social Security or for Social Security Disability. The Social Security Act makes Medicare a secondary payer. This means if an individual who is Social Security eligible has another insurance source able to pay medical expenses, then that other source is the primary payer. All other insurance sources are obligated to pay before Medicare pays any medically related expenses. Workers’ compensation insurance pays for medical expenses. If a workers’ compensation or liability case is contested and medical treatment is needed, Medicare will pay for the medical care for an eligible person until  liability  is determined. These payments are conditional, and if the case is resolved and it is determined the other carrier is responsible, Medicare is entitled to be reimbursed for all conditional payments made. The workers’ compensation or liability carrier is then obligated to pay future medical bills associated with the claim as the primary payer.

An MSA becomes important if a Medicare eligible injured worker or liability claimant is contemplating settling a case.  The purpose of a MSA is to set funds aside from the settlement proceeds to pay for future medical expenses, expenses that are consistent with what Medicare would pay. At all times it is important to be mindful of the fact Medicare is a secondary payer. Settlement does not eliminate that fact; it shifts the primary payer responsibility from the insurance company to the settling party.

Your obligation to Medicare is to protect its interest as a secondary payer. If you are covered by Medicare or are Medicare-eligible and have a workers’ compensation claim, your medical expenses associated with that claim should not be paid by Medicare. Medicare is always a secondary payer. Your obligation is to ensure primary payers like your employer’s insurance carrier fulfill their obligations, pay medical bills that are their responsibility, and not have those bills paid by Medicare. This obligation continues after a case settles if an element of the settlement is future medical expenses. After the claim settles, you step into the shoes of the workers’ compensation carrier and become the primary payor obligated to properly pay your medical bills until the funds intended for future medical care are exhausted. You can contract that responsibility to a professional management company.

If you settle with a Medicare Set Aside, according to CMS guidelines, You:

• Are only allowed to spend your MSA funds on Medicare-covered treatments related to your injury.
• Must place MSA funds in a separate, interest-bearing bank account
• Must keep copies of bills & receipts
• Must report all expenses you used your MSA funds on to CMS each year and in the case your funds run out
• Must only pay the state fee schedule or "usual and customary" pricing for treatments & prescriptions

Settling a claim is a significant life event. After settlement, many of the resources available to provide guidance and support disappear. If represented, your lawyer will likely close your file. You will no longer have an adjuster, medical case manager, or vocational counselor working with you. You will lose the support of your state Workers’ Compensation agency—it no longer has jurisdiction over your case. The good news is there are resources available to help. Two are of importance. When you settle a claim all your future benefits are reduced to a single number and that sum is paid to you. Your settlement can be paid in a lump sum, a structured annuity, or a combination of the two. A structured settlement broker can help you manage your settlement proceeds for the long term. Unless you are experienced in managing large sums of money, having someone with that skill work with you, affords the opportunity to make your settlement funds last longer and be secure in the process.

The second resource is a reputable professional administrator, like Ametros, that helps you manage the funds intended for future medical treatment. If there is a Medicare Set-Aside Account, a professional administrator can guide you through the complicated world of medical and pharmaceutical billing, bill paying, rate negotiating, and resource management. Many injured workers have never seen a medical bill associated with their claim. They have never reviewed a bill for accuracy and have never paid a medical bill associated with their case. Once a case settles, all those tasks and more become their responsibility. Having a professional administrator manage your settlement funds is highly recommended by The Centers for Medicare & Medicaid (CMS) because they understand how complex this process can be. There may be others who can provide guidance, direction, and support. If represented by counsel during the settlement process, a frank discussion about your post settlement hopes, dreams, and concerns should result in fruitful recommendations on how to plan for a productive and meaningful future.

Workers’ compensation was originally designed to be an uncomplicated administrative payment scheme. However, it has evolved over time, and today employers and their insurance carriers have a right to contest cases they believe are not compensable. Workers usually have the right to be told a claim is being contested within certain time limits. If benefits are not being paid, all states have procedures where an injured worker can have the merits of a case determined by a commissioner, hearing officer, or administrative law judge.

To get your case administratively processed you would typically have to file a benefits’ claim form. In some states these are called Petitions for Award of Compensation. Processing a case can be complicated. You may want to retain the services of an attorney who specializes in workers’ compensation and is familiar with the system in your state. You should also contact your state’s Workers’ Compensation Board or Commission seeking their advice and direction. Some states have staff who are charged with responding to employee inquiries, help the injured individual fill out appropriate paperwork, and manage their claims.