Although the coronavirus pandemic has had enormous impacts on people and businesses, initial fears about COVID-19’s effects on workers’ compensation have not come to pass, and the line generally remains healthy. Still, it’s important that employers be mindful of several developing trends that could result in claims challenges this year and beyond. And it’s vital that they — with the help of trusted advisors — stay focused on limiting losses and containing claims costs.
In early 2020 — soon after COVID-19 emerged as a threat in the US, — many insurers, employers, and others were understandably concerned about the disease’s potential short- and long-term impacts on workers’ compensation. In April 2020, for example, the National Council on Compensation Insurance projected that COVID-19 could result in losses of between $2.7 billion and $81.5 billion in those states where NCCI provides rulemaking services.
More than 18 months after the World Health Organization declared a pandemic, those initial fears have generally proven to be overstated. Through the end of 2020, private carriers and state funds reported 45,000 pandemic-related claims to NCCI, totaling $260 million in losses — an average cost per COVID-19 claim of approximately $6,000. An estimated 56 million employees are covered by private carriers and state funds in NCCI jurisdictions, making the COVID-19 claim frequency approximately 8 claims per 10,000 workers.
The distribution of COVID-19 claim values to date further highlights the pandemic’s limited impact on workers’ compensation risks for the vast majority of employers. In NCCI jurisdictions, two-thirds of COVID-19 claims through year-end 2020 cost less than $1,500 each; nearly nine in ten cost less than $5,000 each. Only about 1% of reported COVID-19 claims totaled $100,000 in costs, accounting 60% of COVID-19 losses to date (See Figure 1).
The reality is that the cost of the average COVID-19 claim is lower than the typical “core” workers’ compensation claim. What’s more, only a handful of industries accounted for 90% of all COVID-19 claims through the end of 2020: healthcare, nursing and convalescent homes, first responders, restaurants, building operations, distribution, and retail (see Figure 2).
The down economy, meanwhile, has helped to limit overall claims figures. In California, for example, non-COVID-19 claims volume fell more than 15% from the first quarter of 2020 — largely before the threat of COVID-19 took hold in the US — to the first quarter of 2021, according to the Workers’ Compensation Insurance Rating Bureau of California (see Figure 3). Medical-only claims fell at an even greater pace — more than 20% during the same period.
Favorable claims trends are one reason why the workers’ compensation line generally remains healthy. According to A.M. Best, net premiums written fell 10% in 2020 — as employers’ payrolls shrank significantly — while expense ratios rose. The combined ratio for workers’ compensation rose to 91.1 — higher than in 2019 but well below the breakeven mark of 100.
A.M. Best reported that even as premiums fell by double digits, efforts by employers to improve workplace safety contributed to an overall decline in lost-time claims frequency, and workers’ compensation remained more profitable than other major lines. Insurers are also benefitting from other favorable trends, including drops in fraudulent claims, injury rates, and defense costs.
Claims trends, however, have varied by region, and not all recent developments have been positive. In July, nearly 1,500 COVID-19-related workers’ compensation claims were reported in Florida, and more than 800 such claims were reported in Texas — more than double the number reported in each state in June. Texas has also reported more than 500 COVID-19 vaccine reaction claims from mid-December 2020 through August 1, 2021, which may be a sign of a growing challenge for employers as vaccination rates rise nationally.
Although reactions to COVID-19 vaccines have generally been mild — consistent with the symptoms commonly associated with the flu vaccine — some more serious adverse reactions have been reported. If an employer mandates that employees be vaccinated, a workers’ compensation claim filed by an employee with an adverse reaction could be found compensable, as vaccination might be seen as a requirement for work.
Another long-term trend for employers and insurers to monitor is the potential development of long-term health complications for COVID-19 claimants. Even among those with initially mild illnesses, “some people continue to experience symptoms that can last months after first being infected, or may have new or recurring symptoms at a later time,” according to guidance jointly published in July by the Department of Health and Human Services and the Department of Justice.
So far, COVID-19 claims costs have generally been low, and have not materially impacted overall workers’ compensation results. But the emergence of “long COVID” — which the guidance described as “a persistent and significant health issue” — warrants close monitoring by employers.
A complicating factor for employers — one that precipitated many of the dire projections during the pandemic’s early days — has been regulatory action by various states. To date, roughly half of all states have introduced laws and regulations dictating how workers’ compensation coverage will respond to COVID-19 cases, according to Oliver Wyman research.
A number of these actions create “rebuttable presumptions” that employees in certain professions — for example, first responders — who contract COVID-19 have been infected while working. This has made it easier for many employees to file claims alleging exposure to COVID-19 during the course of work.
Although some of the actions introduced during the early days of the pandemic are now expiring, some states are implementing or exploring the implementation of presumptions that would go beyond COVID-19, to address other types of occupational injuries and illnesses, including psychological conditions. Many of these new actions apply specifically to first responders.
Some states are introducing more sweeping changes. In September, California Governor Gavin Newsom signed into law SB 606, which creates a new rebuttable presumption that an employer with multiple worksites has committed an “enterprise-wide” workplace safety violation if the employer has a written policy or procedure that violates California Division of Occupational Safety and Health regulations or if CAL/OSHA finds evidence of the violation occurring at multiple locations.
Although there have been many positive developments in 2021 for employers and the country as a whole, significant uncertainty about the pandemic remains, including about when it will end. The delta variant of the coronavirus continues to spread — particularly in regions where vaccination rates are stagnant — and it is unclear when and if herd immunity can be achieved in the US and elsewhere.
Despite the fact that COVID-19 claims have not materialized in large numbers to date, employers should remain vigilant. Among other items, employers should continue to focus on:
Although not feasible for workers in all professions, remote work will likely remain a significant feature of the workplace long after the threat of COVID-19 fades. Although working from home can have some drawbacks, employees have by and large demonstrated that they can remain productive away from the office, and employers are embracing it as a way to reduce costs and attract talent.
As remote working continues, employers should be mindful of the associated risks, many of which have manifested throughout the pandemic. Remote workers are particularly susceptible to repetitive stress injuries, slips and falls, and mental health challenges. Some common injury types common to telecommuters — for example, musculoskeletal disorders — can take years to develop.
A significant driver of these injuries is poor workspace design. Employers should work to identify, mitigate, and resolve specific issues that could contribute to pain or discomfort before they escalate to work-related injuries. Employers taking these steps while introducing other specific safety measures can theoretically reduce the injury risk for their remote workers to be no greater than it would be in office settings.
Employers should also develop clear teleworking policies and have employees sign telework agreements before transitioning to remote work. Such agreements can address eligibility criteria, expectations of working hours, and technology requirements, among other considerations.
Beyond the actions employers can take themselves, it’s vital that employers work with claims advisors that can offer experienced adjusters and help them implement best practices.
Of particular importance is working with third-party administrators (TPAs) and insurers to develop clear and detailed plans to prepare the possibility of a future uptick in claims volume. Thorough investigation of COVID-19 claims, through which claims professionals can establish timelines and potentially prove or disprove where a claimant contracted the disease, is also crucial. Some TPAs have developed specific COVID-19-related interview questions that employees should be asked when first reporting their illness.
In addition, experienced and knowledgeable claims advisors can help employers to navigate the implications of rebuttable presumptions and other relevant state laws and regulations, including reporting requirements. They can also work with risk professionals and other stakeholders — including HR departments — on challenges associated with contract tracing.
Managing Director, Worker’s Compensation Center of Excellence, US Casualty Practice
Director of Workers’ Compensation Claims, Marsh’s Workers’ Compensation Center of Excellence