New WCRI Study Measures Adequacy of Workers’ Compensation Income Benefits

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This study highlights a dimension of worker outcomes that may be useful for policymakers and stakeholders—measures of adequacy of income benefits that workers receive after an injury.

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The adequacy of income benefits to replace lost earnings of injured workers is measured in a new study released today by the Workers Compensation Research Institute (WCRI).

“This report provides important metrics that policymakers can use to assess the adequacy of benefits in their state,” said Dr. John Ruser, president and CEO of WCRI. “The report also shows how duration of disability and postinjury employment patterns are related to benefit adequacy.”

The study, Adequacy of Workers’ Compensation Income Benefits in Michigan, shows how adequacy can be determined by examining the extent to which workers’ compensation income benefits help maintain income after an injury, using workers’ compensation and earnings data from Michigan.

The following are among the study’s findings:

  • Within 10 years after an injury, the earnings and income benefits an average worker received were projected to be 88 percent of what a worker would have earned if not injured. However, these aggregate results hide important differences across different types of workers.
  • Workers with 1 to 12 months of temporary disability benefits had total income that was projected to replace 91 to 95 percent of earnings had they not been injured. Workers with permanent partial disability and/or lump-sum payments had total income that was projected, within 10 years postinjury, to replace 69 percent of earnings had they not been injured.
  • Postinjury employment patterns may contribute to the estimates of adequacy presented above. While 44 percent of workers with more than one month of temporary disability benefits returned to work and stayed continuously employed, another 31 percent had a sustained initial return to work but sporadic employment after initial return to work. An additional 21 percent of workers with more than one month of temporary disability benefits either had no meaningful return to work or only had sporadic intermediate-term employment patterns. In contrast, a comparison group of workers with medical-only injuries was more likely to have sustained return to work.

This study focuses on the adequacy of income benefits for injuries in 2004. For every worker in the analysis, the study directly observed postinjury earnings through the end of 2008 (an average of 4.5 years after the injury) and projected potential earnings losses to up to 10 years after an injury. Although the data focus on experience for injuries that happened more than a decade ago, and despite changes in Michigan’s policy and economic environment, the information is still valuable because we rarely have an opportunity to examine postinjury earnings or to relate benefit adequacy to postinjury employment patterns. It is also the first benefit adequacy study of a wage-loss system.

A copy of this study can be purchased on WCRI’s website at https://www.wcrinet.org/reports/adequacy-of-workers-compensation-income-benefits-in-michigan. The authors of this study are Bogdan Savych and H. Allan Hunt.

ABOUT WCRI:

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA. Organized in 1983, the Institute does not take positions on the issues it researches; rather, it provides information obtained through studies and data collection efforts, which conform to recognized scientific methods. Objectivity is further ensured through rigorous, unbiased peer review procedures. WCRI's diverse membership includes employers; insurers; governmental entities; managed care companies; health care providers; insurance regulators; state labor organizations; and state administrative agencies in the U.S., Canada, Australia, and New Zealand.

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Andrew Kenneally
Workers Compensation Research Institute - WCRI
since: 06/2011
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