Financial Incentives of Experience Rating in Workers' Compensation

OBJECTIVE: To investigate the incentive for primary and secondary prevention associated with experience rating in a retrospective workers' compensation program. METHODS: Panel data on 21,558 firms from 1998 to 2007 were used to estimate the relationship between the degree of experience rating and seven measures of workplace occupational health and safety outcomes. We focused on the impact of a policy change in 2004 in which the degree of experience rating was substantially increased for all firms. RESULTS: The 2004 increase in experience rating was associated with a reduction in the total, lost-time, no-lost-time, benefit days, permanent impairment, musculoskeletal disorder, and acute trauma claim rates. These observed changes follow secular trends. CONCLUSION: The association of experience rating with some claim outcomes and not others in some time periods suggests that firms may focus on claims and cost management practices.