It is always helpful, and sometimes critical, for a worker to have insurance outside of workers’ compensation to help them through what can be the most difficult situation they have ever confronted.  The challenge is that there are strict rules about the situations where workers’ compensation benefits overlap with similar benefits from other insurance programs, including health insurance, unemployment, Oregon Health Plan, Medicare, and Social Security Disability.  These issues come up frequently when a workers’ compensation claim is settled.

It is a complicated subject, but I have done my best to unpack it below.

What is a Settlement in a Workers’ Compensation Claim?

When a worker is injured on the job, they start out with the right to file a claim and appeal any denial of benefits that happens along the way.  The worker may have the right to compensation for permanent impairment and to future benefits beyond when the claim is “closed” and impairment compensation is paid.

A settlement is an alternative to exercising these rights and keeping the right to future benefits.  Basically, it is selling back the right to a particular benefit or the right to fight about it.

Some settlements involve selling back all of the rights to any future benefits under a claim, others involve selling back everything except the right to payments for medical services.

When we sell back a benefit or a right to fight about a benefit through a settlement, we often have obligations to other insurers or agencies that provide public benefits similar to those being settled.

Employer Provided Health Insurance and Workers’ Compensation Benefits

Nearly all health insurance plans include provisions stating that they do not cover treatment for work related injuries, and that if they do, they have a right to be reimbursed if the claim is later settled.  If the worker fails to do so, the health insurer would have a claim against the worker for breach of contract.

When we settle future rights to medical services, we are finding it extremely difficult to get a response from some insurers about what they have paid, and what- if anything- they are seeking reimbursement for.  Most insurers now have outside companies handle reimbursement on injury claims.  We start by notifying the health insurer, sometimes multiple times, only to get contact from their vendor several months later asking for the same information about the claim that we have already provided.  It is a frustrating and time consuming process, but we can normally negotiate a reduction on what we have to reimburse if our client can wait that long.  If bills have been paid through health insurance, it often leaves a patient balance that must be paid separately by the worker if they haven’t paid already.

Unemployment and Workers’ Compensation Benefits

Workers who receive unemployment benefits have an obligation to report those to the workers’ compensation insurer if they are asked to do so.  The workers’ compensation insurer gets to credit any amounts paid by unemployment against any wage loss they are otherwise required to pay.  Unemployment does not seek reimbursement, even when a claim is settled.

We try to avoid using unemployment benefits while workers’ compensation is being paid, but we often need to use them when the worker reaches maximum medical improvement.  At that point, the insurer may be required to continue paying wage loss, which is later subtracted from the permanent impairment compensation.

Once the impairment is said to be permanent by the attending physician, the compensation comes out of the future “award” of compensation for permanent impairment, like an advance.  At that point, it is a good idea to file for unemployment if you are otherwise eligible.

One problem we run into is that if a worker is off work for too long, they become ineligible for unemployment.  Their rate based on recent earnings becomes zero.  One way for the worker to get around this is to apply for unemployment as soon as they are released to modified duty and the employer does not offer any.  Even though a worker may not claim benefits each week while workers’ compensation is paying, getting approved can lock in the rate that would be used in the future.

Short/Long Term Disability and Workers’ Compensation Benefits

Some workers have disability coverage that they have purchased on their own, or received from their employer.  The benefits are defined in the contract with the insurer.

Most of the time, the contract says that the long/short term disability insurer gets to take credit for any wage loss paid under a workers’ compensation claim, and has a right to reimbursement if benefits have been paid and disputed wage loss in a workers’ compensation claim is later settled.

There are some plans that pay benefits in addition to workers’ compensation, so it is a good idea to request a copy of your plan documents so you know whether this will be an issue.

Oregon Health Plan and Workers’ Compensation Benefits

When we settle future medical rights for a worker on the Oregon Health Plan, we are required to notify the State, and check to see if OHP or DHS have paid any benefits that they expect reimbursement for out of the settlement.  The Oregon Health Plan is partially funded by Federal dollars through Medicaid, which means both are reviewing claims for compliance.

We are finding that it is now taking 4-8 months to obtain confirmation from the State and negotiate a resolution to their claim.  Yes, you read that correctly.  The State has a massive backlog that is well known to all attorneys who represent injured workers.  If we skip this step, the State has a right to seek reimbursement from the worker and from us.  Because of this risk, we have to do this even in cases where we don’t think OHP paid anything because the claim has been accepted.  It is an unfortunate downside to having coverage under OHP.

Medicare and Workers’ Compensation Benefits

As though there’s not enough aggravation caused by relying on Medicare, one challenge we have in settlement of future medical rights for folks on Medicare is that we have to pay Medicare back for any bills they have paid on the conditions involved, and we also have to consider what they might pay in the future.

That means if there’s too much money going to the worker, we have to set some aside to pay medical for these conditions before Medicare pays.  Insurers are required to report settlements to Medicare, and those are coded for a body part.  The doctor’s bills go to Medicare and are flagged if they are related back to the codes in the settlement.

If Medicare finds that they paid bills that they believe should have been paid out of the worker’s share of the settlement, they can deny coverage going forward.  They also have a right to recover their losses from our firm, the defense firm, and the insurer for their damages.

The more money that goes to the worker, the more formal we have to be about how much to set aside and who is responsible for the accounting.  This makes it difficult to get workers on Medicare a reasonable portion of the settlement proceeds, and is something that both sides have to consider before coming to the table.

Social Security Disability

Social Security Disability treats payments for impairment under workers’ compensation claims as disability payments, and reduces Social Security Disability benefits to offset the disability payments that have been made by workers’ compensation.

If we negotiate a settlement, we insert language that divides the amount the worker receives by their remaining life expectancy.  This gives the worker a smaller monthly deduction from their Social Security Disability than the way it is calculated without receiving the money through a settlement with the necessary language.  Workers who receive a lot of wage loss payments under the workers’ compensation claim can be very surprised to learn that those past payments can affect their future disability payments, but there is no way around this.  Receiving the workers’ compensation benefits does not decrease the overall amount that is paid to a disabled worker, but can create a false expectation.

Social Security and Pensions

Fortunately there is no overlap between a worker’s retirement benefits and their workers’ compensation benefits.


Workers’ Compensation benefits are not taxable, with the exception of penalty payments.  Insurers often fail to report penalty payments to the IRS, which is fine with us and good for our clients.  If they do, the worker must claim the income on their tax return.