Aging Workforce and the Impact on Future Medical Claim Inventories

According to a 2006 study by the National Council on Compensation Insurance,
with respect to medical severities, older workers experience relatively more higher-cost injuries, where the most notable differences in diagnoses involve injuries to the joints—rotator cuff and knees. The overall theme of the study was to show that older employees (aged 46 – 64) experience injuries of greater severity and tend to suffer a greater number of cumulative trauma injuries, which equals a greater cost to employers.

For employers this equates to a very costly future medical inventory. A recent study by the PMA  Companies and PRIMA, showed that self-insured public entities cited as a major concern a combination of the aging workforce and comorbidities such as obesity, hypertension and diabetes within the workforce.  For future medical claim inventories, this translates to work-related injuries becoming more severe as the claimant ages. The severity of these work-related injuries becomes increasingly more expensive to treat as the claim ages.

A study by third-party workers compensation administrator Athens Administrators found that future medical claims have increased proportionately relative to all workers’ compensation open indemnity claims, in both number of total open claims and total
reserve dollars. According to their study completed in 2009, they can be open for as many as 8, 10, or more years; have $40,000 or more in reserves; and can represent 35% of a total open indemnity inventory.

Employers, especially public entities and their claims administrators are fast approaching a tipping point where their future medical inventories far outnumber the open indemnity cases, tying up hundreds of thousands if not millions of dollars in reserve funds.  Reducing future medical inventories through lump sum settlements and administrative closures after two years is the immediate answer to this issue.  Establishing an employer compelled legacy settlement program for the TPA would surely save far more money over the long run than the costs of the settlements themselves.  More importantly, establishing aggressive claims handling protocols; hiring well-educated, proactive claims handlers can limit the amount of reserve money tied up and can help to eliminate the culture of entitlement established over the years, especially on the public entity level.

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