Insight, analysis & opinion from Joe Paduda


NCCI on frequency and the impact of older workers

I’m going to skip over two am speeches – while I could indulge my inner pundit and discourse on Charles Krauthammer’s highly selective use of data in his conservative monologue/analysis of President Obama’s psyche and disuss the insights of Arthur Laffer, he of the widely-discredited “Laffer Curve“, the pm sessions were far more interesting.
I do have to provide just one note re Laffer…
Laffer was not only THE supply-side economist; he was also the guy who in August 2006 famously said: “The United States economy has never been in better shape.” Laffer even bet stock broker and UC Berkeley alumnus [and Ron Paul adviser] Peter Schiff a penny that the economy wouldn’t crash.
Barry Lipton led off the research discussion with a drill-down on changes in frequency.

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Recall that frequency has been on an eighteen (or so) year long steady decline or around 3-5% each year. In 2009, overall frequency based on wage adjusted payroll declined by 8.4%, with that decline overcome last year as frequency (number of claims) jumping nine percent. (see NCCI for why it’s probably not really nine percent, but more likely around three percent)
Building off yesterday’s announcement that frequency increased dramatically in 2010, Barry provided background on which types of industry classes (what kinds of jobs in what industries) were seeing what changes in frequency and the relationship of payroll to severity.
Barry was followed by Harry Shuford discussing older workers and their impact on workers comp. This is rather an important topic as older workers – those over 55, are becoming an increasingly large part of the workforce. Shuford put uo a slide that clearly indicated claim frequency variation between age groups essentially disappeared over time. That is, there was wide variation in claim frequency (how often workers are hurt) among age groups in 1994, but very little variation in 2009.
This held true when corrected for job mix. Moreover, severity (cost of the claim) was pretty consistent regardless of age group (for workers over 35, while costs were lower for workers under 35). With that said, there was a rather significant difference in severity when the two groups (above and below 35 years old) were compared, likely caused by the different mix of injuries sustained by the two populations. In fact, about half of the difference in cost was attributed to injury type.
Disability duration was (unsurprisingly) longer for older workers, but a good chunk of the difference was due, again, to the different injury types incurred by the two groups. After considering the various adjustments, medical cost variation was pretty minimal.
The net is most of the impact of baby boomers is “already there”. That is, we likely won’t see much of an uptick in severity due to the aging population in the future.

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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