Ruling Could Hike Workers’ Compensation Costs by 265%

A recent Connecticut Supreme Court ruling could increase workers’ compensation claims costs as much as 265% according to a new report.

A preliminary analysis by the National Council on Compensation Insurance also found the decision may increase overall system costs by 41%.

The NCCI report analyzed the potential impact of the court’s March 18 Gardner v. Department of Mental Health and Addiction Services ruling.

That ruling overturned decades of legal precedent while unravelling the key 1993 reforms that brought long-term stability to Connecticut’s worker’s compensation system.

Coupled with the court’s December 2024 Cochran v. Department of Transportation ruling, the Gardner decision marks the most costly and consequential period of change in recent history for Connecticut’s workers’ compensation system.

(The Cochran decision grants claimants wage replacement benefits even if they are retired, have not worked for years, and have no intention of returning to work.)

Cost Hikes

Based on the ruling, administrative law judges now have the discretion to grant ongoing temporary partial disability benefits for up to 520 weeks and are not required to convert an award to permanent partial disability benefits once a claimant reaches maximum medical improvement. 

“The Gardner decision will have a disastrous impact on all public and private sector employers,” said Chris Davis, CBIA’s vice president of public public policy.

“All employers face higher costs and the state and municipalities will need to dramatically boost their reserves for claims—potentially leading to tax hikes or cuts in other state programs.

“The ruling will also impact overall workers’ compensation system costs and undermine decades of stability.”

“The Gardner decision will have a disastrous impact on all public and private sector employers.”

CBIA’s Chris Davis

In its analysis, NCCI outlined a number of scenarios highlighting the potential for significant cost increases:

• Extended temporary partial disability benefits: The potential for extending TPD benefits beyond MMI dramatically increases indemnity and settlement costs, leading to a possible 41% increase in overall system costs. 
• System unpredictability: The decision impacts existing open claims, given the possibility of reopening previous claims, creating unfunded liabilities due to retroactive implications—including additional costs for claims not reflected in premiums assessed for policies issued before the ruling. 
• Behavioral changes: The ruling incentivizes claimants to seek extended TPD benefits, leading to increased claim filings and higher indemnity benefits. Studies indicate that significant benefit increases often lead to changes in claimant behavior, further driving up costs.

Awards Frequency

The frequency with which judges award extended TPD benefits will play a crucial role in determining the overall cost impact of the Gardner ruling. 

For instance, if extended TPD benefits are awarded in 50% of cases, overall system costs could rise by 21% under the maximum 520-week scenario.

However, if a judge awarded TPD benefits at a 90% frequency, costs could rise up to 37%.

It is crucial that employers support advocacy efforts that mitigate these cost increases and ensure a sustainable, well-functioning system.

Davis expressed concern about the retroactive impact, noting that “employers who self-fund workers’ compensation claims—such as state and municipal governments—depend on the predictability and stability of payment awards to properly reserve for benefits.”

“This judicial interpretation will disrupt existing risk reserves, which were not designed to accommodate such a drastic shift,” he said.

The potential for substantial increases in workers’ compensation costs underscores the need for businesses to stay informed and prepared for the financial implications of this decision.

As NCCI continues to analyze the impact, it is crucial that employers support advocacy efforts that mitigate these cost increases and ensure a sustainable, well-functioning workers’ compensation system.

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For more information, contact CBIA’s Pete Myers (860.244.1921).