Financial incentives in workers’ compensation: an analysis of the experience-rating programme in Ontario, Canada

Objectives: To investigate the incentive for health and safety and cost management at the firm level associated with the degree of experience rating in a retrospective workers’ compensation programme in Ontario, Canada. Methods: We use panel data on all firms in the principal Ontario experience-rating programme between 1998 and 2007 to estimate regression models of the relationship between the degree of experience rating and various claim rates. We control for firm characteristics and contextual factors that may be associated with the outcomes under investigation. Results: A higher degree of experience rating was found to be associated with a lower lost-time claim rate and a higher no-lost-time claim rate. The relationship with the total claim rate was insignificant. The degree of experience rating was also associated with outcomes that proxied for cost management practices. Conclusions: A higher degree of experience rating appears to be associated primarily with increased secondary prevention efforts (ie work disability prevention), rather than primary prevention. There is also some indication of an incentive for cost management. Workers’ compensation authorities need to consider how best to ensure there are appropriate checks and balances in financial incentives programmes.