CSM logo - horizontal

Understanding workers' comp disability

When an employee sustains an injury or becomes ill as a result of doing work-related activities, their medical expenses may be covered by workers’ compensation insurance.

Unlike health insurance, a work compensation policy is held by the employer, not the employee. The employer pays a fee to the insurance carrier every month; in return, the business receives workers’ compensation coverage for its employees.

Sometimes employees suffer injuries or illnesses that result in significant impairments. Consequently, injured workers may be temporarily or permanently unable to do their jobs. These types of injuries or illnesses are categorized as disabilities.

When an employee sustains a work-related injury or illness that results in a disability, the treating physician must determine three things:

  • the level of disability (temporary or permanent, total or partial)
  • whether the employee has reached maximum medical improvement (MMI)
  • a workers’ comp impairment rating

The level of disability has several different categories. A disability may be temporary or permanent. These terms are relatively self-explanatory; a temporary disability means that the employee is unable to do their pre-injury job for only a limited period of time. This period can last up to three years in most cases. A permanent disability, however, means that the employee will be impaired in some way for the perpetual future.

A disability may also be total or partial. A total disability means an employee is impaired to the point that they cannot perform their job entirely. This may be a temporary total disability (such as a broken arm, for example, which will ultimately heal) or a permanent total disability (such as the loss of a limb). A partial disability means that the impairment only partly hinders the employee’s ability to perform their pre-injury job.

Medical maximum improvement (MMI) is the point at which the employee’s illness or injury has improved as much as it will, with or without further medical treatment. The MMI is an important metric because it helps to determine whether the employee has a disability and whether they are eligible for an impairment rating payout. For example, if a worker sustains a debilitating injury that is unlikely to heal to its pre-injury state, such as the loss of an eye, they would reach MMI when the eye injury has healed and is no longer painful. But because the loss of an eye is permanent, there is no future point at which that worker would be able to see out of that eye again. At that point, the treating physician would assign an impairment rating.

An impairment rating, which is usually issued by the treating physician, is another important aspect in understanding workers’ compensation disability and determining an impaired employee’s payouts.

Safety Library

Get the guides, tips, and more created by our Safety Team to make your business safer.

What is an impairment rating?

The impairment rating is calculated as a percentage. This percentage reflects the employee’s overall level of whole-body disability due to the injury or illness. In general, a higher impairment rating means that the employee is more harmed overall and may be eligible for greater impairment rating payouts.

Impairment rating differs from the level of workers’ comp disability. An employee’s disability rating refers specifically to whether they can return to their pre-injury job, while the impairment rating is calculated as a whole-body level of impairment, without taking job duties into account. Permanent partial disability means that the employee may be able to perform some, but not all, pre-injury job duties. However, the impairment rating could fall within a large range. An impairment rating of 100% usually means that the person has a permanent total disability.

Additionally, impairment ratings take MMI into account. Once the worker has reached MMI and is not expected to improve any further, the physician assigns an impairment rating. In other words, the person must be in a stable condition before the physician offers an impairment rating.

Insurance companies determine impairment rating payouts by considering the employee’s workers’ comp impairment rating, weekly wages, and the maximum compensation for weekly workers’ comp (which can vary by state). If the worker has an impairment rating of 100%, they may receive the maximum allowed weekly disability amount.

How insurance companies calculate impairment rating payouts

In general, insurance companies calculate impairment rating payouts by multiplying the impairment rating by a certain allowed amount. This means that a higher impairment rating equals a higher impairment rating payout. This amount can vary from state to state.

As with many aspects of workers’ compensation insurance, much of this calculation depends on the state in which the policyholder’s business is located. Some states default to a “whole body” impairment rating, which provides a percentage of overall bodily impairment. Others may use body part-specific ratings, such as the left shoulder or right leg. Insurance companies use both types of impairment ratings to calculate impairment rating payouts.

Why CompSource Mutual

CompSource Mutual has provided Oklahoma businesses with workers’ compensation for more than 85 years. Our team offers top-notch expertise to the businesses that support the Sooner State’s economy. Get the coverage and insight that you need from our experienced team. Get a quote.

Meet the Safety Team

Book on-site or virtual support from our security experts to learn how to make your business safer.

The general process to calculate an impairment rating for workers’ comp involves an evaluation by a doctor to assess the injury and rate the disability on a scale from 1 to 100. However, not all doctors can perform this evaluation, and the rules vary by state.

A 100% impairment rating means that the employee is totally disabled. Employees who are awarded disability at this level can receive the maximum monthly compensation.

Impairment ratings are based on a percent scale that ranges from 1 to 100 (where 100 is completely disabled). So, someone with a back injury and a 15% impairment rating is said to have a 15% permanent partial impairment to the body.

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.


Request a Quote

Protect your business with first-rate coverage. Enter your zip code below to get your customized quote.

This field is for validation purposes and should be left unchanged.