IOWA WORKERS’ COMP SYSTEM CHARACTERIZED BY HIGH BENEFIT LEVELS, STABLE COSTS; BUT NEW WCRI STUDY FOUND OPPORTUNITIES FOR IMPROVEMENT

CAMBRIDGE, MA, May 11, 2004 – Higher maximum weekly benefit levels for injured workers and stable costs for employers have set Iowa’s workers’ compensation system apart from other states. However, the Iowa system was not without areas for improvement, according to a new study by the Workers Compensation Research Institute (WCRI).

The study, which is the 34^th in a series of Administrative Inventories of state workers’ compensation systems published by WCRI, reported that Iowa’s maximum weekly benefit levels were higher and more equitable than in most other states.

Iowa paid weekly temporary total disability (TTD) and permanent partial disability (PPD) benefits based on 80 percent of the worker’s spendable, or after-tax, weekly earnings at the time of injury, with a weekly maximum of 200 percent of the statewide average weekly wage. The maximum weekly TTD benefit was the highest in the country as of January 1, 2003, and the maximum weekly PPD benefit was the third highest.

Compared with the typical method of paying TTD benefits – basing benefits on two-thirds of the worker’s pretax earnings, with a weekly maximum of 100 percent of the statewide average weekly wage – Iowa’s approach had three notable advantages.

First, benefits were more equitable because all workers receive benefits that replace the same proportion (80 percent) of after-tax earnings losses. Second, increases in the maximum weekly benefit could be accomplished at lower costs to employers, making higher maximums more likely. Third, maximum benefits could be increased with less concern about creating disincentives to return to work.

Still, the report identified Iowa’s relatively long formal-hearing delays as an area that could be improved in its system.

WCRI reports that after requesting a formal hearing with the Division of Workers’ Compensation, parties had to wait an average of 20.4 months for a hearing decision by a deputy commissioner, among cases closed in fiscal year 2003. This interval was much longer than in other states that have been the subject of WCRI Administrative Inventory studies in the past ten years.

Analysis of division data showed that the interval ranged from 18.4 months in Des Moines (where all deputy commissioners were based and hearings were scheduled most days) to 24.8 months in Storm Lake (where deputies were scheduled to visit six times in 2003). According to WCRI, the delays were primarily due to delays by both sides in preparing for hearings, coupled with infrequent trips by deputy commissioners to outlying venues.

The study also noted that Iowa’s relatively small workers’ compensation agency affected the functioning of the Iowa system in several ways.

First, delays in the formal dispute resolution system were common in areas outside division headquarters. Second, the use of division-offered mediation decreased from a high of 1,099 sessions held in fiscal year 2000 to 173 sessions in fiscal year 2003. Third, current staffing hindered monitoring the claims-handling performance of insurers and self-insurers and assessing penalties for late reporting and payment. Fourth, the division could not adequately enforce the requirements for proof of insurance coverage. Finally, staff limitations did not permit tracking measures of system performance, such as trends in benefit costs, and conducting detailed analyses of dispute resolution delays.  

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on worker’s compensation, healthcare and disability issues.  Its members include employers, insurers, insurance regulators and state regulatory agencies in the U.S., Canada, Australia and New Zealand as well as several state labor organizations.