Firm-Level Early Intervention Incentives: Which Recent Employers of Disability Program Entrants Would Pay More?

The authors used linked Social Security (SS) administrative data to analyze SS Disability Insurance (DI) program reform proposals that would hold firms partially responsible for a portion of the DI benefits paid to their recent employees. One proposal would require employers to carry short-term disability insurance; the second proposal would apply an experience rating to the DI portion of the Federal Insurance Contributions Act premium. Our analysis creates baseline firm-level benefit liability measures, simulates firm liabilities under the proposals, and compares the simulated liabilities to the baseline measures.

We found that the proposals would place a relatively large burden on low-wage firms with fewer than 500 workers.

The policy implications of the findings are:

• Firms with high potential liabilities face competing incentives to accommodate and retain or reduce hiring and retaining workers at high risk for medical problems.
• Although these proposals would likely reduce DI expenditures, they might have less desirable unintended consequences.