CUT COSTS BY MANAGING DOUBLE DIPPING

In California, workers' compensation benefits replace two-thirds of a totally disabled worker's pretax earnings, subject to a maximum. This gap gives employees incentive to return to full-time, productive work.

Why Is Double-Dipping a Problem?

When a worker receives other benefits due to his or her disability (called double dipping), total benefits can approach or even exceed pre-disability earnings. This gives little incentive to return to full-time, productive work. Keep in mind that employees receive workers' compensation benefits tax-free, and they also save on commuting and other work-related costs.

What Employers Should Look for

To prevent possible overinsurance of an injured worker, employers should look at the following coverages:

Sick leave: Take a look at the structure of your sick leave program. Many employers allow employees to use sick leave, vacation leave and personal leave to supplement their workers' compensation benefits. You'll want to ensure these plan documents contain wording that prohibit a worker who is claiming workers' compensation benefits from receiving more than his or her pre-disability pay.

State disability: California law limits state disability benefits to workers who have non-occupational injuries, so workers cannot receive benefits under both programs. If you have workers in other states, check the wording of your short-term disability coverage.

Long-term disability policies: The typical disability policy pays 60 percent of the employee's pre-disability wages, subject to a maximum. If your organization offers group disability income benefits, make sure your plan includes a coordination of benefits provision, which will reduce the amount of workers' compensation benefits received by amounts a disabled worker receives from other sources for his or her injuries. Most (but not all) individual disability policies also contain coordination of benefits provisions. Most also discourage malingering by requiring an insured to accept "any gainful employment" he or she is "reasonably suited to" by education and experience after a certain period, such as two years.

Social Security disability insurance (SSDI): Totally and permanently disabled workers can receive benefits under both SSDI and workers' compensation, but Social Security will reduce the amount of any benefits paid by amounts received from workers' compensation. The combined total of workers' compensation and SSDI benefits cannot exceed 80 percent of the worker's average current earnings.

Unemployment benefits: Each state has different criteria to determine eligibility for unemployment benefits. California requires a worker to be physically able to work to receive unemployment insurance benefits, which would typically prevent a disabled worker from receiving both unemployment and workers' compensation.

Auto insurance: Personal auto policies often contain personal injury protection (PIP), or no-fault coverage. PIP pays the insured's medical bills, loss of income and other costs related to an auto accident, regardless of who is at fault. Many policies exclude coverage while driving an employer's vehicle or for work purposes.

Other Sources of Income for Injured Workers

Lawsuits: Workers' compensation law does not allow workers to sue their employers for workplace injuries. However, they can sue a third party (someone besides the employer or a co-worker) who causes or contributes to their injury – for example, the manufacturer of a defective piece of equipment that causes injury.

When an employee collects tort damages or other settlements in addition to workers' compensation payments, the employer or its insurer has the right to "subrogate," or claim a credit against any settlement or recovery received. Subrogation prevents an injured worker from collecting for the same injury twice; it also helps lower workers' compensation costs.

Other employment: We've all heard the stories of employees collecting workers' compensation disability benefits who get caught working under the table in physically demanding jobs. This sort of behavior goes beyond double dipping and constitutes fraud. If you suspect workers' compensation fraud, contact your insurer's fraud department.

We can help design benefits under workers' compensation and other benefits to encourage, rather than discourage, injured employees to return to work. For more information, please contact the PCOC Insurance Program department of The Leavitt Group at (877) 860-7378 or, email us at ProPest@Leavitt.com.

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