Workers Comp Permanent Disability: How Do They Decide?

December 23, 2021by Laura Schaefer1

If you received a percentage number regarding your workers comp permanent disability, you may wonder how they calculated that. It may feel random or unfair. In fact, a recent question from our reader asked about this very issue:

How does workers Comp decide on the percent of permanent disability given? I was given a 17% disability, but I’m not sure if that is correct.

How do they come up with the percentage?

It’s a great question, and we understand the reader’s confusion. It’s helpful to understand how insurance companies calculate these percentages, since they impact settlement amounts.

Answer: Doctors in 42 out of 50 states refer to the American Medical Association’s Guide to the Evaluation of Permanent Impairment. Workers’ compensation systems also use this guide to rate injured workers and assign them a percentage. It is considered the gold standard for rating work-related permanent impairments.

However, there are eight states that use their own guidelines for assigning workers comp permanent disability ratings:

  • Florida
  • Illinois
  • Minnesota
    New York
  • North Carolina
  • Oregon
  • Utah
  • Wisconsin

Workers’ compensation settlements and rates depend on the type of injury an employee experiences on the job, and how it affects them over time. In some cases, employees may get weekly benefits from their employer if they cannot return to work.

The American Medical Association’s Guides to the Evaluation of Permanent Impairment, 5th Edition, defines impairment as “a loss, loss of use or derangement of any body part, organ system or organ function.” It says that impairment percentages or ratings developed by medical specialists are “consensus-derived estimates” that reflect the severity of the medical condition and the degree to which the impairment decreases an individual’s ability to perform common Activities of Daily Living (ADL), excluding work. 

Who Decides on the Workers Comp Permanent Disability Rating Percentage?

A doctor judges your injury’s severity and then determines your workers comp permanent disability rating percentage. This percentage directly determines either your monthly workers comp benefit or lump-sum settlement amount. Only a qualified, experienced physician can perform your impairment evaluation. This means that the physician must meet at least one of the following criteria:

  • Certified by the American Board of Independent Medical Examiners (ABIME)
  • Certified by the American Academy of Disability Evaluating Physicians (AADEP)
  • Possess both knowledge and experience in using the AMA’s Guides; or
  • Possess the requisite professional background as well as work experience to conduct such ratings.

The physician’s impairment rating report is to provide both that doctor’s opinion and a descriptive rationale supporting the stated impairment rating. The rating is a percentage that represents the extent of a whole-person impairment of the employee, based on the organ or body function affected by a covered illness or illnesses.

The physician references a combined value chart in the AMA’s Guides to calculate the aggregation of multiple organ or body function impairments into a whole-person impairment.

Disability Percentage and Settlement Amounts Vary by State

Want to better understand how this process works? You can look at some examples showing how they determine these percentages for injured energy workers using the online federal guide for rating impairments.

Another online tool created by ProPublica shows how different each state’s payout amounts are for the same body part. (Note: ProPublica’s tool estimates lost-limb values using 2015 workers’ comp payout data.) Because Congress lets each state determine its own workers’ comp benefits, workers who live across state lines from each other (yet work in the same place of business) can experience very different payouts for identical injuries.

There are no federal minimums. For example, if you lose a thumb at work in Kentucky, your compensation could total nearly $196,000. But in Rhode Island? That same loss nets you no more than $13,500. Employees in all states can receive workers’ comp and Social Security disability payments at the same time, as long as they qualify for both.

Talk to a Workers’ Comp Attorney Today

To navigate the complex workers’ compensation laws in your state, it helps to have an expert advocate on your side. Speak to an experienced workers’ compensation lawyer for free about your potential case today.

Ready to see if you may qualify? Complete your free online workers’ compensation case evaluation now!

Laura Schaefer
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Laura Schaefer is the author of The Teashop Girls, The Secret Ingredient, and Littler Women: A Modern Retelling. She is also an active co-author or ghostwriter of several nonfiction books on personal and business development. Laura currently lives in Windermere, Florida with her husband and daughter and works with clients all over the world. Visit her online at lauraschaeferwriter.com and linkedin.com.

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