Workers Compensation Experience Rating and the Incidence of Workplace Injuries

Jonathan Gruber

NBER Disability Research Center Paper No. NB 18-10
Issued in December 2018

One potentially fruitful avenue for addressing the high costs of Disability Insurance (DI) is to engage employers further in deterring employees from leaving work to join the program. One possible means of increasing employer engagement is by following private insurance products in introducing experience rating.

This project studies the effects of experience rating within the Workers Compensation (WC) program, the nation’s largest social insurance program. I use unique data from a major WC insurer to model the impact of experience rating on firm behavior. These data allow me to measure the marginal cost of additional injuries, and to assess how higher marginal costs affect the incidence and duration of injuries. This allows me to address the question of whether experience rating programs such as DI would impact worker injury probabilities and costs.

In this report I detail the empirical strategy used in the AIG data to assess whether experience rating impacts utilization of the WC program. Despite detailed data construction and multiple careful empirical strategies, I am unable to draw a firm conclusion.

Acknowledgments