An actuarial method for estimating the long-term, incidence-based costs of Navy civilian occupational injuries and illnesses

Abstract

Problem: Federal agencies primarily depend on summary figures presented in their annual workers' compensation bill to assess current safety and cost containment efforts at their facilities. These figures represent payments for a mix of active cases originating in different prior accident years and can confound this assessment. Method: An incidence-based approach can be used to analyze data in a manner reflecting contemporary rather than historical losses. We describe such an approach — an actuarial method developed for the U.S. Navy to estimate the long-term costs associated with civilian workforce injuries and illnesses sustained at Navy facilities. To project costs, we reorganized case records by accident year to provide payment histories, then applied a series of actuarial models similar to those used in the insurance industry to project future payments. Discussion: A review of incidence-based methods and the “bottom-up” analytical approach employed for this project is presented. We outline the procedures used to build the database, establish accident year cohorts, classify cases, and develop the projection factors necessary to project long-term costs. Impact on Government and Industry: While an incidence-based approach can be considerably more labor intensive than its prevalence-based counterpart, important benefits accrue from having accurate cost information available. Substantial savings are possible if serious cases can be prevented or identified early enough to permit effective use of intervention strategies such as return-to-work or light-duty assignments. With this approach, organizations can isolate current from historical losses to support fiscal responsibility and accountability, and a full spectrum of cost containment strategies.