Professional Documents
Culture Documents
Workers’ Compensation
System Report, 2000
by
David Berry (principal)
Carolyn MacDonald
Grant Martin
Brian Zaidman
January 2002
This report is available on the Research and Statistics website at www.doli.state.mn.us/rsreport.htlm. Copies are also
available from the Department of Labor and Industry at 1-800-342-5354. Information in this report can be obtained in
alternative formats by calling the Department of Labor and Industry at 1-800-342-5354 or TTY at (651) 297-4198.
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Executive Summary
The Minnesota workers’ compensation system Indemnity Claims and Costs: Detail
has seen a period of stability in the latter part of
the 1990s, with claim rates and costs at • Among paid indemnity claims in 2000:
historically low levels since 1984. The last two
years of data, however, show an increase in cost › 85 percent received total disability benefits
related to longer durations of wage-replacement (temporary or permanent);
benefits. Whether this is a minor fluctuation or › 30 percent received temporary partial
the beginning of longer trend remains to be seen. disability benefits;
› 21 percent received permanent partial
This report, part of an annual series, presents disability benefits;
data from 1984 through 2000 on several aspects › 15 percent received stipulated benefits.
of Minnesota’s workers’ compensation
system—claims and costs, vocational The percentages with temporary partial,
rehabilitation, and disputes and dispute permanent partial, and stipulated benefits fell
resolution. Its purpose is to describe statistically in varying degrees during the 1990s.
the current status and direction of workers’
compensation in Minnesota. • The average durations of total disability and
temporary partial disability benefits were 10
Major Findings and 18 weeks in 2000. These durations were
stable from 1995 through 1998 but were up
Claims and Costs: Overview 13 to 14 percent between 1998 and 2000.
• Claim rates fell during most of the 1990s. • Driven primarily by the increase in duration,
Current figures indicate 8.2 paid claims per average indemnity benefits per indemnity
100 full-time-equivalent (FTE) workers in claim rose 7 percent between 1998 and 2000.
1999, and 1.7 paid indemnity claims per 100 The 2000 figure, $10,600, is still low by
FTE workers in 1999 and 2000. historical standards.
• The average cost of VR services declined 10 • The rate of denial of filed indemnity claims,
percent between 1998 and 2000. after increasing in the 1980s, has remained
between 14 and 16 percent since 1991.
• Three-quarters of VR participants have a job
at the time of plan closure, a majority of these • The percentage of paid indemnity claims with
with their pre-injury employer. claimant attorney fees decreased from 17
percent in 1991 to 12 percent in 2000.
Disputes and Dispute Resolution
• For 2000, total attorney fees were roughly 16
• The incidence of all types of disputes, after percent of indemnity benefits and 6 percent
peaking in 1991, declined rapidly in the early of total workers’ compensation system cost.
1990s but changed relatively little during the
second half of the decade.
ii
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Contents
Executive Summary.........................................................................................................................i
Figures ........................................................................................................................................... v
1. Introduction.............................................................................................................................1
Major Findings........................................................................................................................................2
Background.............................................................................................................................................2
Claim Rates.............................................................................................................................................4
System Cost ............................................................................................................................................4
Insurance Arrangements .........................................................................................................................5
Pure Premium Rates................................................................................................................................5
Benefit Costs Relative to Payroll............................................................................................................6
Indemnity and Medical Shares ...............................................................................................................6
Indemnity Cost Relative to Payroll: Insurance and DLI Data ...............................................................7
Benefit Costs per Claim..........................................................................................................................8
Indemnity Cost of Indemnity Claims: Insurance and DLI Data ............................................................9
Major Findings......................................................................................................................................10
Background...........................................................................................................................................10
Benefit Cost by Claim Type .................................................................................................................12
Claims by Benefit Type ........................................................................................................................13
Benefit Duration ...................................................................................................................................14
Weekly Benefits....................................................................................................................................14
Average Indemnity Benefit by Type.....................................................................................................15
Indemnity Benefits per Indemnity Claim .............................................................................................16
4. Vocational Rehabilitation.......................................................................................................17
Major Findings......................................................................................................................................17
Background...........................................................................................................................................17
Participation Rate..................................................................................................................................18
Cost .......................................................................................................................................................18
Timing of Services................................................................................................................................19
Service Duration ...................................................................................................................................19
Services Provided .................................................................................................................................20
Return-to-Work Outcomes ...................................................................................................................20
Return-to-Work Wages.........................................................................................................................21
Reasons for Plan Closure......................................................................................................................21
(Continued)
iii
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Major Findings......................................................................................................................................22
Background...........................................................................................................................................22
Dispute Rates ........................................................................................................................................24
Dispute Types .......................................................................................................................................25
Denials ..................................................................................................................................................26
Dispute Resolution Proceedings ...........................................................................................................27
Resolution of Claim Petition Disputes..................................................................................................28
Resolution of Discontinuance Disputes ................................................................................................28
Resolution of Medical Disputes............................................................................................................29
Resolution of Rehabilitation Disputes ..................................................................................................29
Claimant Attorney Involvement ...........................................................................................................30
Claimant and Defense Attorney Costs..................................................................................................31
Appendices
A. Glossary ................................................................................................................................................32
B. Workers’ Compensation Law Changes of 1992, 1995, and 2000 ........................................................38
C. Data Sources and Estimation Procedures .............................................................................................42
iv
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Figures
2.1 Paid Claims per 100 Full-Time-Equivalent Workers, Injury Years 1984-2000..................................4
2.5 Benefit Cost per $100 of Payroll in the Voluntary Market, Accident Years 1984-2000.....................6
2.6 Indemnity and Medical Cost Shares in the Voluntary Market, Accident Years 1984-2000 ...............6
2.7 Indemnity Cost per $100 of Payroll, Injury Years 1984-2000: Insurance and DLI Data...................7
2.8 Average Indemnity and Medical Costs of Insured Claims, Adjusted for Wage Growth,
Policy Years 1984-1998 ......................................................................................................................8
2.9 Average Indemnity Cost of Indemnity Claims, Adjusted for Wage Growth, 1984-2000:
Insurance and DLI Data.......................................................................................................................9
3.1 Benefit Cost by Claim Type for Insured Claims, Policy Years 1984-1998 ......................................12
3.2 Percentages of Paid Indemnity Claims with Selected Types of Benefits, Injury Years
1984-2000..........................................................................................................................................13
3.3 Average Duration of Wage-Replacement Benefits in Weeks, Injury Years 1984-2000 ...................14
3.4 Average Weekly Wage-Replacement Benefits, Adjusted for Wage Growth, Injury Years
1984-2000..........................................................................................................................................14
3.5 Average Indemnity Benefit by Type per Claim with that Benefit Type, Adjusted for Wage
Growth, Injury Years 1984-2000.......................................................................................................15
3.6 Average Indemnity Benefit by Type per Indemnity Claim, Adjusted for Wage Growth,
Injury Years 1984-2000.....................................................................................................................16
4.1 Percentage of Paid Indemnity Claims with a Vocational Rehabilitation Plan Filed, Injury
Years 1991-2000 ...............................................................................................................................18
4.2 Vocational Rehabilitation Plan Costs, Adjusted for Wage Growth, Plan-Closure Years
1998-2000..........................................................................................................................................18
4.3 Time for Injury to Start of Vocational Rehabilitation Services, Plan-Closure Years
1998-2000..........................................................................................................................................19
v
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
5.7 Resolution of Medical Disputes: Final Venue for Disputes Filed 1997-1999...................................30
5.8 Resolution of Rehabilitation Disputes: Final Venue for Disputes Filed 1997-1999 .........................30
5.10 Attorney Fees as Percentage of Total Indemnity Benefits, Injury Years 1995-2000 ........................32
vi
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
1
Introduction
For much of the past one and a half decades, Appendix A contains a glossary. Appendix B
high workers’ compensation costs were a major summarizes portions of the 1992, 1995, and
concern both in Minnesota and in most of the 2000 law changes relevant to trends in this
nation. During the early and middle 1990s, report. Appendix C describes data sources and
through cost-control measures by employers and estimation procedures.
insurers and law changes in most states, costs
fell nationwide. In Minnesota, a combination of Some important points to keep in mind
employer and insurer efforts and law changes in throughout the report:
1992 and 1995 produced major cost reductions
during the first half of the 1990s, followed by a Developed statistics. Most statistics in this
period of stability in the latter part of the decade. report are presented by injury year or insurance
1
policy year. An issue with such data is that the
The most recent two years of data, however, originally reported numbers for more recent
show an increase in cost driven by longer years are not mature because of longer claims
durations of wage-replacement benefits. Only and reporting lags. In this report, all injury-year
future data will indicate whether this is a short- and policy-year data are “developed” as needed
term fluctuation or the beginning of a longer to a uniform maturity so that the statistics are
trend. comparable over time. The technique uses
“development factors” (projection factors) based
This report, part of an annual series, presents on observed data for older claims. Appendix C
data from 1984 through 2000 on several aspects gives more detail.
of Minnesota’s workers’ compensation
system—claims and costs, vocational 2000 law change. The benefit changes enacted
rehabilitation, and disputes and dispute by the 2000 Legislature (see Appendix B) took
resolution. Its purpose is to describe statistically effect for injuries on or after Oct. 1, 2000;
the current status and direction of workers’ therefore, those changes do not appreciably
compensation in Minnesota. affect the data in this report.
To enhance readability, this year’s report is Economic slowdown. The current economic
presented in a new format featuring a more slowdown may affect the workers’
selective presentation of data and a bullet-point compensation system. Some effect may be
text format emphasizing current developments. present in statistics in this report, to the extent
that claims from 2000 and earlier remained open
Chapter 2 presents overall claim and cost data. after the slowdown began. However, the full
Chapter 3 presents more detailed claim and cost effect of the slowdown will only be present in
data to explain some of the trends in Chapter 2. future reports.
Chapters 4 and 5 provide statistics on vocational
rehabilitation and disputes and dispute
resolution.
1
Definitions in Appendix A. Some insurance data are by
accident year, which is equivalent to injury year.
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
2
Claims and Costs: Overview
This chapter presents overall indicators of the Workers’ Compensation Benefits and Claim
status and direction of Minnesota’s workers’ Types
compensation system.
Workers’ compensation provides three basic
Major Findings types of benefits:
• Claim rates fell during most of the 1990s. Indemnity benefits compensate the injured or ill
The most recent figures indicate 8.2 paid worker (or dependents) for wage loss, permanent
claims per 100 full-time-equivalent (FTE) functional impairment, or death.
workers in 1999, and 1.7 paid indemnity
claims per 100 FTE workers in 1999 and Medical benefits consist of reasonable and
2000. (Figure 2.1) necessary medical services and supplies related
to the injury or illness.
• After a half-decade of decline, total system
cost per $100 of payroll leveled off at $1.37 Vocational rehabilitation benefits consist of a
for 1999 and 2000; this is down 45 percent variety of services to help eligible injured
from an average of $2.51 for 1989-1994. workers return to work. These benefits are
(Figure 2.2) considered separately in Chapter 4.
• After falling by nearly half during the middle Claims with indemnity benefits are called
and late 1990s, pure premium rates increased indemnity claims; these claims typically have
for 2002. The 2002 rates are up 1.4 percent medical benefits also. The remainder of claims
from 2001. (Figure 2.4) are called medical-only claims because they
only have medical benefits.
• Indemnity and medical costs—measured per
2
claim and relative to payroll—declined Insurance Arrangements
steeply during the early 1990s but fell more
slowly or leveled off later in the decade. Employers cover themselves for workers’
Indemnity costs—per claim and relative to compensation in one of three ways. The most
payroll—increased in 1999 and 2000. common is to purchase insurance in the
(Figures 2.5, 2.7-2.9) “voluntary market,” so named because an
insurer may choose whether to insure any
particular employer. Employers unable to insure
Background in the voluntary market may insure through the
Assigned Risk Plan, the insurance program of
The following basic information is necessary for last resort administered by the Department of
understanding the figures in this chapter. See Commerce. Employers meeting certain
Appendix A for more detail. financial requirements may self-insure.
Rate-Setting
2
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
insurance companies rather than by a central These rates represent expected losses (indemnity
authority. In determining their rates, insurance and medical) per $100 of payroll for some 600
companies start with “pure premium rates” payroll classifications. Insurance companies add
calculated every year by Minnesota’s workers’ their own expenses to the pure premium rates
compensation data service organization and and make other modifications in determining
rating bureau, the Minnesota Workers’ their own rates.
Compensation Insurers Association (MWCIA).
3
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
6
• In 1999 and 2000, there were 1.7 paid
indemnity claims per 100 FTE workers, down 4
37 percent from 1990. Most of the decrease
2
was during the early 1990s.
0
• The medical-only claims rate fell only slightly '84 '86 '88 '90 '92 '94 '96 '98 '00
during the 1990s, to 6.5 per 100 FTE workers in
1999. Indemnity Medical-only [2]
Total [2]
• Indemnity claims made up 20 percent of total Medical-
paid claims in 1999, down from 27 percent for Injury Indemnity Only Total
1991. Most of the decrease was between 1991 Year Claims Claims Claims
and 1995. 1984 2.9 7.4 10.3
1990 2.6 7.0 9.6
1998 1.6 6.8 8.4
1999 1.7 6.5 8.2
2000 1.7 [2] [2]
1. Developed statistcs from DLI data and other sources (see
Appendix C).
2. Not available at time of publication.
$2.00
• System cost per $100 of payroll was $1.37 in
2000, the same as in 1999 and down 45 percent $1.50
from the average of $2.51 for 1989-1994. $1.00
4
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Percentage of total
percent in 1999 and 2000. 80%
60%
• During the same period, the Assigned Risk Plan
share fell from 12 percent to 2 percent and the 40%
self-insured share fell from 27 percent to 22
20%
percent.
0%
• These shifts are at least partly due to declining '84 '86 '88 '90 '92 '94 '96 '98 '00
insurance rates (Figure 2.4).
Voluntary market Assigned Risk
Total insured Self-insured
• When market share is measured by pure
premium (not shown here), the trends are nearly Assigned
identical. Injury Voluntary Risk Total Self-
Year Market Plan Insured Insured
1984 79.6% 2.3% 81.8% 18.2%
1993 60.9 12.4 73.3 26.7
1999 76.4 2.0 78.4 21.6
2000 75.8 1.8 77.6 22.4
1. Data from DLI.
25%
• The decreases during the 1990s reflect a
combination of the 1992 and 1995 law changes 0%
and other factors, including safety programs, '84 '86 '88 '90 '92 '94 '96 '98 '00 '02
more active medical treatment, better Effective Percentage
management of claims and costs, and more Year of 1984
3
effective return-to-work programs. 1984 100.0%
1994 133.6
• Insurers in the voluntary market use the pure 2000 72.7
premium rates in determining their own rates, 2001 69.0
which in turn affect total system cost (Figure 2002 70.0
2.2). 1. Data from the MWCIA. Pure premium rates represent
expected indemnity and medical losses per $100 of
covered payroll in the voluntary market.
3
These are well-documented in the workers’
compensation literature.
5
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Benefit Cost Relative to Payroll Figure 2.5 Benefit Cost per $100 of Payroll in the
Voluntary Market, Accident Years
Indemnity and medical costs fell sharply relative to 1984-2000 [1]
payroll in the early 1990s and have been stable
since 1995. $2.00
Indemnity and Medical Shares Figure 2.6 Indemnity and Medical Cost Shares in
the Voluntary Market, Accident Years
The indemnity share of total benefit cost fell 1984-2000 [1]
steadily from the mid-1980s to the mid-1990s, to a
point almost equal to the medical share. However, 70%
the indemnity share turned back upward in 2000. 60%
50%
• Reflecting the data in Figure 2.5, indemnity cost
was 54 percent of total benefit cost in 2000, up 40%
6
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Indemnity Cost Relative to Payroll: Figure 2.7 Indemnity Cost per $100 of Payroll,
Injury Years 1984-2000: Insurance
Insurance and DLI Data and DLI Data [1]
5
This may occur because the two data sources have
different inclusions and exclusions (see notes in Figure 2.7) or
because the insurance data are projected to a greater maturity.
7
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
A: Indemnity Claims
$5,000
$0 Indemnity Medical
'84 '86 '88 '90 '92 '94 '96 '98 Total
B: Medical-Only Claims
$100
$0
'84 '86 '88 '90 '92 '94 '96 '98
C: All Claims
$0 Indemnity Medical
'84 '86 '88 '90 '92 '94 '96 '98 Total
1. Developed statistics from MWCIA data (see Appendix C). Includes the Assigned Risk Plan; excludes
self-insured employers. Costs are adjusted for average wage growth between the respective year and 2000.
Benefit Costs per Claim • The average total cost of all claims combined
was down 4 percent in 1998 from 1997, with
Adjusted for wage growth, average claim costs both indemnity and medical costs
fell sharply during the early 1990s and continued contributing to the decrease.
a gradual decline through 1998.
• The decreases in benefit costs relative to
• For all claims combined, in 1998 relative to payroll (Figure 2.5) are driven by the
1990: decreases in average claim costs (Figure 2.8)
and decreases in claim rates (Figure 2.1).
› average total cost was done 53 percent;
› average indemnity cost was down 63
percent;
› average medical cost was down 36 percent.
8
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Indemnity Cost of Indemnity Claims: Figure 2.9 Average Indemnity Cost of Indemnity
Claims, Adjusted for Wage Growth,
Insurance and DLI Data 1984-2000: Insurance and DLI
Data [1]
DLI data show an increase in the average
indemnity cost of indemnity claims between 1998
and 2000, adjusted for wage growth. For earlier $20,000
years, the insurance and DLI data corroborate each $16,000
other closely.
$12,000
9
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
3
Indemnity Claims and Costs: Detail
10
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
a dispute, and stipulated benefits are usually to the most severe type of benefit on the claim.
paid in a lump-sum. In increasing severity, the benefit types are
medical, temporary disability (TTD or TPD) ,
Total disability. In most figures in this PPD, PTD, and death. For example, a claim
chapter—those presenting DLI data—the term with medical, TTD, and PPD payments is a PPD
“total disability” refers to the combination of claim. PPD claims also include (1) claims with
TTD and PTD benefits, because the DLI data do temporary disability benefits lasting more than
not distinguish between these two benefit types. one year and (2) claims with stipulated
settlements. All benefits on a claim are counted
Counting Claims and Benefits: Insurance in the one claim type category that the claim
Data and Department Data falls into.
The first figure in this chapter uses insurance In the DLI data, by contrast, each claim may be
data (from the MWCIA); all other figures use counted in more than one category depending on
DLI data. the types of benefits paid. The same claim, for
example, may be counted among claims with
In the insurance data, claims and benefits are total disability benefits and among claims with
categorized by “claim type,” defined according PPD benefits.
11
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Figure 3.1 Benefit Cost by Claim Type for Insured Claims, Policy Years 1984-1998 [1]
80.3%
80%
60%
A: Percentage 40% 13.9% 19.7%
of All Claims 20% 5.6% 0.06% 0.04%
0%
Medical- Temp. PPD PTD [2] Death [2] All
only disab. indemnity
claims [3]
Claim type
$400,000
$400,000
B: Average
$172,000
Benefit Cost $200,000
(Indemnity and $481 $5,050 $42,400 $17,300 $3,780
Medical) per $0
Claim [4] Medical- Temp. PPD PTD [2] Death [2] All All claims
only disab. indemnity
claims [3]
Claim type
89.8%
100%
62.9%
C: Percentage 75%
of Total 50% 18.6%
25% 10.2% 6.6% 1.7%
Benefit Cost
0%
Medical- Temp. PPD PTD [2] Death [2] All
only disab. indemnity
claims [3]
Claim type
12
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
20%
• The decrease in the percentage of claims with
PPD benefits between 1992 and 1994 resulted 0%
from the introduction of the new PPD rating '84 '86 '88 '90 '92 '94 '96 '98 '00
6
schedule in July 1993. Total disability [2] TPD
PPD Stipulated [3]
• The decrease in the percentage of claims with
Injury Total Stipu-
stipulated benefits after 1992 is probably related
Year Disab.[2] TPD PPD lated [3]
to a declining dispute rate (Chapter 5, Figure 1984 93.1% 18.8% 17.5% 10.7%
5.1). 1992 85.2 32.2 25.9 19.2
1995 84.3 31.1 20.6 16.6
• The 1984-1992 period experienced substantial 1999 85.0 29.9 22.0 14.6
increases in the percentages of claims with 2000 84.7 29.5 21.3 15.0
TPD, PPD, and stipulated benefits, and a 1. Developed statistcs from DLI data (see Appendix C). An
decrease in the percentage with total disability indemnity claim may have more than one type of benefit
benefits. paid. Therefore, the sum of the figures for the different
benefit types is greater than 100 percent.
2. Total disability includes TTD and PTD benefits. TTD
and PTD are not distinguished in the DLI database.
3. Includes indemnity and medical components.
6
“Analysis of the Effects of the 1993 Permanent Partial
Disability Rating Schedule,” DLI Research and Statistics,
August 1999.
13
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
300
• Average weekly total disability and TPD
benefits have been generally steady since 1993. 200
This means these weekly benefits have grown at 100
the same rate as overall wage levels. 0
'84 '86 '88 '90 '92 '94 '96 '98 '00
• Average weekly total disability and TPD Total disability [2] TPD
benefits fell from 1984 through 1993. This was
primarily because pre-injury wages (the basis Injury Total
Year Disab. [2] TPD
for weekly benefits) grew more slowly than 1984 $542 $360
7
overall wage levels. 1993 444 220
1996 463 222
1999 455 226
2000 432 228
1. Developed statistics from DLI data (see Appendix C).
7 Benefit amounts are adjusted for average wage growth
Minnesota Workers’ Compensation System Report, between the respective year and 2000.
1999, DLI Research and Statistics, February 2001. 2. Total disability includes TTD and PTD benefits. TTD
and PTD are not distinguished in the DLI database.
14
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Average Indemnity Benefits by Type Figure 3.5 Average Indemnity Benefit by Type
Per Claim with that Benefit Type,
After a period of stability since the mid-1990s, Adjusted for Wage Growth,
Injury Years 1984-2000 [1]
average total disability, TPD, and stipulated benefit
amounts have increased in the last two years after
Stipulated ($1,000s)
near their historical lows since 1984. $12 $30
8
The 2000 law change raised PPD benefit levels for
injuries on or after Oct. 1, 2000 (see Appendix B).
15
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Indemnity Benefits per Indemnity Figure 3.6 Average Indemnity Benefit by Type
Per Indemnity Claim,
Claim Adjusted for Wage Growth,
Injury Years 1984-2000 [1]
After a relatively low period during the late 1990s,
average indemnity benefits per indemnity claim are
$8 $16
($1,000s)
duration increases.
$4 $8
• Indemnity benefits per indemnity claim in 2000 Injury Total Stipu- Total
are up by 7 percent from 1998. These numbers Year Disab. [2] TPD PPD lated [3] Indem. [4]
(last column of Figure 3.6) are the DLI numbers 1984 $5,880 $1,450 $2,120 $4,690 $14,930
in Figure 2.9. 1990 5,350 2,140 2,210 6,380 16,990
1995 3,440 1,120 1,400 3,780 10,150
• This increase reflects increases in total 1998 3,410 1,100 1,280 3,490 9,860
1999 3,670 1,070 1,240 3,450 10,080
disability and TPD benefits per indemnity claim
2000 3,800 1,210 1,170 3,500 10,580
of 11 percent and 14 percent, respectively,
between 1998 and 2000. The latter increases 1. Developed statistics from DLI data (see Appendix C).
Benefit amounts are adjusted for average wage growth
are a result of higher average benefit amounts between the respective year and 2000.
(Figure 3.5) given stable or somewhat 2. Total disability includes TTD and PTD benefits. TTD and
decreasing percentages of indemnity claims PTD are not distinguished in the DLI database.
with these benefits (Figure 3.2). The increased 3. Includes indemnity and medical components.
4. Because some benefit types are not shown, total
total disability and TPD benefit amounts, in indemnity benefits are greater than the sum of the benefit
turn, reflect duration increases (Figure 3.3). types shown.
16
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
4
Vocational Rehabilitation
This chapter gives data on vocational benefits. VR services are provided to injured
rehabilitation (VR) services in Minnesota’s workers who need help in returning to work
workers’ compensation system. because of their injuries and whose employers
are unable to offer them suitable employment.
Major Findings
VR services include—
• After a period of major fluctuation resulting
from a law change, court decisions, and DLI • vocational evaluation,
administrative initiatives, VR began a period • counseling,
of relative stability in 1997. (Figure 4.1) • job analysis,
• job modification,
• About 17 percent of paid indemnity claimants • job development,
injured in 2000 (about 5,300 individuals) • vocational testing,
received VR services. This represents a • transferable skills analysis,
gradual increase from 15 percent for 1997. • job-seeking skills training,
(Figure 4.1) • on-the-job training, and
• retraining.
• The total cost of VR services was about
$19.7 million in 2000; this is about 2 percent VR services are provided by “qualified
of total workers’ compensation system cost. rehabilitation consultants” (QRCs) registered by
(Figure 4.2) DLI. QRCs determine whether injured workers
are eligible for VR services, develop VR plans
• Adjusted for average wage growth, the for those determined eligible, and coordinate
average cost of VR services declined 10 service delivery under these plans. Eligibility is
percent between 1998 and 2000. determined in a VR consultation, which is
(Figure 4.2) typically done within certain timelines or if
requested by the employee or employer.
• About three quarters of VR participants have
a job at the time of plan closure, a majority of Time Period Covered
these with their pre-injury employer.
(Figure 4.6) Most of the data in this chapter come from VR
plan closure forms filed with DLI. Because the
• The average VR participant returning to work VR system experienced major changes in the
receives a wage about the same as their pre- early and middle 1990s, only the closure data
injury wage, but this varies widely among from 1998 through 2000 are used. Earlier plan
individuals. (Figure 4.7) closure data are strongly affected by changes
over time in the types of injured workers
receiving services.
Background
17
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Plan- Total
Closure Average Median Cost
Year Cost Cost ($Millions)
1998 $4,720 $2,870 $21.1
1999 4,500 2,780 21.8
2000 4,260 2,640 19.7
18
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Months
5.6 5.2
6 4.6
0
1998 1999 2000
6
• VR service duration was shortest for
participants returning to work with the pre-
3
injury employer and longest for participants not
returning to work.
0
• Injured workers who began services later after 1998 1999 2000
the injury had, on average, longer service Average months Median months
durations.
19
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
0%
1998 1999 2000
20
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
21
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
5
Disputes and Dispute Resolution
9
This chapter presents data on workers’ issues:
compensation disputes and dispute resolution.
• denial of primary liability,
Major Findings • eligibility for and amount of monetary
benefits,
• The incidence of all types of disputes, after • discontinuance of wage-loss benefits,
peaking in 1991, declined rapidly in the early • medical issues, and
1990s but changed relatively little during the • rehabilitation issues.
second half of the decade. (Figure 5.1)
Dispute Resolution Process
• Claim petition disputes—usually over
primary liability and benefit issues—are the Depending on the nature of the dispute and the
most common type of dispute. (Figure 5.2) wishes of the parties, dispute resolution may be
facilitated by the Customer Assistance (CA) unit
• The rate of denial of filed indemnity claims, of the Department of Labor and Industry (DLI)
after increasing in the 1980s, has remained or by the Office of Administrative Hearings
between 14 and 16 percent since 1991. (OAH). Decisions from OAH can be appealed
(Figure 5.3) to the Workers’ Compensation Court of Appeals
and then to the Minnesota Supreme Court.
• The percentage of paid indemnity claims with
claimant attorney fees decreased from 17 CA and OAH carry out a variety of dispute
percent in 1991 to 12 percent in 2000. resolution activities:
(Figure 5.9)
Customer Assistance Activities
• For 2000, total attorney fees were roughly 16
percent of indemnity benefits and 6 percent Informal assistance. This process, which can
of total workers’ compensation system cost. be initiated by any party to a dispute, may
(Figure 5.10) involve phone calls or correspondence with the
parties, to avoid a longer, more formal and
Background costly process.
9
Disputes also occur over miscellaneous other types of
issues, such as attorney fees, which are not considered in this
report.
22
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Office of Administrative Hearings Activities Given the data currently available, four
“dispute” categories are used in this report:
Mediation. OAH will conduct a mediation for
any dispute. The judge actively participates in Claim petition disputes. Disputes over primary
negotiations and provides advice as requested. liability and benefit issues are typically filed on
a claim petition, which triggers a formal hearing
Settlement conference. OAH conducts or settlement conference at OAH. Some
settlement conferences in litigated cases to medical and vocational rehabilitation disputes
achieve a negotiated settlement where possible are also filed on claim petitions.
without a formal hearing.
Discontinuance disputes. These disputes are
Administrative conference. OAH conducts most often initiated by a claimant’s Request for
administrative conferences on most Administrative Conference in response to the
discontinuance disputes and on medical disputes insurer’s declared intention to discontinue
involving more than $1,500. The OAH judge temporary total or temporary partial benefits.
conducting the conference issues a “decision and They may also be presented on the claimant’s
order.” Objection to Discontinuance or the insurer’s
petition to discontinue benefits, which leads to a
Formal hearing. OAH conducts formal hearing at OAH.
hearings on disputes presented on claim
petitions (see “claim petition disputes” below) Medical requests. Medical disputes are often
and other petitions where resolution through a filed on a Medical Request form, which triggers
settlement conference is not possible. OAH also an administrative conference at CA or OAH.
conducts hearings on some discontinuance
disputes, disputes referred by CA because they Rehabilitation requests. Vocational
do not seem amenable to less formal resolution, rehabilitation disputes are often filed on a
and disputes over miscellaneous issues such as Rehabilitation Request form, which leads to an
attorney fees and pre-hearing disputes. OAH administrative conference at CA.
also conducts hearings de novo when a party
disagrees with an administrative-conference or Many disputes, especially those handled
nonconference decision and order. informally by CA through mediation or other
means, are not counted in these categories.
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Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
20%
15%
Dispute rate
10%
5%
0%
'84 '86 '88 '90 '92 '94 '96 '98
Dispute Rate
Injury Claim Discontinuance Medical Rehabilitation Any
Year Petitions [2] Disputes [3] Requests [4] Requests [5] Dispute [6]
1984 8.5% [7] [7] [7] [7]
1989 11.5 7.7% 6.2% 4.7% 17.4%
1990 12.4 8.1 7.3 5.2 19.0
1991 12.6 8.2 6.9 5.1 19.0
1995 10.2 6.3 3.6 3.1 14.4
1998 10.1 6.2 2.9 3.6 14.1
1999 10.0 5.9 3.0 3.6 13.7
1. Developed statistics from DLI data. 2000 data are not presented because they are not yet
sufficiently reliable. (See Appendix C.)
2. Percentage of filed indemnity claims with claim petitions. (Filed indemnity claims are claims for
indemnity benefits, whether ultimately paid or not.)
3. Percentage of paid wage-loss claims with discontinuance disputes.
4. Percentage of paid indemnity claims with Medical Requests.
5. Percentage of paid indemnity claims with Rehabilitation Requests.
6. Percentage of filed indemnity claims with any disputes.
7. Not available before 1989.
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Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Discontinuance
disputes: 21%
25
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Figure 5.3 Indemnity Claim Denial Rates, Injury Years 1984-2000 [1]
30% 60%
25% 50%
20% 40%
15% 30%
10% 20%
5% 10%
0% 0%
'84 '86 '88 '90 '92 '94 '96 '98 '00
Pctg. of
Filed Indemnity Claims [2] Paid Indemnity Claims Denied Filed
Pctg. Pctg. Indemnity
Injury Ever Ever Claims
Year Total Denied [3] Total Denied [3] Ever Paid
1984 43,400 7.8% 40,100 3.7% 43.8%
1991 47,200 14.2 42,000 8.8 55.4
1998 38,100 16.1 32,700 8.1 43.3
1999 39,300 14.9 34,000 7.9 46.0
2000 39,800 14.3 34,600 7.1 43.1
1. Developed statistics from DLI data (see Appendix C).
2. Filed indemnity claims are claims for indemnity benefits, whether ultimately paid
or not.
3. Denied claims include claims initially denied (some of which are eventually paid)
and claims initially paid but later denied.
Denials of primary liability are of interest • Among filed indemnity claims that were
because they frequently generate disputes. denied, the proportion ever paid has ranged
Denial rates have been stable for the last decade. from 41 percent to 55 percent, with the
highest rates occurring in the early 1990s.
• The denial rate among filed indemnity claims
has been between 14 and 16 percent since
1991.
26
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
27
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
28
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
11
In contrast with medical disputes, all administrative
conferences on rehabilitation disputes take place at DLI.
29
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Claimant Attorney Involvement Figure 5.9 Claimant Attorney Fees, Injury Years
1984-2000 [1]
Claimant attorney involvement decreased steadily
during the 1990s after a large increase in the
1980s.
15%
• Between injury years 1991 and 2000, the
percentage of paid indemnity claims with
10%
claimant attorney fees dropped from 17 percent
to 12 percent.
5%
• Among paid indemnity claims with claimant
attorney fees, these fees represented about 12
percent of indemnity benefits for injury years 0%
1993-1999, with a slight decrease in 2000. '84 '86 '88 '90 '92 '94 '96 '98 '00
30
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
31
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Appendix A
Glossary
Accident year. The year in which the accident Cost-of-living adjustment. An annual
or condition occurred giving rise to the injury or adjustment of temporary total disability,
illness. In accident year data, all claims and temporary partial disability, permanent total
costs are tied to the year in which the accident disability, and dependents’ benefits computed
occurred. Accident year, used with insurance from the annual change in the statewide average
data, is equivalent to injury year, used with weekly wage (SAWW). The percent adjustment
Department of Labor and Industry data. is equal to the proportion by which the SAWW
in effect at the time of the adjustment differs
Administrative conference. An expedited, from the SAWW in effect one year earlier, not
informal proceeding where parties present and to exceed a statutory limit. The timing of the
discuss viewpoints in a dispute. If agreement is first adjustment and the annual percent limit
not achieved, a “decision and order” is issued have changed over time, as described in
which is binding unless appealed. Currently, the Appendix B.
Customer Assistance Unit of the Department of
Labor and Industry conducts administrative Customer Assistance (CA). A unit in the
conferences on medical issues involving$1,500 Department of Labor and Industry that provides
or less and on vocational rehabilitation issues, information and clarification on workers’
and the Office of Administrative Hearings compensation statute, rules, and procedures;
conducts conferences on medical issues carries out a variety of dispute prevention
involving more than $1,500 and on activities; conducts informal dispute resolution
discontinuance disputes presented on a Request activities including mediations; and holds
for Administrative Conference. administrative conferences on some issues (see
administrative conference).
Assigned Risk Plan (ARP). The workers’
compensation insurer of last resort, which Dependents’ benefits. Benefits paid to
insures employers unable to insure themselves in dependents of a worker who has died from a
the voluntary market. The ARP is necessary work-related injury or illness. These benefits
because all nonexempt employers are required to are equal to a proportion of the worker’s gross
have workers’ compensation insurance or self- pre-injury wage and are paid for a specified
insure. The Department of Commerce operates period of time, depending on the dependents
the ARP through contracts with private concerned.
companies for administrative services. The
Department of Commerce sets the ARP Developed numbers. Estimates of what the
premium rates, which are different from the number of claims or their cost will be at a given
voluntary market rates. maturity. Developed numbers are relevant for
accident year, policy year, and injury year data.
Claim petition. A document by which the They are obtained by applying development
injured worker contests a denial of primary factors, based on historical rates of development
liability or requests an award of indemnity, of claim and cost figures, to tabulated numbers.
medical, or rehabilitation benefits. In response
to the claim petition, the Office of Development. The change over time in the
Administrative Hearings generally schedules a reported number or cost of claims for a
settlement conference or formal hearing. particular accident year, policy year, or injury
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Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
year. Claim costs develop whether the costs are Injury year. The year in which the injury
paid or incurred. The reported figures develop occurred or the illness began. In injury year
both because of the time necessary for claims to data, all claims, costs, and other statistics are
mature and, in the case of Department of Labor tied to the year in which the injury occurred.
and Industry data, because of reporting lags. Injury year, used with Department of Labor and
Industry data, is essentially equivalent to
Discontinuance of wage-loss benefits. The accident year, used with insurance data.
insurer may propose to discontinue temporary
total or temporary partial disability benefits if it Medical cost. The cost of medical services and
believes that one of the legal conditions for supplies provided to the injured or ill worker,
discontinuance have been met. See “Notice of including payments to providers and certain
Intention to Discontinue,” “Request for reimbursements to the worker. All reasonable
Administrative Conference,” “Objection to and necessary medical costs related to the injury
Discontinuance,” and “petition to discontinue or illness are covered, subject to a maximum-fee
benefits.” schedule.
33
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
to be the DSO. Among other activities, the fixed for injuries from 1984 through September
MWCIA collects data on claims, premium, and 2000, but were raised in the 2000 law change for
losses from insurers and annually produces pure injuries on or after Oct. 1, 2000. The PPD
premium rates. benefit is paid after temporary total disability
(TTD) has ended. For injuries from October
Nonconference decision and order. A decision 1995 through September 2000, it is paid at the
issued by the Customer Assistance Unit of the same rate and intervals as TTD until the overall
Department of Labor and Industry, without an amount is exhausted. For injuries on or after
administrative conference, on a dispute for October 2000, the PPD benefit may be paid as a
which it has administrative conference authority lump-sum, computed with a discount rate not to
(see “administrative conference”), when it has exceed 5 percent. See Appendix B for related
sufficient information without conducting a law changes.
conference. The decision is binding unless
appealed or overturned by review at the Office Permanent total disability (PTD). A wage-
of Administrative Hearings. replacement benefit paid if the worker sustains a
severe work-related injury specified in law.
Notice of Intention to Discontinue (NOID). A Also paid if the worker, because of a work-
form by which the insurer informs the worker of related injury or illness in combination with
its intention to discontinue temporary total or other factors, is permanently unable to secure
temporary partial disability benefits. In contrast gainful employment, provided that, for injuries
with the petition to discontinue benefits, the on or after Oct. 1, 1995, the worker has a PPD
NOID brings about benefit termination if the rating of 13-17 percent, depending on age and
worker does not contest it. education. The benefit is equal to two thirds of
the worker’s gross pre-injury wage, subject to
Objection to Discontinuance. A form by which minimum and maximum weekly amounts, and is
the injured worker requests a formal hearing to paid at the same intervals as wages were paid
contest a proposed discontinuance of temporary before the injury. For injuries on or after Oct. 1,
total or temporary partial disability benefits. 1995, benefits end at age 67 under a rebuttable
The hearing is at the Office of Administrative presumption of retirement. Minimum and
Hearings. maximum weekly benefit provisions are
described in Appendix B. Cost-of-living
Office of Administrative Hearings (OAH). An adjustments are described in this appendix and
executive branch body that conducts hearings on Appendix B.
administrative law cases. One section is
responsible for workers’ compensation cases; it Petition to discontinue benefits. A document
conducts administrative conferences and by which the insurer requests a formal hearing to
settlement conferences in addition to hearings. allow a discontinuance of temporary total or
temporary partial disability benefits. The
Permanent partial disability (PPD). A benefit hearing is at the Office of Administrative
that compensates for permanent functional Hearings.
impairment resulting from a work-related injury
or illness. The benefit is based on the worker’s Policy year. The year of initiation of the
impairment rating, a percentage of whole-body insurance policy covering the accident or
impairment determined on the basis of health condition that caused the injury or illness. In
care providers’ assessments according to a rating policy year data, all claims and costs are tied to
schedule in rules. The PPD benefit is calculated the year in which the applicable policy took
under a schedule specified in law, which assigns effect. Since policy periods often include
a benefit amount per rating point with higher portions of two calendar years, the data for a
ratings receiving proportionately higher benefits. policy year include claims and costs for injuries
The scheduled amounts per rating point were occurring in two different calendar years.
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Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Primary liability. The overall liability of the discontinuance of temporary total or temporary
insurer for any costs associated with a claim partial disability benefits.
once the injury is determined to be compensable.
An insurer may deny primary liability (deny that Special Compensation Fund (SCF). A fund
the injury is compensable) if it has reason to within the Department of Labor and Industry
believe the injury was not work-related, was (DLI) that, among other things, pays uninsured
intentionally self-inflicted, resulted from claims and reimburses insurers (including self-
intoxication, or happened during participation in insured employers) for supplementary and
a nonrequired recreational program. second-injury benefit payments. (The
supplementary benefit and second-injury
Pure premium rates. Rates of expected provisions only apply to older claims because
indemnity and medical losses per year per $100 they were eliminated by the law changes of 1995
of covered payroll, also referred to as “loss and 1992, respectively.) Revenues come
costs.” Pure premium rates are determined primarily from an assessment on paid indemnity
annually by the Minnesota Workers’ benefits. The SCF also funds the operations of
Compensation Insurers Association for DLI, the workers’ compensation portion of the
approximately 560 insurance classes in the Office of Administrative Hearings, the Workers’
voluntary market. They are based on insurer Compensation Court of Appeals, and workers’
“experience” and statutory benefit changes. compensation functions in the Department of
“Experience” refers to actual losses relative to Commerce.
pure premium for the most recent report periods.
The pure premium rates are published with Second-injury claim. A claim for which the
documentation in the annual Minnesota insurer (or self-insured employer) is entitled to
Ratemaking Report subject to approval by the reimbursement from the Special Compensation
Department of Commerce. Fund because the injury was a subsequent (or
“second”) injury for the worker concerned. The
Pure premium. A measure of expected losses, 1992 law eliminated reimbursement (to insurers)
equal to the sum, over all insurance classes, of of “second-injury” claims for subsequent
payroll times the applicable pure premium injuries occurring on or after July 1, 1992.
rate(s) (the rate(s) for the insurance class(es)
concerned), adjusted for individual employers’ Self-insurance. A mode of workers’
prior loss experience. It is different from (and compensation insurance in which an employer
somewhat lower than) the actual premium or employer group insures itself or its members.
charged to employers because actual premium To self-insure, the employer or employer group
includes other insurance company costs plus must meet financial requirements and be
taxes and assessments. approved by the Department of Commerce.
35
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
and by DLI to adjust provider fee limits. This 450 weeks after the injury (with an exception for
report uses the SAWW to adjust average benefit approved retraining). Maximum weekly benefit
amounts for different years so they are all provisions are described in Appendix B. Cost-
expressed in constant (2000) wage dollars. The of-living adjustments are described in this
SAWW, from the Department of Economic appendix and Appendix B.
Security, is the average weekly wage of
nonfederal workers covered under Temporary total disability (TTD). A wage-
Unemployment Insurance. replacement benefit paid if the worker is unable
to work because of a work-related injury or
Stipulated benefits. Indemnity and/or medical illness. (The benefit is not payable for the first
benefits specified in a “stipulation for three calendar days of total or partial disability
settlement,” which states the terms of settlement unless the disability lasts, continuously or
of a claim among the affected parties. A intermittently, for at least ten days.) The benefit
stipulation usually occurs in the context of a is equal to two thirds of the worker’s gross pre-
dispute, but not always. The stipulation may be injury wage, subject to minimum and maximum
incorporated into a mediation agreement, or may weekly amounts, and is paid at the same
be reached in a settlement conference or intervals as wages were paid before the injury.
associated preparatory activities, in which case it Currently, TTD stops if (1) the employee returns
must be approved by a workers’ compensation to work, (2) the employee withdraws from the
judge. Stipulated benefits are usually paid in a labor market, (3) the employee fails to diligently
lump-sum. search for work within his or her physical
restrictions, (4) the employee is released to work
Supplementary benefits. Additional benefits without physical restrictions from the injury, (5)
paid to certain workers receiving temporary total the employee refuses an appropriate offer of
disability (TTD) or permanent total disability employment, (6) 90 days have passed after the
(PTD) benefits for injuries prior to October employee has reached maximum medical
1995. These benefits are equal to the difference improvement or completed an approved
between 65 percent of the statewide average retraining plan, (7) the employee fails to
weekly wage and the TTD or PTD benefit. The cooperate with an approved vocational
Special Compensation Fund reimburses insurers rehabilitation plan or with certain procedures in
(and self-insured employers) for supplementary the development of such a plan, or (8) 104
benefit payments. For injuries on or after Oct. 1, weeks of TTD have been paid (with an
1995, supplementary benefits were repealed (see exception for approved retraining). Minimum
Appendix B). and maximum weekly benefit provisions are
described in Appendix B. Cost-of-living
Temporary partial disability (TPD). A wage- adjustments are described in this appendix and
replacement benefit paid if the worker is Appendix B.
employed with earnings that are reduced
because of a work-related injury or illness. (The Vocational rehabilitation (VR) dispute. A
benefit is not payable for the first three calendar dispute over a vocational rehabilitation issue,
days of total or partial disability unless the such as whether the employee should be
disability lasts, continuously or intermittently, evaluated for VR eligibility, whether he or she is
for at least ten days.) The benefit is equal to two in fact eligible, whether certain VR plan
thirds of the difference between the worker’s provisions are appropriate, or whether the
gross pre-injury wage and his or her gross employee is cooperating with the plan.
current wage, subject to a maximum weekly
amount, and is paid at the same intervals as Vocational rehabilitation plan. A plan for
wages were paid before the injury. For injuries vocational rehabilitation services developed by a
on or after Oct. 1, 1992, TPD benefits are qualified rehabilitation consultant (QRC) in
limited to a total of 225 weeks and to the first consultation with the employee and the
36
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
employer and/or insurer. The plan is developed compensation insurer must purchase “excess of
after the QRC determines the injured worker to loss” reinsurance (reinsurance for losses above a
be eligible for rehabilitation services, and is filed specified limit per event) from the WCRA.
with the Department of Labor and Industry and Insurers may obtain other forms of reinsurance
provided to the affected parties. The plan (such as aggregate coverage for total losses
indicates the vocational goal, the services above a specified amount) through other means.
necessary to achieve the goal, and their expected
duration and cost. Workers’ Compensation Court of Appeals
(WCCA). An executive branch body that hears
Voluntary market. The workers’ compensation appeals of workers’ compensation decisions
insurance market associated with policies issued from the Office of Administrative Hearings.
voluntarily by insurers. Insurers may choose The next and final level of appeal is the
whether to insure a particular employer. See Minnesota Supreme Court.
Assigned Risk Plan.
Written premium. The entire “bottom-line”
Workers’ Compensation Reinsurance premium for insurance policies initiated in a
Association (WCRA). A nonprofit entity given year, regardless of when the premium
created by law to provide reinsurance to comes due and is paid. Written premium is
workers’ compensation insurers (including self- “bottom-line” in that it reflects all premium
insureds) in Minnesota. Every workers’ modifications in the pricing of the policies.
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Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Appendix B
Workers’ Compensation Law Changes
of 1992, 1995, and 2000
This appendix summarizes those components of TPD duration limit. TPD benefits were limited
the 1992, 1995, and 2000 workers’ to 225 weeks of total duration and to the first
compensation law changes relevant to this 450 weeks after the injury (with an exception for
report. Other components of the law changes, as approved retraining).
well as law changes from other years, are not
described. Supplementary benefit eligibility.
Supplementary benefit eligibility was limited to
1992 Law Change PTD beneficiaries. Previously, TTD
beneficiaries were also eligible. The law
Indemnity Benefits retained the provision that (for injuries on or
after Oct. 1, 1983) eligibility begins four years
The indemnity benefit changes in the 1992 law after the beginning of temporary total or
took effect for injuries on or after Oct. 1, 1992. permanent total disability.
The new permanent partial disability (PPD)
rating schedule, promulgated by the Department Cost-of-living adjustments. Cost-of-living
of Labor and Industry (DLI) after clarifications adjustments were limited to 4 percent per year
of statutory authority in the 1992 law, took and delayed until the second anniversary of the
effect for injuries on or after July 1, 1993. injury. Previously, adjustments were limited to
6 percent per year and began on the first
Temporary total disability (TTD) and anniversary of the injury. Cost-of-living
permanent total disability (PTD) minimum adjustments are further described in Appendix
benefit. The minimum weekly TTD and PTD A.
benefit became the lesser of 20 percent of the
statewide average weekly wage (SAWW) or the PPD rating schedule. The 1992 law clarified
employee’s pre-injury wage. Previously, the that PPD ratings must be based on objective
minimum was the lesser of 50 percent of the medical evidence, and further provided that (1)
SAWW or the pre-injury wage, but no less than the rating schedule must be reviewed
20 percent of the SAWW. periodically to determine whether any omitted
impairments should be included, and must be
TTD, temporary partial disability (TPD), and amended accordingly; (2) the schedule may
PTD maximum benefit. The maximum weekly contain zero ratings for minor impairments; and
TTD, TPD, and PTD benefit was increased from (3) an impairment must be rated exclusively
100 percent of the SAWW to 105 percent of the according to the categories in the schedule or, if
SAWW. it is not in the schedule, according to the most
similar condition in the schedule. DLI
Additional TPD weekly benefit limit. An promulgated a new permanent impairment rating
additional limit was placed on the weekly TPD schedule reflecting these provisions, effective
benefit, restricting it to no more than 500 percent for injuries on or after July 1, 1993. The
of the SAWW minus the employee’s weekly department devised the schedule with the intent
wage earned while receiving TPD benefits. of following a pre-existing statutory provision
that total PPD benefits should remain the same,
to the extent possible, as under the old schedule.
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Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
The old schedule had assigned ratings primarily injuries to the same worker, effective for
on the basis of diagnoses and surgeries subsequent injuries on or after July 1, 1992.
performed. The new schedule relies less on
these factors and more on objective findings of Insurance policy deductibles. The law required
functional impairment and clinical test results. all insurers, including the Assigned Risk Plan, to
Thus, some cases that would have received a offer deductibles in workers’ compensation
positive rating under the old schedule because of policies. Under deductible provisions,
a diagnosis or surgery do not receive such a employers directly bear costs up to the
rating under the new schedule if the condition deductible amount (through reimbursements to
has completely resolved with no remaining insurers) in exchange for a reduced premium.
functional impairment. The new schedule
contains more zero-rated categories than the old Fraud. The law required DLI to establish a unit
schedule, but also some positively rated to investigate fraudulent and other illegal
categories for impairments not in the old one. practices of health care providers, employers,
insurers, attorneys, employees, and others. It
Medical Services and Fees also stipulated that knowingly misrepresenting
or concealing information in order to receive
Maximum medical fees. The 1992 law froze workers’ compensation benefits to which a
maximum medical fees from October 1992 person is not entitled is theft punishable as a
through September 1993 at the previous year’s criminal offense.
level and provided for a relative-value fee
schedule for non-inpatient-hospital services with Safety committees. The law required all private
a 15 percent overall payment reduction. The and public employers with more than 25
new fee schedule took effect in December 1993. employees, and smaller employers in high-
Annual adjustments in the new schedule are hazard industries, to establish and use joint
based on growth in the SAWW (without the cap labor-management safety committees.
that applies to benefit adjustments), rather than Insurer safety consultation services. The law
on growth in medical charges as they had been required insurers to offer safety consultation
previously. services to their insured employers.
39
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
petition. Previously, claimant attorney fees were for higher ratings. The ERC benefit depended
limited to 25 percent of the first $4,000 and 20 on both the impairment rating and the pre-injury
percent of the next $27,500 of disputed benefits wage, and was substantially higher than the IC
awarded, not to exceed $6,500 except by benefit. If the employee received a “suitable
petition. The 1992 law change also introduced a job” offer, they received the IC benefit, paid in a
limit on defense attorney costs of $13,000 per lump-sum if they accepted the offer or in the
claim, with exceptions by petition. same weekly amounts and intervals as TTD if
they did not. If the employee did not receive a
Mandated 16 percent rate reduction. The law “suitable job” offer, they received the ERC
prohibited insurers from increasing their filed benefit, paid in the same weekly amounts and
rates from April 1 through Oct. 1, 1992, intervals as TTD. The 1995 law eliminated ERC
mandated a 16 percent filed rate reduction and provided for all PPD benefits to be
effective Oct. 1, 1992, and prohibited filed rate determined under the previous impairment
increases from that date until April 1, 1993, at compensation schedule, which has been fixed
which time insurers were again free to file rate since 1984, and to be paid in the same weekly
increases. amounts and intervals as TTD.
40
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
13
Irwin v. Surdyk’s Liquor, 599 N.W.2d 132 (Minn.
1999), Sept. 2, 1999.
14
Tucker v. Plymouth Plumbing, 60 W.C.D. 160 (May
25, 2000).
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Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
Appendix C
Data Sources and Estimation Procedures
This appendix describes data sources and to the next) in the statistic in question. The
estimation procedures for those figures where result is a series of statistics developed to a
additional detail is needed. Two general constant maturity, e.g. to a “fifth-report” or
procedures are used throughout the report — (1) “eighth-report” basis. The developed insurance
“development” of statistics to incorporate the statistics in this report are computed by the DLI
effects of claim maturation beyond the most Research and Statistics Unit using tabulated
current data and (2) adjustment of benefit and numbers and associated development factors
cost data for wage growth to achieve from the MWCIA.
comparability over time. After a description of
these procedures, additional detail for individual Research and Statistics has adapted this
figures is provided. See Appendix A for technique to DLI data. It tabulates statistics at
definitions of terms. regular intervals from the DLI database,
computes development factors representing
Developed statistics. Many statistics in this historical development for given injury years,
report are by accident year or policy year and then derives developed statistics by applying
(insurance data) or by injury year (Department the development factors to the most recent
of Labor and Industry [DLI] data) (see Appendix tabulated statistics. In this manner, the annual
A for definitions). For any given accident, numbers in any given time series are developed
policy, or injury year, these statistics grow, or to a constant maturity, e.g. a 17-year maturity
“develop,” over time because of claim for the claim and cost statistics in Chapters 2 and
maturation and reporting lags. This affects a 3 since the DLI database extends back to injury
range of statistics including claims, costs, year 1983 for claim and cost data. An example:
dispute rates, attorney fees, and others. In Figure 2.1, the developed number of
Statistics from the DLI database develop indemnity claims for injury year 2000 is 34,600
constantly as the data are updated from insurer (rounded to the nearest hundred). This is equal
reports received daily. With the insurance data, to the tabulated number as of Oct. 1, 2001,
insurers submit annual reports to the Minnesota 31,409, times the appropriate development
Workers’ Compensation Insurers Association factor, 1.1007.
(MWCIA) giving updates on prior accident and
policy years along with initial data on the most All developed statistics are estimates, and are
recent year. If the DLI and insurance statistics therefore revised each year in light of the most
were reported without adjustment, time series current data.
data would give invalid comparisons because the
statistics would be progressively less mature Adjustment of cost data for wage growth.
from one year to the next. Several figures present costs over time. As
wages grow, a given cost represents a
The MWCIA uses a standard insurance industry progressively smaller burden from one year to
technique to produce “developed statistics.” In the next by comparison to the cost of labor.
this technique, the reported numbers are adjusted Except for costs expressed relative to payroll, all
to reflect expected development between the costs are adjusted for wage growth to
current report and future reports. The standardize the costs over time. The number for
adjustment uses “development factors” derived each year is multiplied by the ratio of the 2000
from historical rates of growth (from one report statewide average weekly wage (SAWW) to the
42
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
SAWW for that year, using the SAWW through policy year (PY) 1999 is from the
reflecting wages paid during the respective year. MWCIA. The 2000 figure is estimated using the
Thus, the numbers for all years represent costs ratio of premium credits to written premium for
expressed in 2000 wage dollars. 1999 (applying this to the 2000 premium figure).
When the actual amount becomes available for
Figure 2.1. The developed number of paid 2000, that year’s total cost figure will be revised.
indemnity claims for each year is calculated
from the DLI database. The annual number of For self-insured employers, the primary
medical-only claims is estimated by applying the component of estimated total cost is pure
ratio of medical-only to indemnity claims for premium from the Minnesota Workers’
insured employers to the total number of Compensation Reinsurance Association
indemnity claims. (The ratio is unavailable for (WCRA). A second component is
self-insured employers.) The MWCIA, through administrative cost, estimated as 10 percent of
special tabulations, provides this ratio by injury pure premium. The final component is the total
year for compatibility with the injury year assessment paid to the Special Compensation
indemnity claims numbers. The ratio of Fund (SCF), net of the portion used to pay
medical-only to indemnity claims was not yet claims from defaulted self-insureds, since this is
available for 2000, and so the medical-only and already reflected in pure premium.
total paid claims numbers could not be estimated
for that year. Total workers’ compensation covered payroll is
computed as the sum of insured payroll, from
The number of full-time-equivalent (FTE) the MWCIA (annual Ratemaking Reports
workers covered by workers’ compensation is through PY 1998, unpublished data for PY
estimated as total nonfederal Unemployment 1999), and self-insured payroll, from the
Insurance (UI) covered employment from the WCRA. Insured payroll was not yet available
Department of Economic Security (DES) times for 2000, and self-insured payroll is not
average annual hours per employee (from the available for 1980-1989. These figures were
annual survey of occupational injuries and estimated by extrapolating from actual figures
illnesses, conducted jointly by the U.S. Bureau using the trend in nonfederal UI-covered payroll
of Labor Statistics and state labor departments) (from DES) and the trend in the relative insured
divided by 2,000 (annual hours per full-time and self-insured shares of total pure premium
worker). Nonfederal UI-covered employment is (from the WCRA).
used because there are no data on workers’
compensation-covered employment. Figure 2.3. Paid indemnity claims are from the
DLI database. The percentages are taken from
Figure 2.2. For insured employers, total cost is undeveloped claim counts. Using undeveloped
computed as written premium adjusted for rather than developed claim counts has little
deductible credits, minus paid policy dividends. effect on the percentages, because the number of
Written premium and paid dividends for the indemnity claims develops at nearly the same
voluntary market are obtained from the rate for the different insurance arrangements.
Department of Commerce. Written premium for
the Assigned Risk Plan (ARP) is obtained from Figures 2.5 and 2.6. Following the procedure
the Park Glen National Insurance Company, the in the MWCIA’s Ratemaking Report, Figures
Plan Administrator. (There are no policy 2.5 and 2.6 are based on paid losses since these
dividends in the ARP.) are more stable than incurred losses, which
include paid losses plus reserves. The data are
Written premium is adjusted upward by the from financial reports to the MWCIA by
amount of premium credits granted with respect voluntary market insurers only.
to policy deductibles, in order to reflect that
portion of cost for insured employers that falls Paid losses are developed to a uniform maturity
below deductible limits. Premium credit data of eight years (an “eighth-report basis”) using
43
Minnesota Department of Labor and Industry Workers’ Compensation System Report—2000
the selected development factors in the 2002 Figure 4.1. The data in this figure are by injury
Ratemaking Report, and then converted to an year, and consequently develop over time.
incurred basis using the selected ratios of paid to However, DLI has not yet produced developed
15
incurred losses at eighth report, from the versions of these statistics. The numerator and
Ratemaking Reports of different years. The denominator in the percentages in this figure are
resulting figures thus represent incurred losses at the number of claims with plans filed to date and
eighth report. the number of paid indemnity claims identified
to date, respectively. For more recent injury
Payroll data for Figure 2.5 are from insurer years, both numerator and denominator are
reports on policy experience. progressively less mature so that the errors tend
to offset each other in the overall percentage.
Figure 2.7. The “insurance data” in this figure However, the more recent injury years must still
are from Figure 2.5. For the “DLI data,” be regarded as preliminary.
developed DLI indemnity cost data are
combined with the same payroll data used with Figure 5.1. As indicated in this figure, the 2000
total system cost (Figure 2.2), described above. data are not presented because they are not yet
This payroll figure includes self-insured sufficiently reliable. This determination was
employers and the ARP along with the voluntary made by examining the stability of developed
market for compatibility with the DLI indemnity statistics for injury years prior to 2000. If a
cost data. developed statistic for a given injury year
changes only slightly from one tabulation (and
Figures 2.8 and 3.1. Figures 2.8 and 3.1 use projection) to the next, this stability indicates
claim and loss data from the MWCIA’s 2002 that developed statistics for recent injury years
Minnesota Ratemaking Report. These data are sufficiently reliable to be used. There was
come from insurance company reports on policy not enough stability in the developed dispute
experience (claims and losses) for the voluntary incidence rates to deem the 2000 numbers
market and the ARP. Data are developed to a reliable enough for publication.
fifth-report basis using the development factors
in the Ratemaking Report, and then adjusted for Figure 5.10. Insurers submit an annual report to
wage growth. DLI indicating total defense attorney costs paid
during the year. For the percentage in the figure,
Figure 3.1 presents data by claim type. For these costs are compared to total indemnity
permanent total disability (PTD) and death benefits paid during the year, compiled by DLI
cases, the number of claims and their average primarily from insurer reports to the SCF.
cost (at any given maturity) fluctuate widely
from one policy year to the next because of
small numbers of cases. Therefore, in order to
produce more meaningful comparisons among
claim types, the data on PTD and death claims
were averaged over policy years 1990-1996.
1997 and 1998 were excluded in order to avoid
the relatively large variability in development
for these claim types between first and third
report.
15
Doing so may be difficult, in that recent declines in the
time from injury to start of services (Figure 4.3) suggest that
historical rates of development in the percentage of claims with
vocational rehabilitation plans may not well predict future
development for recent claims.
44