12 Nov 2012

Role of Age Regarding Workers’ Compensation May Be Exaggerated

NCCI Suggests Younger and Older Employees’ Claims Are Comparable

By John Stahl, Esq.

Recent research by the National Council on Compensation Insurance, Inc., (NCCI) questions the belief that the aging American workforce is at the eye of the perfect storm related to workers’ compensation claims. The anticipated increases in care provided (and the resulting increased shortage of medical providers) under Obamacare, high prescription drug costs related to physician dispensing and opioid abuse, and the extended recovery time and other characteristics of knee and back injuries are widely believed to be exacerbated as people become older.

NCCI reexamines aging-related workers’ compensation issues in the October 2012 research brief entitled “Workers Compensation and the Aging Workforce: Is 35 the New “Older” Worker?” NCCI economist Tanya Restrepo and NCCI chief economist Harry Shuford wrote the brief.

Using a study entitled “Estimated Age Effects in Athletic Events and Chess” as a base, the NCCI researchers particularly note that the fact that paper concludes that rates of age-related mental and physical deterioration are minimal indicates that “societies may have been too pessimistic about losses from aging for individuals who stay healthy and fit.” NCCI reports as well that its research supports the findings of the “Age Effects” study.

The brief determines as well that the proof from the “Age Effects” study that “the annual rate of age-related deterioration for Long Distance Run, Sprint, and Chess is very small and gradual for ages up until the mid- to late- 70s” justifies researching whether older workers are now younger. Another way of stating that is that 35 may be the new 65.

The NCCI researchers additionally refer to a 2011 NCCI research brief that shows that the average workers’ compensation costs for every employee who is 35 and older seem similar. That data shows as well that those expenses “are higher than the average costs for workers aged 16 to 34.”

Restrepo and Shuford, who prepared the 2011 research brief, observe as well that higher premiums that reflect the higher wages that older employees earn largely offset the higher workers’ compensation costs associated with that demographic. That team consequently concludes that “an aging workforce appears to have a far less negative impact on workers’ compensation claim costs than might have been thought.”

Research Overview

The current research relies largely on data that is based on “the 15 most common diagnosis codes, based on the total of permanent partial, temporary total, and medical-only claim counts across Accident Years 1996-2008.” This research is additionally limited to workers’ compensation claims that were closed at 24 months.

The October 2012 research brief also examines statistics regarding which diagnoses are most common regarding workers’ compensation claims. An example is that “open wound of finger” is the top diagnosis code for both younger and older workers.

The definition of “total severity index” is “total indemnity and medical severity for each diagnosis for both age cohorts combined, divided by the total indemnity and medical severity across all diagnoses for both age cohorts combined; it is a measure of the relative severity of each diagnosis.”

The overall findings include that:

The shares by type of workplace injury “for a range of specific diagnoses” “are remarkably comparable across age cohorts.”
“The factors accounting for increases in severity (referred to as mix, quantity, and price) over two time periods (1996/97 to 2000/01 and 2001/02 to 2007/08) are relatively similar across age cohorts.”
“Injuries due to high severity diagnoses have historically been more common for older workers, but those high severity diagnoses are now becoming common in younger-age cohorts as well.”

Age-related Differences in Injuries

Restrepo and Shuford state that “the key observation is that for a given diagnosis, on average, an injury sustained by an older worker is no more likely to result in a … [temporary total or permanent partial] claim than for a younger worker.” Other indications include that “older workers are more likely [than younger workers] to sustain higher-cost permanent injuries” but that other factors that the research brief identifies are more significant regarding workers’ compensation costs.

The data also shows that, regarding diagnosis codes that do not overlap, “older workers are more likely to have higher-cost rotator cuff and knee injuries while younger workers are more likely to have lower-cost back strains.” Further, “diagnosis codes that are much more common for older workers tend to be more expensive, with total severity indexes that are well above average.”

Wisdom of the Aged

The current NCCI research suggests that the blame for higher workers’ compensation costs should not be unduly attributed to those among us who remember the moon landing. Acting to reduce workplace injuries and encouraging every worker to maintain good health and fitness seem key.