In Nebraska workers’ compensation benefits are not indexed for inflation. Further inflation can work to decrease the amount of benefits paid in addition to the value of those benefits.
The Nebraska Workers’ Compensation Court announced earlier this month that mileage reimbursement for medical and vocational travel will increase from $.585 per mile to $.625 a mile effective July 1, 2022.
The rule change should benefit injured workers – particularly those who live in rural parts of Nebraska who are often required to travel long distances to larger cities for specialized medical care. But increased travel costs are part of a broader trend of rising inflation. That trend will impact injured workers in less helpful ways.
Workers’ compensation benefits are set by an employee’s wages at or near the time of injury. Inflation is rising at a rate higher that wages. So workers are starting their claims with reduced real wages.
Inflation is bad for injured workers in Nebraska (and most places) for other reasons. In Nebraska, weekly workers compensation benefits are fixed at earnings near the time of injury. Nebraska doesn’t adjust those benefits for inflation. Even when inflation was more moderate injured workers got a raw deal because the value of their benefits declined relative to inflation. Higher inflation just further erodes the grand bargain of workers’ compensations.
But inflation doesn’t just decrease the purchasing power of workers’ compensation benefits, it can reduce the nominal or gross amount of benefits awarded.
An award of permanent disability benefits is based on how the injury effects a person’s ability to earn a living. Further, injured workers who have long lasting injuries often have their disability determined by wages at the time they healed from their injury. So even if an employee can’t increase their benefits for inflation, their earning power is based wages that have inflated while they have been healing from their injury.
Again, even during times of modest inflation workers could get nickeled and dimed a 2.5-5 percent of loss of earning power based on inflation. Higher inflation will probably mean that loss of earning power benefits will be further discounted. I’ve written about how to argue against using inflation in lost of earning power analysis. I think those kinds of arguments will be more urgent with higher inflation, but I don’t know how appellate courts will come down on the issue.
While higher inflation is an overall negative for most injured employees, there could be some positive effects of higher inflation.
One bit of good news is that higher transportation costs could increase awards of permanent disability
An award of permanent disability benefits is based on how the injury effects a person’s ability to earn a living. That hinges in part on where you live. Commute costs factor into the amount of available jobs and will be considered by Judges in how disabled an individual is for the purposes of workers’ compensation. Higher commuting costs tend to lead to higher disability awards.
Commute costs can also be a decisive factor in deciding whether an employee is permanently partially or permanently totally disabled. Permanent partial disability benefits are limited to 300 weeks while permanent total disability benefits are paid out over a lifetime. The difference can amount to hundreds of thousands of dollars.