Does experience rating reduce sickness and disability claims? Evidence from policy kinks

Workers' Moral Hazard and Insurer Effort in Disability Insurance

“…This research suggests that employer and/or insurer incentives reduce workers' disability claims (Koning, 2016). For public DI schemes, there is evidence that experience-rated DI premiums for firms are an e↵ective tool for doing so (De Groot & Koning, 2016;Koning, 2009;Kyyrä & Paukkeri, 2018;Korkeamäki & Kyyrä, 2012). In addition, Lurie et al (2019) show that the number of disability claims correlate with firm size, also suggesting that employers play a role in preventing worker disability.…”

A burden too big to bear? The effect of experience‐rated disability insurance premiums on firm bankruptcies and employment*

“…If DI benefit costs of smaller firms are largely driven by conditions that are beyond the firms’ scope of control, this leads to a loss of social welfare. Accordingly, policymakers might want to mitigate the effect of premium adjustments with premium caps (as in the Netherlands) or with a mixture of differentiated and collective premiums – as in Finland and France (see, e.g., Lengagne, 2016; Kyyrä and Paukkeri, 2018). Ultimately, the efficiency costs of such measures – that is, increased inflow into the DI scheme – should be weighed against the risk of extra bankruptcies.…”

“…Presumably, smaller firms have limited resources to financially accommodate the premium adjustments that are inherent to experience rating. If DI benefit costs are driven by conditions that are beyond the scope of control of these firms, this might be considered an argument to mitigate the effect of premium adjustments with premium caps (as in the Netherlands) or with a mixture of differentiated and collective premiums – as in Finland and France; see, for example, Kyyrä and Paukkeri (2018) and Lengagne (2016).…”

A cofinancing model for disability insurance and local government employers

“…Hakola and Uusitalo (2005) and Korkeamäki and Kyyrä (2012) find that employer liability for early retirement reduced the uptake of early retirement. Meanwhile, Kyyrä and Tuomala (2013) and Kyyrä and Paukkeri (2018) use program extensions and size cutoffs for identification and find no evidence that experience rating contributed to a lower inflow to early retirement, something they attribute to the complexity of the framework.…”

“…The yardstick principle is also attractive in that it combines cofinancing with a credible mechanism to ensure that the central government finances the DI system in the aggregate. The yardstick principle is also quite transparent, which helps address the concern that incentives can be blunted by opacity, a concern that has been raised in the context of the Finnish system (Kyyrä & Paukkeri, 2018).…”