On June 20, 2017, the Supreme Court of Pennsylvania found that the use of an impairment rating exam (IRE) is unconstitutional and will no longer allow workers’ compensation carriers to use this tool to determine the disability of an injured worker.
History of the Impairment Rating Exam
An IRE was initially implemented in 1996 as a response to Act 57 of the rewriting of the Pennsylvania Workers’ Compensation Act. An IRE allowed a workers’ compensation insurance carrier to be in control of a claim and determine the disability of the injured employee. An insurance adjuster would request an IRE after 104 weeks (2 years) of indemnity payments had been made to the injured worker. The Workers’ Compensation Bureau would then assign the claim to a designated doctor for the exam.
The doctor would make a permanency determination by reviewing all medical reports, examining the injured worker, and following the American Medical Associations Guide to the Evaluation of Permanent Impairment. Indemnity benefits could not be limited If the doctor determined that the injured employee’s disability rating was over 50 percent of the whole body, however, the employee could be required to have another IRE at a later time if their condition changed. If the doctor found the injured employee’s disability to be less than 50 percent of the body, then the carrier could cap the indemnity payments at 500 weeks.
Impact on Workers’ Compensation
The Pennsylvania Supreme Court’s decision will have a huge impact on workers’ compensation premiums, as well as the cost of a claim. The Pennsylvania Compensation Rating Bureau is expected to recommend higher premiums for workers’ compensation sometime in August 2017, which has caused adjusters to start increasing the reserves for claims.
The increase in reserves will create a greater exposure, thereby causing employers to have higher premiums. An adjuster must consider that there will be no cap on indemnity payments when reserving a claim for the total expected exposure.
Groups have been investigating legislative remedies for this issue but there is no fix in sight.