In a May report, the National Council on Compensation Insurance(NCCI) described the condition of the workers' compensation marketas "deteriorating." In making that assessment, we pointed to anumber of significant challenges confronting market stakeholders,including: 

• Premium decline—2010 net writtenpremium for workers' compensation private carriers declined another1.3 percent (a disturbing trend, albeit this was a much smallerdecline than those of the prior two years).
• Deteriorating underwritingresults—With investment yields at historic lows, thecurrent levels of underwriting losses are notsustainable. 
• Claim frequency—It is unclear whetheran upward tick in claim frequency is a "new normal" or a one- ortwo-year phenomenon coming on the heels of the GreatRecession.
• The political situation in Washington,D.C.—With the enactment of the financial reform billand the establishment of the new Federal Insurance Office, theinfluence of the federal government over property & casualtyinsurance issues is likely to increasesignificantly. 
• The health care reform bill—Theimpact of this bill on workers' compensation insurance remainsuncertain.
• Rising medical expenses—The averagemedical cost per lost-time claim increased 2 percent in 2010.

In dealing with many of these challenges, the market will needto wait for the economy to spring back, or for employers to onceagain begin meaningful hiring, or for our leaders in Washington toagree on a final disposition of national health care.

That is not to say, however, that there are no actions that canbe taken to reduce system costs. One area in particular thatappears ripe for attention is the growing issue of obese workersand the extra costs those workers cause the system.

A Growing Epidemic
As any casual observer of the news knows, the incidence ofobesity in the U.S. is growing dramatically. Intuitively, theimplications of this trend for workers' compensation aredisturbing.

The Centers for Disease Control and Prevention (CDC) reportsthat being overweight or obese appears to increase the risk ofincurring one or more diseases and adverse health conditions,including:

• Hypertension (high blood pressure)
• Dyslipidemia (for example, high total cholesterol or highlevels of triglycerides)
• Type 2 diabetes
• Coronary heart disease
• Stroke
• Osteoarthritis (a degeneration of cartilage and its underlyingbone within a joint)
• Gallbladder disease
• Sleep apnea and respiratory problems
• Some cancers (endometrial, breast, and colon)

The CDC warning is consistent with other research findings. A2008 study published in the Journal of Occupational andEnvironmental Medicine reported that in a survey of overweightand obese people, more than half of the respondents indicated thatthey suffered from at least one of the three leadingheart/circulatory-related illnesses; more than 30 percent sufferedfrom two or more illnesses (co-morbidity).

Despite the obvious health consequences, obesity continues togrow virtually unchecked in the U.S. Witness the following alarminggrowth in state obesity levels compiled by the CDC:

• In 1990, among states participating in a CDC survey, 10 stateshad a prevalence of obesity less than 10 percent, and no states hada prevalence equal to or greater than 15 percent.
• By 1999, no state had a prevalence less than 10 percent, 18states had a prevalence of obesity between 20–24 percent, and nostate had a prevalence equal to or greater than 25 percent.
• In 2009, only one state (Colorado) and the District of Columbiahad a prevalence of obesity less than 20 percent; 33 states had aprevalence equal to or greater than 25 percent, and 9 of thesestates had a prevalence of obesity equal to or greater than 30percent.

Productivity and Medical Costs in theWorkplace
As might be expected, excess weight also adversely affects workperformance. In fact, the more medical problems there are, thegreater the deterioration in performance. While it is evident thatexcess weight and related co-morbidities play a role inabsenteeism, it appears that they especially contribute to declinesin on-the-job performance. 

Health-related costs are also much greater for overweight andobese employees with co-morbidities. This is true in terms ofemergency room visits, visits to medical providers, and days ofhospitalization.

A 2007 Duke University study published in the Archives ofInternal Medicine confirms that the high costs associated withexcess weight also characterize workplace injuries and workers'compensation costs, stating: " … nearly six workers comp claimswere filed per 100 workers of normal BMI, compared with more than11 claims filed per 100 of the heaviest workers."

Similarly, medical and indemnity severity increase steadily withthe injured worker's body mass index (BMI). The costs associatedwith obese injured workers are more than double the average costsof workers of normal or "recommended" weight.  NCCI Research on Obesity
NCCI's own research confirms that work-related injuries are farmore costly if the injured worker is obese. The dramatically highermedical costs suggest that the types of injuries sustained by obeseworkers are more likely to result in permanent disabilities.

Our research team paired more than 7,000 claims with obesity asa secondary diagnosis with more than 20,000 claims with virtuallyidentical characteristics: primary diagnosis, gender, industrygroup, year of injury, and approximate age.

Key findings included measuring the development of medical claimcosts over time and on an individual pair basis:

• Twelve months after the date of injury, the paid medical costsof obese claims were three times greater than the medical costs ofthe matched non-obese claims.
• Cumulative medical payments for obese claims continued to growat a faster pace than the non-obese claims; at 36 months they werefour times more costly.
• By 60 months, the difference in medical payments for the obesewas more than five times greater than those for the non-obese.

These findings reflect differences in total dollars. From apersonal perspective, it is worth noting that for the vast majorityof claims—on a pair-by-pair basis—the claim with the obesediagnosis might be 40 to 90 times more expensive. To a largeextent, this reflects the fact that a large portion of thenon-obese claims were relatively low-cost, medical-only injuries;their obese counterpart often involved a much more extensive rangeof medical services.

Our study concluded that there are notable and systematicdifferences in the outcomes for obese and non-obese claimants withcomparable demographic characteristics. The study also concludedthat there is greater risk that injuries will create permanentdisabilities if the injured worker is obese. (Additionalinformation on NCCI's research on obesity is available at ncci.com.)

What Can Be Done?
Given a difficult workers' compensation environment, the need forcarriers and employers to adopt innovative strategies to reduceboth injuries and medical costs is all the more important.

Many companies, including NCCI, have turned to corporate-widewellness programs to encourage healthier employees, reduced medicaland insurance costs, and a more vital workplace.

Among the elements included in successful programs are:

• Biometric screenings and health assessments
• Encouraging appropriate exercise
• Diet and nutrition education
• Annual health assessments
• Positive goal setting
• Constant reinforcement and education.

Each of these measures offers a good first step towardaddressing and reducing the incidence of obesity in theworkplace.

Obtaining more data about obesity and its impact on workplaceinjuries also is important. Given past experience that obesityclaims are more likely to be permanent disabilities and have highercosts, one way to control costs is to collect data on claims forheight and weight. For example, the province of British Columbia,Canada, employs consultants to collect data on height and weight onapplications for workers' compensation benefits.

If that data were available in the U.S., then insurers couldbecome aware up front if obesity is likely to be an issue. If so,the insurer could try to improve the outcome for the injured workerand his family by keeping the claim from becoming a permanentinjury and, in turn, reducing duration. Depending on the addedcosts of managing these claims, it might also reduce overall claimcosts.

In terms of prevention, insurers could also consider offeringincentives similar to those already in place for drug-freeworkplaces. Ultimately, however, it is up to individuals to takeresponsibility for their own health.

Clearly, there are marked differences in outcomes for obese andnon-obese workers who sustain injuries with comparable primarydiagnoses. In particular, injuries sustained by obese workers aremore likely to be permanent disabilities.

That realization should serve as both a wake-up call and anopportunity for carriers, employers, and employees to seek moreeffective strategies to reduce obesity in the workplace. Thepromised result will not only reduce medical costs and minimizetime off the job, but it will result in healthier and moreproductive employees.