Impairment Rating Evaluations Declared Unconstitutional - What You Need to Know

The Pennsylvania Supreme Court recently handed down a blockbuster decision which effectively eliminated a tool often used by workers’ compensation carriers to reduce, or, in some cases, eliminate, the wage loss portion of injured workers’ claims.  Both employers and injured workers should know about the decision and its implications.

The case, Protz v. WCAB (Derry Area School District), No. 6 WAP 2016 and No. 7 WAP 2016, decided June 20, 2017, laid to rest an issue which had been languishing in the courts for years and causing much uncertainty for workers’ compensation practitioners; namely, whether the Pennsylvania Legislature could cede legislative authority to the American Medical Association to decide which injured worker met a threshold for impairment to allow him or her to continue to receive total disability.

The statutory scheme, before it was struck down, basically allowed for an employer to seek an Impairment Rating Determination (IRE) of an injured worker after the injured worker had received 104 weeks of total disability benefits.  The IRE was to be performed under “the most recent edition” of the American Medical Association’s Guides to the Evaluation of Permanent Impairment.  When this provision was added to the Workers’ Compensation Act in in 1996, the AMA Guides were in their Fourth Edition.  Currently, they are on their Sixth Edition.  The changing Guides served to highlight the problem for the majority of the Court – the AMA could issue new Guides at will and substantively change an injured worker’s entitlement to wage loss benefits.

There is no arbitrary end to total disability wage loss benefits under the Workers’ Compensation Act.  Theoretically, a Pennsylvania injured worker could receive total disability benefits for his or her lifetime.  However, receipt of partial disability benefits is limited to 500 weeks (roughly 9.6 years).  What the IRE provisions of the Act added in 1996 was a method for the employer and its insurance company to switch claimants from total disability to partial disability, and thus to limit the length of time the injured workers could receive benefits.  Essentially, once the injured worker had received 104 weeks of total disability and had reached maximal medical improvement under the Guides, the employer could seek to modify the claimant’s benefits from total disability to partial disability by showing that the claimant’s injuries did not meet the threshold laid out in the Guides of 50% of total body impairment.  The practical effect of this change, for most claimants, was minimal, because the vast majority of injured workers in our Commonwealth do not have wage loss claims lasting longer than 11 years.  However, for those few seriously injured individuals who did have wage loss claims lasting more than 11 years, the IRE provisions of the Act provided insurance companies with a powerful tool to effectively eliminate their wage loss benefits.  The 50% threshold changed from Edition to Edition of the Guides.

Rather than striking all of the offending Section 306(a.2), or undertaking a severability analysis, the Commonwealth Court declared the law unconstitutional only “insofar as it proactively approved versions of the AMA Guides beyond the Fourth Edition without review,” since it had been the Fourth Edition which was in effect as of the time the relevant provisions of the Act were adopted.  On further appeal, the Pennsylvania Supreme Court went further and struck the entire provision as unconstitutional, reasoning that the scheme ceded too much authority to the AMA to craft substantive law.

Justice Wecht, writing for the Court, explained that by any objective measure, the authority delegated to the AMA in Section 306(a.2) of the Workers’ Compensation Act was “broad and unbridled.”  He noted that the AMA could change its formulas at will so that almost all Pennsylvania claimants could be considered 50% impaired, or that almost no one would be considered 50% impaired, or anything in between.  The Court reasoned that the AMA was given too much control over whether any particular injured worker’s benefits would artificially end, without any oversight by the Legislature.  Because of these defects, the Court struck down the law, even after engaging in a severability analysis.

The full implications of the Protz decision have not yet been realized.  Any employer which was in the process of attempting to seek an impairment rating or modifying a claimant’s benefits from total to partial disability based on an IRE will certainly have to cease its efforts.  Since the Supreme Court gave no guidance on the retroactivity of its decision, however, it is less clear what will happen to claimants whose benefits were modified from total to partial disability long ago, either by the provided-for administrative process or by an unappealed decision after litigation, which would presumably be subject to waiver defenses.  The use of vocational experts and labor market surveys to establish a claimant’s ability to work will almost certainly increase.  Settlement values of most cases should increase, even incrementally, because one of the workers’ comp carrier’s mechanisms to limit its liability is, for the moment, gone.  Each claimant’s situation is fact-specific, and should be evaluated by a certified specialist workers’ compensation lawyer to give the best opportunity for an optimal outcome.

Levi S. Wolf, Esquire is the managing attorney in the Pottstown law firm of Wolf, Baldwin & Associates, P.C., practicing mainly in Montgomery, Berks, and Chester Counties.  He was a member of the inaugural class of attorneys who were certified as specialists in the practice of workers’ compensation law by the Pennsylvania Bar Association’s Section on Workers’ Compensation Law as authorized by the Pennsylvania Supreme Court.  He can be reached at 610.323.7436, or by e-mail to LWolf@wolfbaldwin.com.

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