Reserving in the Age of Obesity

Posted Date: November 1, 2010

Industry InformationResearch

View the complete report: Reserving in the Age of Obesity (PDF)

There is increasing evidence that obesity contributes to the cost of medical care in workers compensation, and that this contribution is significant in magnitude. For instance, a recent study of workers compensation claims of Duke University employees shows that, for the morbidly obese, the medical costs per 100 full-time equivalent employees are nearly seven times as high as for employees of recommended weight. In the attached study, NCCI examines evidence of the contribution of obesity to the medical costs of workers compensation as generalized to a set of claims that comprises 36 U.S. States and nine injury years.

The study also shows how the cost difference between "obese claims" and comparable "non-obese claims" develops as claims mature—this evidence of the difference in development offers important guidance for reserving and ratemaking.

The study results show that, in the aggregate, obese claims are 2.8 times more expensive than non-obese claims at the 12-month maturity, but this cost difference climbs to a factor of 4.5 at the three year maturity and to 5.3 at the five year maturity.

Further, the cost difference (at the five year maturity) is less for females than for males. Mandatory utilization review and, in particular, mandatory bill review significantly reduce the cost difference between obese and non-obese claims.