Posted Date: May 10, 2023
NCCI’s Large Claims Deconstructed presentation provides an in-depth review of the characteristics and drivers of large claims. In this presentation, large claims are defined as those that cost $1M or more. This Large Claims Deconstructed Guide provides a slide-by-slide examination of the key insights, data sources, and formulas underlying the Large Claims Deconstructed presentation.
As you review the information contained in this Guide, it may be useful to keep in mind the following main takeaways that NCCI’s Large Claims Deconstructed presentation highlighted:
We hope you find the Large Claims Deconstructed Guide both a beneficial and informative resource.
For this analysis, large claims are defined as those that meet the following criteria within the first ten unit report levels:
\[Incurred \text{}\ Medical_{Trended} + Incurred \text{}\ Indemnity_{Trended} ≥ $1M\]
All incurred loss amounts are trended to 12/31/2021. Incurred indemnity losses are trended using Average Weekly Wage values from the Quarterly Census of Employment and Wages (QCEW) as a proxy. Incurred medical losses are trended using the Personal Health Care index published by the Centers for Medicare and Medicaid Services (CMS). Refer to the Unit Statistical Data Valuation and Due Dates table in Appendix B for more information on the unit report levels.
FASTELC claims exceed the $1M threshold in unit report levels one or two based on incurred loss amounts trended to Accident Year 2021. SLOWELC claims exceed the $1M threshold in unit report levels three through ten based on incurred loss amounts trended to Accident Year 2021. Refer to the Unit Statistical Data Valuation and Due Dates table in Appendix B for more information on the unit report levels.
\[Large Claim Frequency = FAST_{ELC} \text{ Frequency}\ + SLOW_{ELC} \text{ Frequency}\ \]
See the background section of Deconstructing Frequency into FASTELC and SlowELC for more information on the frequency calculations.
Claims are identified as FASTELC or SLOWELC using the definitions established in the Deconstructing Large Claims slide. For each cohort, the claim counts by Accident Year are developed to a 19th report using the all-year volume-weighted chain ladder method. Lost-time claims are developed to a 10th report, which is assumed to be at ultimate. Similar to large claims, the all-year volume-weighted chain ladder method was employed.
The formulas are as follows:
\[FAST_{ELC} Frequency =\frac{\small\text{At 19th report }\small{FAST_{ELC}}\small\text{ Claim Counts}}{\small\text{(Ultimate Lost-Time Claim Counts / 10,000)}} \] \[SLOW_{ELC} Frequency =\frac{\small\text{At 19th report }\small{SLOW_{ELC}}\small\text{ Claim Counts}}{\small\text{(Ultimate Lost-Time Claim Counts / 10,000)}} \]
The development Factors for the 1st - 10th unit report levels are derived from NCCI’s Statistical Plan data while the development Factors for the 10th - 19th unit report levels are derived from NCCI’s Call 31 data. Refer to the Unit Statistical Data Valuation and Due Dates table in Appendix B for more information on the unit report levels.
This slide deconstructs the frequency of FASTELC claims by diagnosis group for Accident Years 2012 through 2021. The overall FASTELC frequency per 10K lost-time claims was calculated using NCCI’s Statistical Plan data, which was then linked to NCCI’s Medical Data Call to identify the diagnosis group. For this analysis, each Accident Year is developed to a 19th report using the all-year volume-weighted chain ladder method.
This slide deconstructs the frequency of SLOWELC claims by diagnosis group for Accident Years 2012 through 2021. The overall SLOWELC frequency per 10K lost-time claims was calculated using NCCI’s Statistical Plan data which was then linked to NCCI’s Medical Data Call to identify the diagnosis group. For this analysis, each Accident Year is developed to a 19th report using the all-year volume-weighted chain ladder method.
After claims were identified as FASTELC or SLOWELC using the definitions established in the Deconstructing Large Claims slide, the most common injury characteristics were identified using the Cause of Injury, Nature of Injury, and Body Part fields as reported in NCCI’s Statistical Plan data.
Large claims were identified as FASTELC or SLOWELC using the definitions established in the Deconstructing Large Claims slide and evaluated as of the fifth unit report level. For each cohort of large claims, the most common occupation groups were identified using the Class Code field as reported in NCCI’s Statistical Plan data. The ranges represent the minimum and maximum shares that the selected occupation groups account for in any single accident year over the given timeframe. For example, construction-related occupations account for up to 31% of all FASTELC claims at the fifth unit report level. Refer to the Unit Statistical Data Valuation and Due Dates table in Appendix B for more information on the unit report levels.
Large claims were identified as SLOWELC using the definition established in the Deconstructing Large Claims slide and evaluated as of the fifth unit report level. For slow-emerging claims, the most common occupation groups were identified using the Class Code field as reported in NCCI’s Statistical Plan data. The ranges represent the minimum and maximum shares that the selected occupation groups account for in any single accident year over the given timeframe. For example, clerical occupations account for up to 6% of all SLOWELC claims at the fifth unit report level. Refer to the Unit Statistical Data Valuation and Due Dates table in Appendix B for more information on the unit report levels.
FASTELC and SLOWELC claims were identified using NCCI’s Statistical Plan data, which was then linked to NCCI’s Medical Data Call to identify the ages.
Large claims were identified as FASTELC or SLOWELC using the definitions established in the Deconstructing Large Claims slide. For each cohort of large claims, the most common outcomes were identified using the Injury Type field as reported in NCCI’s Statistical Plan data. Injury types were evaluated as of the most recent unit report level for each claim. Refer to the Unit Statistical Data Valuation and Due Dates table in Appendix B for more information on the unit report levels.
Large claims were identified as FASTELC or SLOWELC using the definitions established in the Deconstructing Large Claims slide. Next, incurred loss amounts were trended to Accident Year 2021. Incurred indemnity losses are trended using Average Weekly Wage values from the Quarterly Census of Employment and Wages (QCEW) as a proxy. Incurred medical losses are trended using the Personal Health Care index published by the Bureau of Labor Statistics (BLS).
The losses were then developed to a 19th report using the all-year volume-weighted chain ladder method. The development Factors for the 1st - 10th unit report levels are derived from NCCI’s Statistical Plan data while the development Factors for the 10th - 19th unit report levels are derived from NCCI’s Call 31 data. Refer to the Unit Statistical Data Valuation and Due Dates table in Appendix B for more information on the unit report levels.
This slide deconstructs the loss development of large claims by FASTELC and SLOWELC designation, and provides non-large claims as a benchmark for which to compare. Medical payments are broken out into various categories and trended to December 2021 using inflation factors from the Bureau of Labor Statistics (BLS); refer to the Medical Cost Categories and Inflationary Factors table in Appendix B for more information. The trended medical payments by category are then developed to a ten-year claim maturity (i.e., ten years after the initial accident) using the all-year volume-weighted chain ladder method. Finally, the trended and developed medical payments by category are recombined to produce the overall medical values displayed above.
The “growth factors” displayed in this slide start at 1 and can be interpreted as the increase in medical costs after the first year. For example, the yellow line displays a growth factor of 1.7 ten years after the injury for fast emerging claims, indicating 70% growth. So, if a fast-emerging large claim had $1M of medical treatment costs in the first 365 days after the initial injury, then this claim would incur an additional $700K of medical costs in years 2 through 10, totaling $1.7M over the first ten years.
This slide deconstructs the medical costs for non-large claims in Year 1 and Year 10 to demonstrate how the medical services for these claims evolve over time. Medical payments are broken out into various categories and trended to December 2021 using inflation factors from the Bureau of Labor Statistics (BLS); refer to the Medical Cost Categories and Inflationary Factors table in Appendix B for more information. The trended medical payments by category are then developed to a ten-year claim maturity (i.e., ten years after the initial accident) using the all-year volume-weighted chain ladder method. Finally, the trended and developed medical payments by category are recombined to produce the respective shares displayed above.
Note that this is an incremental analysis. Meaning, Year 1 represents all medical costs incurred within the first 365 days after the initial accident, and Year 10 represents all medical costs incurred in the tenth year after the accident. The Year 10 metrics displayed above are not a summation of Years 1 through 10.
This slide deconstructs the medical costs for the selected FASTELC claims in Year 1 and Year 10 to demonstrate how the medical services for these claims evolve over time. Medical payments are broken out into various categories and trended to December 2021 using inflation factors from the Bureau of Labor Statistics (BLS); refer to the Medical Cost Categories and Inflationary Factors table in Appendix B for more information. The trended medical payments by category are then developed to a ten-year claim maturity (i.e., ten years after the initial accident) using the all-year volume-weighted chain ladder method. Finally, the trended and developed medical payments by category are recombined to produce the respective shares displayed above.
Note that this is an incremental analysis. This means Year 1 represents all medical costs incurred within the first 365 days after the initial accident, and Year 10 represents all medical costs incurred in the tenth year after the accident. The Year 10 metrics displayed above are not a summation of Years 1 through 10.
This slide deconstructs the medical costs for all other FASTELC claims in Year 1 and Year 10 to demonstrate how the medical services for these claims evolve over time. Medical payments are broken out into various categories and trended to December 2021 using inflation factors from the Bureau of Labor Statistics (BLS); refer to the Medical Cost Categories and Inflationary Factors table in Appendix B for more information. The trended medical payments by category are then developed to a ten-year claim maturity (i.e., ten years after the initial accident) using the all-year volume-weighted chain ladder method. Finally, the trended and developed medical payments by category are recombined to produce the respective shares displayed above.
Note that this is an incremental analysis. Meaning, Year 1 represents all medical costs incurred within the first 365 days after the initial accident, and Year 10 represents all medical costs incurred in the tenth year after the accident. The Year 10 metrics displayed above are not a summation of Years 1 through 10.
This slide deconstructs the medical costs for slow-emerging claims in Year 1 and Year 10 to demonstrate how the medical services for these claims evolve over time. Medical payments are broken out into various categories and trended to December 2021 using inflation factors from the Bureau of Labor Statistics (BLS); refer to the Medical Cost Categories and Inflationary Factors table in Appendix B for more information. The trended medical payments by category are then developed to a ten-year claim maturity (i.e., ten years after the initial accident) using the all-year volume-weighted chain ladder method. Finally, the trended and developed medical payments by category are recombined to produce the respective shares displayed above.
Note that this is an incremental analysis. Meaning, Year 1 represents all medical costs incurred within the first 365 days after the initial accident, and Year 10 represents all medical costs incurred in the tenth year after the accident. The Year 10 metrics displayed above are not a summation of Years 1 through 10.
This slide displays the composition of the “Other” medical cost category for FASTELC claims. Medical payments for FASTELC claims are broken out into the categories displayed above and trended to December 2021 using inflation factors from the Bureau of Labor Statistics (BLS); refer to the Medical Cost Categories and Inflationary Factors table in Appendix B for more information. The trended medical payments by category are then developed to a five-year claim maturity (i.e., five years after the initial accident) using the all-year volume-weighted chain ladder method.
This slide highlights key points in the medical journey of a hypothetical injured worker with a low back strain to demonstrate how a SLOWELC claim might develop over time. The services shown are an illustration of such claims.
This slide displays the share of overall medical costs for SLOWELC claims that are attributable to prescription drugs, broken out by opioids and non-opioids, for Accident Years 2012 through 2019. Medical payments for SLOWELC claims are broken out into various categories and trended to December 2021 using inflation factors from the Bureau of Labor Statistics (BLS); refer to the Medical Cost Categories and Inflationary Factors table in Appendix B for more information. The trended medical payments by category are then developed to a five-year claim maturity (i.e., five years after the initial accident) using the all-year volume-weighted chain ladder method.