Permanent Total Disabilities in the Oregon Workers' Compensation System, 1995

In 1995, the Oregon workers' compensation system produced 63 decisions on Permanent Total Disability (PTD) benefits, an increase of two from the previous year. There were 14 affirmations of previous decisions granting benefits, 17 rescissions of benefits, and 32 grants, for a net total of 15 claims awarded PTD benefits in 1995.

Declining PTD grants

The figure of 15 net PTD awards in 1995 is the second lowest on record. The large drop since 1988 in net PTD awards is primarily the result of the declining number of PTD grants, as there has been no sustained increase in the number of benefit rescissions. In 1988, PTD grants totaled 73 at the Evaluation Unit of the Workers' Compensation Division and 127 at the Hearings Division of the Workers' Compensation Board, compared to 1995 figures of 15 and 13, respectively.

Changes to statute and administrative rules have had an effect on PTD grants. The 1987 reforms (House Bill 2900) mandated use, at all levels, of standards for evaluating permanent disabilities. New administrative rules on evaluating disability (OAR 436 chapters 30 and 35), implemented during 1988, provided a more uniform process for claim determination. A later amendment, effective in late 1990, codified case law that had strictly interpreted the statutory mandate that a potential PTD claimant seek regular and gainful employment. Claimants seeking PTD because they are unable to "perform work at a gainful and suitable occupation" must obtain testimony from a certified vocational counselor (see excerpts from Oregon Administrative Rules).

Changes in claims handling are another likely factor behind the decrease in PTD grants. The SAIF Corporation, for example, created a "Critical Claims Unit" focused on management of claims for severe injuries. Medical treatment and rehabilitation may have become more effective in promoting employability and return to work, and there may be more emphasis on those goals due to increased regulation of medical care by the department and to raised ceilings on worksite modification costs and obtained employment purchases.

Perhaps most significant in sustaining the trend of fewer PTD grants has been the claims disposition agreement (CDA, also known as compromise and release settlement), legalized by Senate Bill 1197 in 1990. In a CDA settlement, a worker typically gives up the right to future benefits, except medical services, in exchange for a lump-sum settlement. The nearly 15,000 agreements approved by the Workers' Compensation Board through fiscal year 1995 certainly include cases that would have been awarded PTD at some level of the system. For example, of the 66 PTD awards rescinded since 1991, 26 had been settled in full (as of July 1996) via a CDA. One implication for grant counts is that 26 claimants will not attempt to obtain reinstatement of their PTD awards. Note, however, that this report does not count a CDA as a rescission of a PTD award.

In sum, there is no single explanation for the decline in PTD grants. Factors having a broad impact upon the workers' compensation system, such as changes in Oregon's economy, shifts in the industrial mix away from more hazardous forms of employment, and increased emphasis upon workplace safety and health, may have reduced injury severity, as well as incidence.

Costs

Reports by carriers of their net costs (average cost of grants multiplied by number of net grants) for 1995 PTD cases totaled about $11.9 million, compared to $19.0 million in 1994 and about $64.9 million in 1988. These figures represent paid costs for all indemnity awards, medical care, and rehabilitation; plus reserves set aside for future expenses; minus anticipated relief from the Handicapped Workers Reserve and reimbursements for Preferred Workers.

Following are costs and other claim characteristics for grants awarded in 1995, with comparisons made to 1994 and 1988 grant cases.

The table above displays average incurred costs for PTD grants only, rather than net PTD awards. Average incurred costs have increased 139 percent since 1988. Although indemnity accounted for over two-thirds of average incurred costs in 1988, medical costs have increased both in absolute terms and relative to indemnity. Data reported for 1995 grants again show medical costs at almost two-thirds of average incurred costs. Some reasons for this recent prominence include the increasing cost of medical care within the system in general, and the possibility that claims granted PTD represent injuries more severe than in the past, as well as the relative stagnation in incurred indemnity.

The incurred costs for the PTD award comprise a large portion of incurred indemnity, which may also include temporary and permanent partial disability, and rehabilitation. Factors influencing trends in PTD indemnity costs include the benefit schedule in effect for the date of injury and the worker's weekly wage and life expectancy. For all 1995 grants, PTD indemnity benefits were calculated at two-thirds of the injured worker's wage up to a maximum benefit limitation equal to the statewide average weekly wage in effect at the time of the injury (plus allowances for dependents, minus offset for Social Security benefits). On the average, workers granted PTD benefits in 1995 were earning 109.5 percent of the statewide average weekly wage used in calculating benefits, while the comparable figure for 1994 grants was 112.6 percent. Wage data also show that 80.6 percent of 1995 grants received less than the benefit maximum, compared to 80.0 percent of 1994 grants and 74.9 percent of 1988 grants.

The relative stagnation in average incurred indemnity has occurred despite benefit maximums that have increased annually, and indications of more expense from the factor of life expectancy as measured by the declining average age at the time of injury. The average age of claimants at the date of injury has been in the 45-to-46-year range since 1992, compared to about 49 years for 1988 grants.

Insurers

In 1995, SAIF was the insurer in 43.8 percent of the PTD grants, compared to 58.3 percent the previous year. Private carriers covered 37.5 percent and self-insurers, 18.8 percent. No claimants worked for employers with assigned-risk coverage. In 1988, SAIF carried 61.1 percent of PTD grant cases.

For 1994 and 1995 grants, the average lag from date of injury to date of order granting PTD benefits was 6.5 years, compared to the 1988 figure of 5.5 years.

Body part

In 1995, PTD grants involved injuries to the back in 22 percent of the cases. In 1994, the back was the injured body part in 25 percent of the cases, while in 1988, the back was involved in 57 percent of grants. Over the last ten years, back injuries as a percentage of all accepted disabling claims reached a peak (31 percent) in 1986, declining thereafter until reaching figures currently in the range of 27 to 29 percent. The change in back injuries as a percentage of all accepted disabling claims does not, by itself, explain the steep drop in back injuries leading to PTD awards.

Other claims characteristics

The small number of grant cases in recent years warrants caution in identifying trends in other claims characteristics. In 1995, manufacturing led all other industries with 12 PTD grants, but no occupational group stood out from the others.

For 1995 grants, the worker had been with the employer an average of just over five years when the injury or illness occurred, similar to figures for 1994 and 1988 cases. As in previous years, the vast majority (81.3 percent) of 1995 PTD claimants were men.

For grants since 1991, injuries to muscles and tendons (includes sprains and strains) have been the most prominent nature of injury, accounting for 34 percent of cases. The event most often resulting in a PTD grant has been a fall, at 25 percent of cases. Structures and surfaces have been the most frequent source of PTD, at 23 percent.

Excerpts from Oregon Administrative Rules on Permanent Total Disability, Effective 1/1/95 (436-30-055)

Determining Permanent Total Disability

(1) A worker is permanently and totally disabled if permanently incapacitated from regularly performing work in a suitable and gainful occupation. For the purpose of this rule:

(a) "Incapacitated" from regularly performing work means that the worker does not have the necessary physical and mental capacity and the work skills to perform work.

(b) "Suitable occupation" means those occupations that exist in a theoretically normal labor market, within a reasonable geographic distance, for which a worker has the training or experience, and abilities to realistically perform the job duties, with or without rehabilitation.

(c) "Gainful occupation" is defined as: those types of general occupations that are either full time or part time in duration and pay wages equivalent to, or greater than the state and federal mandated minimum hourly wage. Those types of general occupations that pay on a commission or piece-work basis, as opposed to a wage or salary basis, may not be "gainful employment" depending upon the facts of the individual situation.

(d) "Work skills" as used in this rule means those skills acquired through experience or training that are necessary to gain and adequately perform skilled, semi-skilled or unskilled occupations. Unskilled types of general occupations require no specific skills that would be acquired through experience or training to be able to gain and adequately perform unskilled occupation. Every worker has the necessary work skills to gain and adequately perform unskilled types of general occupations with a reasonable period of orientation.

(e) A "reasonable geographic distance" as used in this rule means either of the following unless the worker is medically precluded from commuting:

(1) The area within a 60-mile radius of claimant's place of residence at the time of: (i) the original injury; or (ii) claimant's last gainful employment; or (iii) determination by the department; or (iv) reconsideration by the Appellate Unit.

(2) The area in which a reasonable and prudent uninjured and unemployed person, possessing the same physical capacities, mental capacities, work skills and financial obligations as claimant does at the time of his rating of disability, would go to seek work.
(f) "Types of general occupations" as used in this rule means: groups of jobs which exist in a theoretically normal labor market, and share similar vocational purpose, skills, duties, physical circumstances, goals, and mental aptitudes. It does not refer to any specific job or place of employment for which a job or job opening currently exists.

(g) "Theoretically normal labor market" as used in OAR 436-30-055 and 065 means a labor market that is undistorted by such factors as local business booms and slumps or extremes of the normal cycle of economic activity or technology trends in the long-term labor market.

(2) Disability which existed before the injury shall be included in determining permanent total disability.

(3) In order for a worker to be determined permanently and totally disabled, a worker must:

(a) Prove permanent and total disability;

(b) Make reasonable effort to find work at a suitable and gainful occupation or actively participate in a vocational assistance program, unless medical or vocational findings, including the residuals of the compensable injury, make such efforts futile; and

(c) Be willing to seek regular and gainful employment.

(4) When a worker retains some residual functional capacity and is not medically permanently and totally disabled, the worker must prove inability to regularly perform work at a gainful and suitable occupation, and the futility of seeking work if claimant has not made reasonable work search efforts, by competent vocational testimony. Competent vocational testimony is that which comes from the opinions of persons fully certified by the State of Oregon to render vocational services. It does not include opinions by claimants or physicians not certified.

(5) Every Determination Order which grants permanent total disability shall notify the worker that:

(a) The claim shall be reexamined by the insurer at least once every two years, and may be reviewed more often if the insurer chooses.

(b) The insurer may require the worker to provide a sworn statement of the worker's gross annual income for the preceding year. The worker shall make the statement on a form provided by the insurer in accordance with therequirements under section (6) of this rule.

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This document was originally published in August 1996.
Document URL: http://www.cbs.state.or.us/external/imd/rasums/ptd95.htm

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