NCCI: Indemnity Benefits Are Keeping Up with Wage Growth

03 Dec, 2019 Nancy Grover


Boca Raton, FL ( – Benefits paid to injured workers are, by and large, keeping up with — or exceeding — wage growth, according to a new report from NCCI “This paper demonstrates that since 2000, indemnity benefits on a wage-adjusted basis have indeed kept pace with wage growth across all indemnity injury types in most NCCI states,” the authors conclude.

While the findings may seem to conflict with other recently published reports, NCCI says it has to do with the rates of injuries.

“These indices are likely being driven by frequency decreases, which have accumulated to about -50% between 2000 and 2018. Since there are fewer workplace injuries today, there are less benefits being paid per dollar of payroll,” the report says. “In contrast, the indices presented in this paper reflect average indemnity benefits based on the compensation structure in a state and are not impacted by changes in claim frequency.”

Increases in an injured worker’s average weekly wage generally translate to higher benefits paid for new injuries that occur in later years, the authors say. Their focus is on benefit indices that filter out all wage-related changes.

Two types of indices are used in the report:

1.    Nominal changes, or “the natural changes,” which are typically increases in average wages in a state over time. Using this as a basis, “benefits by state and injury type have increased significantly since 2000, nearly doubling in many cases,” the report notes. 

2.    Wage-adjusted benefit changes that exclude nominal changes and instead “account for the dampening impact of fixed-dollar benefits or maximum benefits,” the authors explain, such as when a state’s maximum weekly benefit does not concur with the AWW.

An example of WABC is the situation in Alabama, where the maximum weekly benefit for permanent partial disability has been capped at $220 since before 2000. “This means that workers who are hitting that maximum are losing ground each year in terms of wage-adjusted benefits. A meaningful index of benefits must account for this,” the report says. However, temporary total disability and permanent total disability benefits are indexed to the state AWW but not subject to the $220 limit. “Thus, TTD and PTD benefits have risen with increases to the SAWW, while the $220 cap on PPD benefits has not changed in about three decades … In a situation like this, we can calculate the impact of the fixed cap by using a countywide distribution of workers and their wages, indexed to the state’s average injured workers’ weekly wage.”

Looking at WABC provides better insight into what the injured worker is truly experiencing after reflecting the effect of wage growth, the authors say.

WABC may include legislative changes, such as

  • Number of weeks of benefits awarded for particular injuries
  • Percentage rates of compensation
  • Maximum and minimum weekly benefits

Court decisions also can impact compensation. The report notes that a case in Kentucky invalidated certain conditions for the termination of benefits and resulted in loss costs increasing by 5.6 percent.

The report looks at the cumulative impact of WABC from January 2000 through 2018 on PPD and TTD benefits. “…when WC benefits are adjusted for wage increases, workers have typically realized slightly increased benefits or no change,” the report says. “WABC PPD changes are constant or positive in 71% of NCCI states for the period 2000–2018; for TTD, 82% of the changes are constant or positive. This means that indemnity benefits on a wage-adjusted basis have indeed kept pace with wage growth in most NCCI states.”

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    About The Author

    • Nancy Grover

      Nancy Grover is a freelance writer having recently retired as the Director, Media Services for She comes to our company with more than 35 years as a broadcast journalist and communications consultant. Grover’s specialties include insurance, workers’ compensation, financial services, substance abuse, healthcare and disability. For 12 years she served as the Program Chair of the National Workers’ Compensation and Disability Conference® & Expo. A journalism/speech graduate of Ohio Wesleyan University, Grover also holds an MBA from Palm Beach Atlantic University.

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