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The impact of COVID-19 on Workers' Compensation creates uncertainty

The National Council on Compensation Insurance (NCCI) reported in December that nearly two-thirds of the more than 100 insurance leaders surveyed cited pandemic-related issues as their top concern, indicating they are most worried about the uncertainty of the duration of the pandemic, the number and size of COVID-19 comp claims, and how long it will take workers and the economy to recover. The second most pressing concern was whether COVID-19 compensability presumptions that have been enacted in multiple states will become permanent or evolve to include other diseases and if there will be an increased appetite for expansion of COVID-19 compensability in other states, particularly if they had a change in leadership. The other three top concerns are the overall impact of the pandemic on the health of the U.S. economy, rate adequacy in workers' comp, and the impact of working from home on compensable injuries, ergonomics and overall worker safety.

Here's what we know is happening now:

Flurry of presumption activity

A flurry of presumption bills, both COVID-related and non-related, are being considered in states and several are opting to extend their expiring orders and laws. Alaska, Iowa, Minnesota, Nebraska, New York, Oregon, Texas, and Virginia are considering rebuttable presumptions for certain workers who contract COVID-19. Some are restricted to first responders, essential and health care workers, whereas others apply to a wide range of workers. Vermont's Governor, Phil Scott, signed an extension of the state's temporary COVID-19 workers compensation presumption law for frontline workers to July 1, 2021, and Illinois lawmakers filed an amendment to extend the presumption of compensability for workers who acquire COVID-19 on the job to June 30, 2021.The Missouri Division of Workers' Compensation this week published an emergency rule decreeing that if a first responder contracts COVID-19, the only evidence needed to show that the contagion was work-related is a statement from the employer.

Ohio passed a law establishing a fund to compensate first responders who suffer post-traumatic stress disorder without a corresponding physical injury. Connecticut, South Carolina, Wisconsin, and California are exploring presumptions for mental health and/or certain cancers contracted by frontline workers. Missouri lawmakers introduced legislation that would presume diagnosed PTSD by first responders was acquired on the job. Virginia lawmakers are considering adding "salaried or volunteer emergency medical services personnel" to the existing presumption law regarding death or disability from respiratory disease, hypertension, heart disease, or cancer. New Hampshire is considering a bill that would make a first responder's death by suicide eligible for workers' compensation benefits.

Presumption laws, which put the burden on employers to prove that a particular condition was not work-related, are changing the way stakeholders think of workers' comp.

Surge of COVID-19 cases in 4th quarter

While claims have varied significantly by state, preliminary data indicates COVID-related claims were higher in November and December than at any other time of the year in many states. CorVel Corp., a third-party administrator, reported that COVID-19 workers' compensation claims increased in 17 states in the fourth quarter, with the Midwest region showing a 20% uptick in claim volume. Workers aged 37 - 56 represented 70% of the claims, with an average cost of $2,366, and fewer than 1% costing more than $75,000.

COVID-19 claims in California represented over 50% of all claims in December, soaring to 32,549. This brings the total number of COVID-19 claims for accident year (AY) 2020 to 103,712, or more than one out of every six workers' comp claims with a 2020 injury date, according to a new analysis by the California Workers' Compensation Institute (CWCI). It's predicted that this will soar even higher when the final figures are in.

Florida was an exception, with claims falling in the fourth quarter to about 5,500. About $55.4 million was paid out for more than 29,000 COVID-19 medical and indemnity claims in 2020, with 9,000 open COVID-19 claims at the end of the year. While coronavirus claims accounted for 31.5% of all indemnity claims in 2020, the vast majority of claims cost less than $5,000, with just eight claims costing more than $500,000 and a total of $6.7 million paid out for those higher-cost claims. The denial rate was 43 percent.

The distribution across industries is consistent in most states. The health care sector and public safety/government workers continue to account for more COVID-19 claims than other sectors and claims from retail workers ticked up in the fourth quarter, likely related to holiday shopping. Researchers from Johns Hopkins University looked at 21,336 workers' compensation claims from Accident Fund filed between Jan.1, 2020 and Aug. 31, 2020 in eleven Midwestern states and concluded, "This suggests that the vast majority of workplaces will not be subject to a high frequency of COVID-19 related WC claims over the course of the pandemic."

In all states, non-COVID-19 workers' compensation claims declined in the first half of 2020 compared with the same period in 2019. By industry, the largest drop of non-COVID-19 workers' compensation claims came from clerical and professional employees, which reported a 57% reduction in the second quarter of 2020, compared with the same quarter in 2019, with the smallest decrease, 25%,reported by the construction industry.

Impact on premium and future outlook

According to NCCI, net premium for calendar year 2020 is estimated to be at just under $39 billion - an 8.1% drop from 2019, but profit levels remained strong and the dire predictions at the beginning of the pandemic did not materialize.The rapidly declining payrolls from small businesses that were hardest hit were somewhat offset by the decline in claim frequency from business shutdowns during the pandemic.

However, not reflected in the rating agency's numbers are larger organizations that purchase high-deductible policies or self-insured and public entities. In most cases, these employ people who worked continually on the front lines and have incurred higher cost COVID-19-related claims, some multi-million-dollar losses. The costs of long-term medical complications and the potential for future PTSD claims are unknown.

A new report from NCCI points to several expected economic changes in 2021 that could adversely affect workers' comp:

The uncertainty of how the workplace will look in the future coupled with the need to address pandemics as a new risk for the industry create a substantial challenge for the future.

Surveys of employees

Employer takeaway: For the return to work to be successful, employers need to take the time to understand what worries their employees the most. While implementing policies and protocols is a key first step in creating a safe work environment, they won't ensure a safe return if employees are not trained, if coworkers don't follow the guidelines, and if managers and supervisors aren't trusted. Workers also need to know of long-term solutions underway, such as improving air quality, to make their workspaces safer and healthier.