In the early 2000s, California workers’ compensation insurance premiums were skyrocketing and the system was in crisis. Plagued by high costs and inefficiency, this prompted a sweeping reform bill in April 2004 that, among other things, dramatically changed the way individuals with permanent partial disability (PPD) claims were compensated. In particular, the 2004 reform bill (California Senate Bill 899, 2004) required disability ratings to be based on the fifth edition of the American Medical Association’sGuides to the Evaluation of Permanent Impairment(Cocchiarella and Andersson, 2001). The AMA Guides are measures of functional impairment based on “objective” clinical evidence, and...

SB 863 (2012) introduced a number of provisions that were designed to increase benefits for injured workers, including an increase in the amount of wages that can be considered for benefits, and fixing the variable earnings component at a higher rate. Still, there was concern that some workers were not being adequately compensated by the PD benefit because they had earnings losses that deviated significantly from what was expected. To address this potential inequity, the bill also created a new program to provide additional payments to workers whose losses exceed what would have been expected given the nature of their...

There are two key empirical items that we address in this report to offer some preliminary estimates of potential program eligibility and cost. The goal of the program, as described by statute, is to provide supplemental payments to workers whose PD benefits are disproportionately low in comparison to their earnings loss. That means that to determine eligibility, there needs to be some empirical estimate of expected losses that are contemplated by the PD award, and some determination of what exceeds the expected amount by a sufficient level to merit a supplemental payment. Additionally, the statute provides a set budget that...

With this report, we have outlined one potential method of identifying workers whose PD benefits are disproportionately low in comparison to their earnings loss We have proposed to define those workers as workers whose earnings losses are disproportionately high relative to what would be expected based on their disability ratings. In particular, we focused on workers who are not observed working for their at-injury employer and who experience greater-than-average losses given a disability rating. Using a series of assumptions, we attempt to forecast the number of workers eligible for the benefit and the average dollar amount each worker could receive...