Permanent Disability at Private, Self-Insured Firms: A Study of Earnings Loss, Replacement, and Return to Work for Workers' Compensation Claimants

By Robert T. Reville; Suzanne Polich et al. | Go to book overview

CHAPTER 7
EXPLAINING THE DIFFERENCES: THE IMPACT OF FIRM SIZE AND
PRE-INJURY EARNINGS ON WAGE LOSS AND REPLACEMENT RATES

Two significant differences exist between the self-insured and insured firms the number of employees they have and the level of pre-injury earnings of their workers. In this chapter, we explore the differences in wage loss and replacement rates by firm size and by pre-injury earnings within the self-insured and insured firms.

This analysis has a twofold purpose: First, we wish to investigate whether subpopulations by firm size or pre-injury earnings reveal adequacy issues. Second, we wish to investigate whether differences in firm size or earnings within the self-insured and insured groups result in patterns of wage loss and replacement that are similar to the patterns revealed when insured and self-insured firms are compared.

This chapter concludes with a discussion of analyses (reported in more detail in Appendix A) that compare similarly sized and equal-paying firms that differ only in their insurance status.

Table 7–1 shows earnings losses and replacement rates for 1993 injuries at self-insured and insured employers by firm size quartile (number of employees).1 Firm size by the average number of employees within each quartile is reported in the first column of the table. As has been noted previously in this report, the size difference between self-insured and insured firms is clear. An average-size firm within the quartile of largest insured employers is still smaller than every self-insured firm except those in the quartile of smallest firms. At the 25th percentile, the size of self-insured firms is 4,705 employees (with the quartile below that having an average size of 1,715 employees), whereas at the 75th percentile insured firms have only 393 employees (with the top quartile having an average of only 3,932 employees).

If the lower proportional earnings losses at self-insured firms are in part attributable to firm size, we would expect to find that within both the self-insured and the insured firms proportional losses would be smaller the larger the employer. The information in Table 7–1 confirms this prediction, except that when moving from the lowest to the second lowest quartile of self-insured firms, increased firm size consistently leads to lower proportional earnings losses. However, self-insured firms in the lowest quartile in terms of size, which includes firms that on

____________________
1
The quartiles with the fewest number of employees represent firms that fall below the 25th percentile in terms of firm size, the quartiles with the second fewest number of employees represent firms between the 25th and 50th percentiles in terms of size, and so forth.

-55-

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