Report Warns of Higher Wage Replacement, Medical Costs for Obesity Claims

As Americans' waistlines continue to expand, employers and insurers are growing increasingly alarmed about the impact the obesity epidemic will have on workers' compensation costs. Those concerns, according to a recent report, are justified.

Researchers from the National Council on Compensation Insurance issued a study that found that the costs for workers' comp claims for obese employees are significantly higher than those for non-obese individuals.

"There is increasing evidence that obesity contributes to the cost of medical care in workers' compensation, and that this contribution is significant in magnitude," the report noted.

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About the research. Few comprehensive studies have quantified the cost differences between obese and non-obese claims. In 2007, a report from Duke University Medical Center found that obese employees filed twice the number of workers' comp claims, had seven times higher medical costs from those claims, and lost 13 times more days of work from work-related injuries or illnesses than non-obese individuals. In addition, the study found that obese workers in high-risk jobs incurred the highest costs -- economically and medically.

NCCI said its study took a different approach. The organization said its objective was not to provide a measurement for the difference in ultimate costs between obese and non-obese claimants. Such a measurement, researchers said, would have to make use of reserve estimates for open (and potentially reopen) claims.

"Instead, we try to shed light on the difference in development between claims from obese and non-obese employees," the report noted. "This way, we are able to provide guidance (on a per claim basis) on the divergence in cumulative payments between these two types of claims for reserving (and ratemaking) purposes."

For the report, NCCI researchers examined evidence of the contribution of obesity to the medical costs of workers' comp as generalized to a set of claims that comprised 36 states and nine injury years (1998-2006). The effect of obesity on the medical cost per workers' comp claim was quantified at different maturities, thus showing how the (percentage) cost difference between obese and non-obese claims developed as claims matured.

Researchers concluded that, in the aggregate, obese claims are 2.8 times more expensive than non-obese claims at the 12-month maturity. However, this cost difference climbed to 4.5 at the three-year maturity and to 5.3 at the five-year maturity. The study also found that the cost difference at the five-year maturity was less for females than for male employees.

"This divergence in development between obese and non-obese claims has profound implications for reserving, as the added cost of obesity reveals itself only over time," the report stated. "A possible reason for such dissimilarity in development may be the longer duration of obese claims, although, at this point, due to data limitations, this cannot be confirmed with confidence. Clearly, the Duke University study points to longer durations for obese claimants."

Researchers said the study's findings highlighted the importance of mandatory utilization review and, in particular, mandatory bill review in significantly reducing the cost difference between obese and non-obese claims.

Focus on wellness. According to Don R. Powell, president and CEO of the American Institute for Preventive Medicine in Farmington Hills, Mich., research has shown that wellness programs that target obesity dramatically cut health care costs and absenteeism, and many companies are now beginning to extend the concept to workers' comp and disability expenses. Many health and safety experts estimate than employers who institute workplace wellness programs to target obesity can see a return on investment as high as $5 per $1 invested. Cost savings aside, many employers say these programs also give them an edge in recruiting and retaining desirable workers.

Powell will discuss the crucial ingredients to build a successful wellness program, including how to maximize employee participation, address low- and high-risk employees, the implications of psychosocial and legal issues, and how to evaluate the effectiveness of work site wellness programs for best results at the 18th Annual National Workers' Compensation and Disability Conference® & Expo, which will take place Nov. 18-20 in Chicago at McCormick Place.

Employers who want to promote wellness and reduce obesity among employees in their workplaces can:

Provide motivation. Incentives, such as subsidized gym memberships or access to nutritionists, can be a powerful tool in motivating employees to get in shape.
Promote healthy activities. Organize group walks during lunch hours or after-work athletic teams.
Host wellness events. Bring in health experts to discuss topics with employees over a bagged lunch or host an annual health fair where employees can receive information on preventive health care measures.
Encourage healthy eating practices. Offer a variety of healthy alternatives in the cafeteria or vending machines.

Read more at the WORKERSCOMP Forum^TM homepage.

October 26, 2009

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