What are permanent disability benefits?
Workers’ comp insurance can help provide financial support to employees who get hurt on the job. Most of the time, injured employees recover and return to work.
However, some workers experience long-term health issues that affect their ability to continue to do their job, resulting in a permanent disability.
Permanent disability benefits are a financial subsidy that’s a part of workers’ compensation coverage. And they can help employees who suffer lasting effects from work-related injuries continue to receive a source of income. These disability payments help compensate for lost earning ability caused by the injury.
Unlike temporary disability benefits, which stop once an employee recovers, permanent disability benefits continue if the worker has long-term or lifelong limitations.
There are two main types of permanent disability benefits:
- Permanent partial disability (PPD) benefits are when an employee can still work but has permanent limitations. For example, if an employee injures their hand and can no longer perform tasks requiring fine motor skills, they may receive PPD benefits.**
- Permanent total disability (PTD) benefits kick in when an employee cannot work at all due to a job-related injury or illness. For example, a worker who becomes paralyzed due to a severe workplace accident may qualify for PTD benefits.
How do employees qualify for permanent disability benefits?
To qualify for permanent disability benefits a worker’s injury or illness must be stabilized and healed to its fullest extent. Their medical diagnosis is that no further medical treatment will significantly improve their condition. This is known as Maximum Medical Improvement (MMI).
A doctor will determine if a worker has reached MMI by evaluating their medical condition and assigning a disability rating. Ratings are often expressed as a percentage:
- A 100% rating is considered a total disability.
- Ratings below 100% are a partial disability.
This rating helps determine the likelihood and amount of disability compensation payments.
For example, a worker with a 20% disability rating may receive lower payments than someone with a 75% rating because their ability to work is less affected.
Medical evaluators may look at patient factors such as:
- Employee occupation
- Patient age
- Date of injury
- How much the work event impacted the disability
- Future earnings capacity
Each state has its own rubric to determine a disability rating. And the amount and frequency of financial benefits for both total disabilities and partial disabilities are also determined state by state.
How are permanent disability benefits calculated and paid?
Permanent disability benefits vary by state, but the dollar amount of a payout is usually based on:
- A percentage of the worker’s pre-injury average weekly wages.
- The disability rating assigned by the treating physician.
- State laws that set minimum and maximum disability award amounts.
Some states cap weekly permanent disability benefits at a specific amount for a specific time period. Others may allow payments to continue for life in cases of total disability.
Workers who qualify for benefits usually receive weekly payments. However, depending on state regulations, they may choose or need to take a one-time settlement payment instead of ongoing benefits.
Lump sums can be beneficial for business owners and employees because they can help resolve a workers’ comp claim quickly. However, some considerations should be discussed with your insurance provider, including:
- The finality of settlement. Once a lump sum is accepted, the worker can’t request additional benefits later, even if their medical condition gets worse.
- Medicare and SSDI eligibility: Some settlements may affect a worker’s eligibility for Medicare or Social Security Disability Insurance (SSDI).
- Payment approval: Some states require court or a workers’ comp board approval for settlements to ensure compliance with regulations.
What about vocational rehabilitation?
If an injured worker cannot return to their previous job, some states offer vocational rehabilitation programs covered by your workers’ comp policy. These programs help employees retrain for new roles or learn new skills so they can find new opportunities to re-enter the workforce.
Workers’ comp coverage can help pay for these programs and other job-related expenses, including:
- Tuition and educational expenses
- Apprenticeship training
- Resume and job placement assistance
- Workplace modifications (such as ergonomic chairs or text-reading software)
5 ways business owners can support employees on permanent disability
As the business owner, you play a key role in managing workplace injuries and reducing the risk of permanent disability claims.
Here are five things you can do to support your employees and make the most of your workers’ compensation coverage:
1. Prevent long-term Workers’ Compensation claims
Workplace safety matters. Put safety policies into place and enforce them. Run employee training programs to help reduce the risk of severe injuries.
Even if you don’t work in an industry where injuries are common, you can still help prevent slips and falls by keeping workspaces clean, organized, well-lit and free of fire risks.
You can also encourage early reporting of work-related injuries and illnesses. Addressing these conditions quickly can prevent minor injuries from becoming major health issues.
2. Manage your claims efficiently
If you do file a claim, stay in communication with your insurance provider. It can help resolve claims faster and ensure that benefits are calculated correctly.
You’ll also want to keep in contact with your injured worker. This can ease the transition and support return-to-work efforts.
3. Learn how permanent disabilities affect costs
Permanent disability claims may affect the cost of your insurance premiums. Severe and costly claims can increase your workers’ compensation insurance rates.
If your employee is able to work in some capacity, you can modify their work duties to help them return to work sooner. This can help to reduce claim costs.
4. Know the laws around Workers’ Comp benefits in your state
Each state has different regulations on permanent disability benefits — how it’s determined and how much a worker can receive. Learn your state’s workers’ compensation laws to help ensure compliance.
If you need more information, check with your state’s workers’ compensation program officials. , And consult with your insurance carrier or agent or seek legal advice to ensure your business is well-prepared.
5. Learn how permanent disability benefits coincide with other benefits
Sometimes permanent disability benefits can overlap with other programs, such as private insurance, state aid or federal programming. In some cases, workers’ compensation payments may be reduced if the employee receives other benefits.
Some programs that could affect your permanent disability compensation include:
- Social Security Disability Insurance (SSDI)
- Unemployment benefits
- Long-term disability insurance (private insurance)
- Medicare and Medicaid
- Veterans’ benefits
Understanding these interactions can help you plan and avoid unexpected repayments.
