Copyright 2009 National Council on Compensation Insurance, Inc. All Rights Reserved.

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1 Demographics and Workers Compensation: Examples From Recent NCCI Research CAS 2009 Spring Meeting New Orleans, LA May 4, 2009 Martin at H. Wolf, PhD

2 Topics to Be Discussed Overview of How Demographics Affects: Claim Frequency Indemnity Severity Medical Severity Preliminary Findings from New NCCI Research on the Workers Compensation Implications of Persons Working Past Age 65 Data Sources Relating to Demographics and Workers Compensation

3 Implications of Demographics on Claim Frequency

4 Manufacturing Incidence Rates, Deviation From Trend, '26 '29 '32 '35 '38 '41 '44 '47 '50 '53 '56 '59 '62 '65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '03 Source: U.S. Bureau of Labor Statistics and NCCI

5 Incidence Rate Patterns Roughly Track Changes in the Share of Younger Workers 20 25% Share of Employment Aged (Right) 15 20% 10 5 Mfg. Incidence Rate (Left) 15% 0 10% Source: U.S. Bureau of Labor Statistics

6 Model 1: Log-Difference Manufacturing Incidence Rates vs. Log-Difference Unemployment Rate, Log-Difference Employment Share Aged and Dummy (87 88 = 1, else 0) Actual Fitted Source: NCCI

7 Results of Regression Analysis Trend LDUNR LDEMPSH DUM R 2 Model t value ( 3.03) ( 5.99) (2.66) (4.01) Source: NCCI

8 Forecasts of Labor Force Shares Show Only Small Changes in the Future Percentage of the Labor Force Estimates obtained by multiplying labor force participation p rates by age cohort (from U.S. Bureau of Labor Statistics) by the population for each cohort (historical and projected population data from the U.S. Census Bureau). Labor force forecast is based on the 2006 participation rate. Source: NCCI. Derived data for all years (including historical period).

9 Impact of Demographics on Indemnity Severity

10 Indemnity Severity Increases With Age $20,000 Average Paid + Case Indemnity Severity Reported at 18 Months by Age Accident Year 2005, NCCI States $16,000 $12,000 $8,000 $4,000 $ Source: NCCI

11 Average Weekly Wage Increases With Age Average Weekly Wage of Injured Workers Closed Claims at 60 Months, , NCCI States $600 $500 $400 $ Source: NCCI

12 Older Workers Have Fewer Claims Closed Than Younger, Both at 18 and 60 Months After Injury Percentage of Claims That Are Closed, , NCCI States 100% 80% 60% 40% 20% 0% 18 Months After Date of Injury 60 Months After Date of Injury Source: NCCI

13 Average Duration Is Longer for Older Workers Average Days From Date of Injury to Closure, Closed Claims , NCCI States Months After Date of Injury 60 Months After Date of Injury Source: NCCI

14 Impact of Demographics on Medical Severity

15 $20,000 Medical Severity Increases With Age Average Paid + Case Medical Severity Reported at 18 Months by Age Accident Year 2005, NCCI States $16,000 $12,000 $8,000 $4,000 $ Source: NCCI

16 Rankings of Top Ten Lost-Time Claim Diagnoses , NCCI States Ages Ages SPRAIN LUMBAR REGION 1 CARPAL TUNNEL SYNDROME 2 LUMBAR DISC DISPLACEMENT 2 LUMBAR DISC DISPLACEMENT 3 CARPAL TUNNEL SYNDROME 3 SPRAIN ROTATOR CUFF 4 LUMBAGO 4 TEAR MENISCUS KNEE 5 CERVICALGIA 5 CERVICALGIA 6 LOWER LEG INJURY NOS 6 SPRAIN LUMBAR REGION 7 SPRAIN OF ANKLE NOS 7 ROTATOR CUFF SYNDROME NOS 8 SPRAIN OF NECK 8 LUMBOSACRAL NEURITIS NOS 9 LUMBOSACRAL NEURITIS NOS 9 LUMBAGO 10 SPRAIN LUMBOSACRAL 10 LOWER LEG INJURY NOS Source: NCCI

17 The Share of U.S. Population 45 to 64 Is Expected to Peak in % 25% 23% 21% 19% 17% 15% '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 Source: U.S. Census Bureau; Moody s Economy.com

18 Working Past Age 65 Implications for Workers Compensation

19 Working Past Age 65 Why More Older Workers? Two Motivations: Wanting to Work Longer Needing to Work Longer

20 Working Past Age 65 Wanting to Work Longer Prohibitions Against Mandatory Retirement t Changes in Social Security (Removal of Earnings Cap) Improved Health Characteristics/Less Strenuous Work Environment

21 Improved Health, Less Strenuous Jobs 40% Percent of Americans Reporting Fair or Poor Health 20% Percent of Jobs Making Strenuous Demands on Workers % 15% 20% 10% 10% 5% 0% Age Age % Source: The Urban Institute

22 Working Past Age 65 Needing to Work Longer Increased Life Expectancy Changes in Pension Plans Increased Healthcare Costs Financial Meltdown

23 25 The Expectation of Life Has Been Steadily Increasing for Older Persons Avg. No. of Years Remaining to Be Lived for Persons Surviving to Age Shown Age 60 Age 65 Age Source: National Vital Statistics Reports, Centers for Disease Control and Prevention

24 There Is an Ongoing Shift Toward Defined Contribution Pension Plans 5 Defined Contribution Plans Defined Benefit Plans Trillions of Dollars, End of Period Q3 Defined contribution plans include 403(b), 457, and private employer-sponsored plans (including 401(k)) Source: Investment Company Institute

25 Per Capita Consumer Spending on Medical Care Is Trending Higher $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 Source: Centers for Medicare and Medicaid Services (CMS)

26 Retirement Accounts Have Suffered a Shock (But Are Still Above 2005 level) $120,000 Median Retirement Accounts of Household Age 50 and Older $100,000 $80, $60,000 $40,000 $20,000 $ Source: Richard W. Johnson, Mauricio Soto, and Sheila R. Zedlewski, How is the Economic Turmoil Affecting Older Americans? Urban Institute, October 2008

27 Household Wealth Stocks, Bonds, Real Estate Off the Cliff $ Billion $8,000 Change in Household Net Worth $6,000 $4,000 $2,000 $0 -$2,000 -$4,000 -$6,000 -$8,000 -$10,000 -$12, Data include households and non profit organizations Source: Federal Reserve Board

28 The Postponement of Retirement Began in the Late 1980s 100% Percent of the Working Age Population at Work or Looking for Work % % % Ages Ages % Ages % Source: U.S. Bureau of Labor Statistics

29 Working Past Age 65 Industries and Occupations

30 Ed/Healthcare and Retail Trade Are Top Choices of Older Workers Employment Shares by Industry*, Total 16+ and 65+ 0% 5% 10% 15% 20% Ed. and health svs. Retail trade Professional and business services Financial activities Other services Manufacturing Leisure and hospitality services Ag., forestry, fishing, and hunting Construction Trans. and warehousing Wholesale trade Information Mining Utilities 65+ Total 16+ * Excludes public administration, postal workers, and teachers in public education facilities Source: U.S. Bureau of Labor Statistics

31 Sales and Service Jobs Are Top Choices for Older Workers Occupational Shares of Employment (Major Categories), % 2% 4% 6% 8% 10% 12% 14% 16% Sales and related Office and admin. support Management Transportation and material moving Building and grounds cleaning and maint. Personal care and service Production Healthcare practioner and technical Food preparation and serving Construction and extraction Installation, maintenance, and repair Protective service Healthcare support Farming, fishing, and forestry Source: U.S. Bureau of Labor Statistics

32 Working Past Age 65 Workers Compensation Experience of Older Workers Injury and Illness Shares

33 Retail Trade Accounts for the Largest Share of Injury and Illness Cases for Older Workers (BLS) Percent of Cases by Industry, % 10% 20% 30% Retail trade Education and health services Leisure and hospitality services Manufacturing Trans. and warehousing Prof. and business services Wholesale trade Financial activities Construction Other services Information Ag., forestry, fishing, hunting Mining Utilities 65+ Total 16+ Source: U.S. Bureau of Labor Statistics

34 Transport. Occupations Have the Largest Share of Injury/Illness Cases (BLS) Percent of Cases by Occupation, % 10% 20% 30% Transportation and material moving Sales and related Food preparation and serving Production Office and admin support Bldg. and grnds. cleaning and maint Installation, maintenance and repair Healthcare support Construction and extraction Personal care and service Healthcare practioner and technical Protective Service Management 65+ Total 16+ Source: U.S. Bureau of Labor Statistics

35 Analyses Using NCCI Data Uses NCCI s Detailed Claim Information (DCI) database Data as of Second Report (18 months after date of injury) Based on average of data for

36 Falls/Slips/Trips Dominate Workplace Injury Claims of Older Workers (NCCI) Share of Claims by Cause of Injury, 65+ vs. All Ages, % 10% 20% 30% 40% 50% Fall/Slip/Trip Strain Struck By Motor Vehicle Misc. Causes Cut/Puncture/Scrape 65+ All Ages Caught In Between Striking Against/Stepping On Burn Cumulative Injuries Source: NCCI

37 Older Workers Have a High Share of Fractures Vs. All Workers (NCCI) Share of Claims by Nature of Injury, 65+ vs. All Ages, % 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Sprain/Strain Fracture/Crushing/Dislocation Other Traumatic Injuries Concussion/Contusion Laceration/Puncture/Rupture Infection/Inflamation 65+ All Ages O.D./Cumulative Injuries Carpal Tunnel Syndrome Amputation/Severance Burn Source: NCCI

38 Falls/Slips/Trips Account for the Largest Share of Indemnity and Medical Payments (NCCI) Shares of Indem. and Med. Paid by Cause of Injury for Workers 65+, % 10% 20% 30% 40% 50% 60% Falls/Slips/Trips (46.7%) Strain (23.3%) Motor Vehicle (5.5%) Struck By (7.4%) Misc. Causes (4.7%) Caught in Between (3.4%) Medical Paid Indemnity Paid Striking Against/Stepping On (3.4%) Cut/Puncture/Scrape (3.5%) Cumulative Injuries (0.8%) Burn (1.3%) Percent values displayed in parentheses represent share of claims from workers aged 65 and older. Source: NCCI

39 Working Past Age 65 Workers Compensation Experience of Older Workers Incidence Rates (Frequency)

40 Older Workers Lower Frequency of Workplace Injuries (BLS) Injury and Illness Incidence Rates per 10,000 Full-Time Workers Private Industry, All Ages Source: U.S. Bureau of Labor Statistics

41 Frequency Is Highest in the Retail Trade and Ed/Health Sectors (BLS*) Injury and Illness Incidence Rates per 10,000 Full-Time Workers Private Industry, Retail trade Education and health services Leisure and hospitality services Manufacturing Transportation and warehousing Prof. and business services Wholesale trade Financial activities 65+ Construction Other services Information Ag., forestry, fishing, hunting Mining Utilities Total 16+ Source: NCCI *NCCI estimates using BLS data and methodology

42 Frequency Is Highest in Transportation and Sales Occupations (BLS*) Injury and Illness Incidence Rates per 10,000 Full-Time Workers Private Industry, Transportation and material moving Sales and related Food preparation and serving Production Office and admin support Bldg. and grnds. cleaning and maint Installation, maintenance and repair Healthcare support Construction and extraction Personal care and service Healthcare practioner and technical Protective service Management 65+ Total 16+ Source: NCCI *NCCI estimates using BLS data and methodology

43 Working Past Age 65 Workers Compensation Experience of Older Workers Indemnity Costs

44 Average Indemnity Paid per Claim Decreases for Workers 65 and Older (NCCI) Based on Total Claims and Indemnity Payments in * $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 ALL < * Data not adjusted for inflation Source: NCCI

45 Indemnity Typically Costs Less for Workers 65 and Older (NCCI) Indemnity Paid per Claim Relativity by Nature of Injury, 65+/All Ages Amput/Severance (1.0%) O.D./Cuml Injuries (1.9%) Burn (0.9%) All Fract/Crush/Disloc (25.3%) Sprain/Strain (30.3%) 3%) Concuss/Contusion (12.7%) Othr Traum Injuries (15.5%) Lacerat/Punct/Rupt (8.1%) Infect/Inflam (3.0%) Carpal Tunnel Syndrome (1.3%) Percent values displayed in parentheses represent share of claims from workers aged 65 and older. Source: NCCI

46 40% Older Workers Have A Higher Share of Long-Term Absences Percent Days Away From Work, All Ages and Age 65+, 2007 All Ages 30% % 10% 0% 1 day 2 days 3-5 days 6-10 days days days 31+ days Source: U.S. Bureau of Labor Statistics

47 $700 Average Weekly Wage Decreases by Age of Worker Pre-Injury Average Weekly Wage, Average, * $600 $500 $400 $300 $200 $100 $0 ALL < * Annual data not adjusted for inflation Source: NCCI

48 Working Past Age 65 Workers Compensation Experience of Older Workers Medical Costs

49 Average Medical Paid per Claim Costs More For Workers 65 and Older (NCCI) $14,000 Based on Total Claims and Medical Payments in * $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 ALL < * Data not adjusted for inflation Source: NCCI

50 Medical Typically Costs More for Workers 65 and Older (NCCI) Medical Paid per Claim Relativity by Nature of Injury, 65+/All Ages Burn (0.9%) O.D./Cumul Injuries (1.9%) Ampu/Severance (1.0%) Other Traumatic Injur (15.5%) All Fract/Crush/Disloc (25.3%) Sprain/Strain (30.3%) Concuss/Contusion (12.7%) Carpal Tunnel Syndrome (1.3%) Lacerat/Punct/Rupt (8.1%) Infect/Inflamm (3.0%) Percent values displayed in parentheses represent share of claims from workers aged 65 and older. Source: NCCI

51 Working Past Age 65 Reducing the Exposure of Older Workers to Workplace Injuries Insights from the National Highway Traffic Safety Administration

52 Challenges Facing Older Workers Eyesight Acuity: Direct ahead not as sharp Peripheral: lateral while looking ahead Adjustment to changes in light, glare, distance Depth perception: judging distance and speed of moving objects Color perception, contrast: t objects with similar il background

53 Challenges Facing Older Workers Muscular/Skeletal Stiff joints and muscles, less flexibility Weaker muscles, less strength Diminished reaction time Less sensitive hearing Mental/Neurological Slower recognition/reaction time Less effective short-term memory More easily distracted t d by noise, sudden movements

54 What Can Employers Do? Reduce the Risk of Falls Eyesight: appropriate lighting Muscular/skeletal: slip-resistant floors, hand rails Neurological: noise reduction, hand rails Provide Information/Support Common health problems Exercise programs

55 Will the Next Boom Be in Workers 65 and Older? Implications of the Exposure Due to More Older Workers How Great a Cost Concern?

56 Workers 65+ Represent a Small Share of Private Employment Shares of Full-Time Employment, % 25% 20% 15% 10% 5% 0% Source: U.S. Bureau of Labor Statistics

57 Workers 65+ Represent a Small Share of Total Claims Within Each of NCCI s Industry Groups 100% % 60% 40% 20% 0% 21% 2.1% 13% 1.3% 0.9% 28% 2.8% 29% 2.9% 18% 1.8% All Industries Manufacturing Contracting Office & Clerical Goods & Services Miscellaneous Source: NCCI

58 Working Past Age 65 - Key Takeaways Why More Older Workers? Better Health Workplace Changes Financial Incentives Financial Necessity Workplace Characteristics of Older Workers Service-oriented: Especially Retail Trade Workers Compensation Experience of Older Workers Slips, Trips, & Falls Lower Frequency Lower Indemnity Higher Medical Implications for the Future of Workers Compensation Safety/Loss Prevention: Environmental Changes to Reduce Falls Cost Implications: Minimal

59 Sources of Demographic Data Relating to Workers Compensation

60 Source of Demographic Data Relating to Workers Compensation NCCI Detailed Claim Information database NCCI new Medical Call U. S. Bureau of Labor Statistics (for injury and illness cases and frequency, by age of worker visit the BLS website at

61 DCI DCI is Detailed Claim Information DCI is collected for a stratified random sample of approximately 50,000 claims per year Applies to all NCCI states and participating p independent bureau states First reports are for claims reported to insurer after 6 months (will be after 18 months in the revised DCI) For upcoming DCI revision, first reports are for claims reported to insurer in September 2009, to be valued in March 2011 and reported to NCCI by June 2011

62 Some Data Elements Unique to DCI Indemnity payments by benefit type Average weekly wage Return-to-work date and type of return-to-work Date of MMI Lump sum information Attorney indicator Controverted case indicator

63 New Medical Data Call Beginning late next year, NCCI will collect medical transaction ti data from just about every carrier writing WC for all 35 NCCI states, plus 5 independent bureau states (to date)

64 Medical Call Data Elements Carrier Code, Policy Number Identifier, Policy Effective Date, Claim Number Identifier, Transaction Code Jurisdiction State Code, Claimant Gender Code, Birth Year, Accident/Injury Date Transaction Date, Bill Identification Number, Line Identification Number Service Date, Service From Date, Service To Date Paid Procedure Code, Paid Procedure Code Modifier Amount Charged by Provider, Paid Amount Primary ICD9 Diagnostic Code, Secondary ICD9 Diagnostic Code Provider Type Code, Provider Identification Number, Provider ZIP Code Network Service Code Quantity/Number of Units per Procedure Code Place of Service Code Secondary Procedure Code

65 Timeline Internal discussion of need for more data began in 2005 Final proposal in early 2007 Board approval in October 2007 Detailed specifications and manuals issued in 2008 Initial reporting will be for medical transactions occurring in 3rd Q 2010, which are due to be reported to NCCI in the following quarter

66 ??? Questions???