January 18, 2011

The Not-So-Hidden Cost of Obesity

NCCI has published an interesting study on the relationship between obesity and the cost of workers compensation claims. To no one's surprise, the study concludes that medical costs for the same injury are 3 times higher among obese claimants in the first year, rising to five times higher at 60 months. In addition, claims for the non-obese are much more likely to be medical only; obese workers, when injured, tend to lose time and collect indemnity. For the same injury and all else being equal, the range of medical treatment, the costs and the duration of the claim are consistently greater for obese employees.

The study cites CDC data on the incidence of obesity in the general population. In 1990 10 states had incidence rates of obesity under 10% and none were above 15%. By 2009, 33 states had incidence rates equal to or above 25% and nine (mostly deep south) states had rates at 30% or higher.

The study is based upon 27,000 claims, of which 7,000 carried a specific diagnosis for obesity as a co-morbidity. Data wonks will duly note that there must have been a significant number of obese claimants outside the "obese" group, due to the fact that treating doctors would not consistently list obesity under the diagnosis.

Underwriting the Overweight
I feel a great deal of sympathy these days for the challenges facing comp underwriters and actuaries. Their customary approach of using the rear view mirror as the major indicator of future risk is increasingly ineffective. Now you can add the issue of obesity to mostly hidden factors that can seriously skew loss ratios.

The CDC data clearly indicates an alarming upward trend in obesity. Many of the obese are in the workforce. Indeed, companies might hire a person within the normal weight range and then see this individual gain substantial weight during the course of employment. Many of these burgeoning employees are performing physically demanding tasks. When they suffer from back strains, for example, the medical costs associated with treatment are more than double those of the non-obese. (On the other hand, the cost for the medical treatment of carpal tunnel injuries is virtually the same for the obese and non-obese.)

Fire the Big People?
With this data in hand, it may be tempting for employers to avoid hiring the obese and find ways of terminating current employees who tip the scale in the wrong direction. This would eliminate some very productive people. In addition, it raises the specter of discrimination. The Americans with Disabilities Act protects those with disabilities that impact "one or more major life activities." That might - but does necessarily - include the morbidly obese.

The NCCI study raises the issue of higher costs for injuries involving the obese. There is a more proactive way to look at the issue. Employers could focus on incentives to promote wellness. Employees who stay fit could receive enhanced benefits. We have drug-free and smoke-free workplaces. Perhaps it's time for snack-free workplaces - or healthy snacks. Out with soda machines and in with the vitamin water.

It's interesting to note that when opening comp claims, insurers generally do not collect data on height and weight . They really should. Where the data indicates that weight will be a significant factor in recovery, steps could be taken to encourage weight loss as part of the treatment plan. (For an example of court-ordered weight reduction, see our blog on the obese pizza maker here.)

Ultimately, the effort of employers to control losses will come up against the freedom of people to act as they choose. It's one thing to provide incentives for losing weight, it's quite another - especially in the deep south - to take away the Coca Colas. For many strong advocates of the American way, them's fighting words, indeed.

| 1 Comment

1 Comment

On one hand I agree that obesity, like many other factors, can contribute to cost of claim. I also agree the obesity pandemic is a massive issue we should be trying to fight. Definitely get the Cokes out of the office. If you really want one, walk across the street and buy one.

That said, the conclusions drawn from the data in the article are bogus. As proof, I have just run some figures on a claims portfolio over the past 5 years (over 140,000 claims) I'm not joking, I took 20 minutes and ran some figures.

My results show that claimants with a surname beginning with Y tend to cost nearly half as much again as the average claim! On the other end of the scale, claimant's with a J surname tended to run at 88% of the average claim cost.

The number of dependant children was possibly the biggest factor I found, with claimants having 5 dependant children costing nearly 10 times as much as the average claim. Even 1 dependant child was 323% average claim cost. Wheras claimants with no dependant children only cost 80% the average.

The surname exercise was just a bit of silliness to show how, even with a massive sample size, apparently significant results can be drawn from inconsequential criteria.

The dependant children factor, however, is definitely significant. These claimants have made a lifestyle choice in having children, and they are massively more expensive when an injury occurs. That doesn't mean that it's appropriate to take measures to kerb the incidence of employees with children.

Responsible people do something to fight obesity, responsible people try not to add to the worlds population problems.

Responsible worker's compensation provides for injured workers, whoever they may be.

Responsible legislation allows for pre-existing conditions and contributing factors to moderate an insurer's liability.

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This page contains a single entry by Jon Coppelman published on January 18, 2011 11:56 AM.

Cavalcade of Risk & workers comp news briefs was the previous entry in this blog.

Low clearance: truckers, this one is for you is the next entry in this blog.

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