How is Workers Comp Settlement Calculated?

If you've been injured on the job, the question of "how is workers comp settlement calculated" is likely at the forefront of your mind. A settlement isn't just a random number; it is a calculated figure based on your wages, the severity of your injury, and future medical needs.

Understanding the Components of a Workers Comp Settlement

The calculation for a workers' compensation settlement is generally divided into three primary categories: wage replacement, medical benefits, and permanent disability ratings.

1. Average Weekly Wage (AWW)

The foundation of almost every calculation is your Average Weekly Wage. Usually, this is calculated by taking your total earnings from the 52 weeks prior to the injury and dividing by 52. In most states, your benefit rate is 66.67% (two-thirds) of this AWW.

2. Permanent Partial Disability (PPD) Rating

Once you reach Maximum Medical Improvement (MMI), a doctor will assign you a disability rating. This percentage represents the permanent loss of function in a specific body part or the body as a whole.

• The Formula: (AWW x 0.667) x (State-assigned weeks for the body part) x (Disability %).
• For example, if your state assigns 500 weeks for a whole-body injury and you have a 10% rating, you are entitled to 50 weeks of benefits.

3. Future Medical Expenses

If you agree to a "Clincher" or full-release settlement, you are giving up your right to have the insurance company pay for future doctor visits or surgeries. Therefore, a calculated settlement must include the projected costs of:

• Prescription medications
• Physical therapy sessions
• Future surgeries or hardware replacements
• Diagnostic imaging (MRIs, CT scans)

Types of Settlements: Lump Sum vs. Structured

When calculating how much you will receive, you must decide how the payout is structured:

• Lump Sum: You receive the entire calculated amount at once. This is common for smaller to mid-sized settlements.
• Structured Settlement: You receive payments over a set period (monthly or yearly). This is often used in cases of catastrophic injury to ensure the injured worker has long-term financial security.

Factors That Can Decrease Your Settlement

It is important to note that the "gross" settlement amount is rarely what you take home. Several deductions usually apply:

1. Attorney Fees: Usually 15% to 25% depending on state law.
2. Unpaid Medical Bills: Any outstanding balances from your treatment.
3. Medicare Set-Aside (MSA): If you are a Medicare beneficiary, a portion of the settlement must be set aside specifically for injury-related care.
4. Child Support Liens: In many states, back-owed child support is deducted directly from the settlement.

Why You Need a Professional Evaluation

While the formula for "how is workers comp settlement calculated" seems straightforward, insurance companies often use their own doctors to provide lower disability ratings. A difference between a 5% and a 15% rating can mean tens of thousands of dollars. Always consult with a legal professional or a workers' comp specialist to ensure your rating accurately reflects your physical limitations.