Paper: The impact of self-insuring for workers’ compensation on workplace fatality rates

Author(s) and Affiliation(s):
Abay Asfaw, Senior Research Fellow CDC-NIOSH
Regina Pana-Cryan, Senior Scientist CDC-NIOSH
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Room: St. David Room, 3rd Floor
Objectives:

A recently published article* concluded that workers in firms with a higher degree of experience rating for workers’ compensation insurance sustain fewer non-fatal occupational injuries than workers in firms with a lower degree of experience rating. One of the limitations of the published study was that while self-insurance increases the incentive of firms to invest in safety, it also increases their incentive to be involved in excessive claims management practices. To better understand whether these results mostly reflected differential reporting behaviour or were likely due to true investments in worker safety, in the present study we considered fatal occupational injuries that are hard to under-report. In other words, we hypothesized that if self-insurance affects only claims-reporting, we would find no significant association between self-insurance and fatalities.

Methods:

Panel data from the Bureau of Labor Statistics and National Academy of Social Insurance between 1998 and 2005 were used. A theoretical framework was developed, and a fixed effects vector decomposition model was estimated.

Results:

Self-insuring was positively associated with relatively low worker fatality rates when compared with insuring for workers’ compensation (including experience rating and manually rating). After controlling for workforce characteristics, industrial composition, firm size, and state-specific laws, states with an above the median percentage of self-insured firms had fatality rates that were lower than rates in states with a below the median percentage of self-insured firms. We found that a 10 percentage point increase in the share of self-insured firms resulted in a 4.5 percentage point decrease in occupational fatality rate.

Conclusions:

Our current results that are based on fatal injuries provide empirical support for the findings we previously published on non-fatal injuries; a higher degree of experience rating seems to better align the economic incentive to invest in prevention and the intended outcome of reducing worker fatality.

References:

* Asfaw, A. and Pana-Cryan, R. (2009). The Impact of Self-Insuring for Workers’ Compensation on the Incidence Rates of Worker Injury and Illness. JOEM 51(12):1466-1478