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Topics: Workers' Compensation
Summary: In this article, we’ll take a deep dive into the top 3 ways employee age can affect workers’ compensation utilization, including the fact that the cost of workers' compensation claims increases as employees age, while long-term medical costs actually decrease, and that an increase in employee age shows an increase in the length of disability.
As the proportion of American workers who are 55 years of age or older increases, how will workers’ compensation utilization change? This is a monumental question for small business owners in the United States. According to one study, nearly 25% of the American labor force will be 55 or older by 2018.
Understanding how an aging workforce can affect the cost of workers’ compensation for small businesses in the near future is paramount to getting the right workers compensation insurance coverage. Whether shopping around for the best carrier, or trying to determine just how much coverage is the right amount, getting the facts straight from the outset is key to getting it right. Let’s get started.
The study, which was first published on July 10, 2012, sought to better understand the effects of an aging U.S. workforce on the cost of workers’ compensation in physically demanding industries, such as in construction. To determine this, the group of researchers took a close look at the relationship between injury type and age with the cost of a workers’ compensation claim for a database of over 100,000 claims in Colorado between 1998 and 2008. They looked strictly at construction workers during their examination. According to a 2012 study published in the American Journal of Industrial Medicine, the average cost of workers’ compensation claims increases incrementally with employee age.
The study concluded that specific injuries related to hard, physical labor were responsible for a higher claim cost among workers who were older, compared with younger counterparts. The results showed that for every year a person ages, the medical cost of an injury increases by 1.1% and the indemnity cost of an injury increases 3.5%.
The study also showed that for less severe injuries, such as strains and contusions, claimants 65 years of age or older had a higher indemnity cost than claimants between the ages of 18 and 24. While these results are not all that surprising, the data clearly shows a strong relationship between an aging US working population and an increase in the cost of workers’ compensation claims.
According to “The Impact of Claimant Age on Late-Term Medical Costs,” a study from the NCCI, claimants older than 60 years of age actually have lower costs associated with late-term workers’ compensation claims.
The study, which was published on October 20, 2014, examined several key characteristics of injured workers in several age groups, including number of medical services and overall price average paid, injury mix, and prescription drug use. The study found that on average, annual late-term medical costs decrease per claim as workers age. The study hints that this relationship could be because some workers are more likely to utilize prescription drugs for pain relief.
What’s more surprising than the fact that late-term medical costs decrease as workers age is that the impact of age on length of disability may be a better indicator of workers’ compensation costs than tenure, according to a study in the Journal of Occupational and Environmental Medicine.
The study showed that for younger workers, tenure was not an important factor in the length of disability. Middle aged workers with low tenure took a bit longer for a disability injury. And older workers with long tenure had increased disability duration.
In other words, age was found to be the most important factor, compared with tenure, in the length of disability for American workers. However, age and tenure are both important factors to consider when examining the cost of a workers’ compensation claim based on length of disability.
While employee age can have a lot to do with length of disability, the availability of a Return-to-Work program also has a big effect. We’ve talked about this previously on our blog in “Help Your Agency Clients Create a Win-Win Return-to-Work Program,” but it’s something that deserves a second look.
Employees generally come back to work faster and contribute to the productivity of the business when there’s a successful Return-to-Work program. But aside from the actual cost of an injury, and the time it takes an employee to return to work fully, a RTW program is an excellent way to build employee loyalty and appreciation, and it shows employees that the business cares about their wellbeing.
Running a business is difficult. But there’s nothing more challenging than maintaining a solid workforce, especially for small businesses. With a large aging worker population a reality in 2018 and beyond, it’s time to start thinking about ways to lower the risk of injury, lower the cost of workers’ compensation claims, and get workers back on the job as soon as possible.
1. As employees age, the cost of workers’ compensation claims increases. Pivoting at-risk employees into positions with less risk of injury, such as mentoring or teaching younger employees, could be a way to mitigate the risk of injury and the cost of workers' compensation utilization.
2. Because employee health tends to diminish in middle life (age 55-70), the length of disability tends to increase as employees age. As employees get older, their physical abilities are likely to diminish. Instead of switching out these employees for younger ones, consider how they might be of use to the business in other ways. Capitalizing on their experience on the job could be an opportunity for an additional revenue stream and a way to keep them on the team.
3. Increased employee tenure correlates to a decrease in the length of disability in a workers’ compensation claim. Investing in employees shows them that their future and stability are important to the company. These employees may be interested in a Return-to-Work program where they come back into a less demanding position for less pay until they’re ready (doctor-approved) to come back to work fully.
To find out how you can help get your workers back on the job after a workers’ compensation claim, check out our article on building a winning return-to-work program.