RAND Reports on COVID Effects on Worker's Comp Industry
Sacramento, CA - RAND Corporation recently released a new Perspectives Report that examines policymakers' initial efforts and reasoning around enabling access to workers' compensation benefits for employees who are required to work outside their homes during the COVID-19 pandemic.
They briefly assess the potential impacts of continuing to expand such access on workers, employers, and insurers. And finally, they pose further questions that policymakers and others may want to consider when evaluating past policies and crafting new ones to meet future public health emergencies.
The coronavirus disease 2019 (COVID-19) pandemic has posed incredible challenges to the U.S. workforce. Although many businesses have transitioned employees from on-site work to telework, frontline employees in certain sectors deemed "essential" (e.g., hospitals and other health care facilities, public safety agencies such as police and fire departments, critical infrastructure such as electric and water utilities, or the food supply chain) must continue to work on-site.
Depending on the specific public health restrictions in place, many "nonessential" businesses have also operated in a manner that requires employees to work on-site and, in some instances, to have extensive contact with customers, vendors, and suppliers.
As of July 31, 2021, 36 states, the District of Columbia, and Puerto Rico have either implemented or are considering changes to make it easier for some classes of workers who contract COVID-19 while working outside the home to obtain benefits.
In a majority of states that have expanded workers' compensation presumptions, the presumption takes effect upon either a positive COVID-19 test result or physician's diagnosis. In Mississippi, North Dakota, and Washington, the presumption takes effect once a worker is ordered to quarantine by an employer because of suspected COVID-19 exposure.
Workers' compensation actuaries in a majority of states have adopted regulations excluding COVID-19 from experience rating. NCCI proposed a rule change omitting COVID-19 claims from experience rating calculations. To date, 34 out of the 36 states (excepting Alaska and Nebraska) within NCCI have approved the rule change. Additionally, all states not covered by NCCI have approved similar rule changes.
The COVID-19 pandemic has, so far, not had dramatic impacts on the profitability of the workers' compensation insurance market. Far from the dire predictions at the start of the public health emergency, many employees who have contracted COVID-19 have recovered relatively quickly, without the need for long-term, costly medical care or time off from work. And although numerous laws and regulations have been enacted across many states, many of the COVID-19 claims have not ultimately met the requirements for compensability.
Additionally, some observers have noted that overall claims frequency in 2020 declined in many states. A study by the Workers' Compensation Research Institute found that in the second quarter of 2020, “the volume of non–COVID-19 WC [workers' compensation] claims . . . [dropped] by at least 30 percent in the vast majority of the states and by as much as 50 percent in Massachusetts” (Fomenko and Ruser, 2021, p. 8).
The biggest risk that insurers now face is the unknown long-term health implications for people who have recovered from a serious COVID-19 infection. Patients admitted to intensive care units are generally at greater risk of long-term adverse health outcomes. Some experts also anticipate that "in addition to claims for occupational exposure to COVID-19, an influx of posttraumatic stress and mental health claims could also be on the way" (Marsh, 2020, p. 5).
It will take decades to fully understand what, if any, serious long-term side effects patients who have recovered from COVID-19 will face. Insurers face uncertain risk around tail costs, which include the potential for latent claims filed for lifetime medical, permanent disability, or death benefits.
The RAND Researchers conclude by saying "The effects of the COVID-19 pandemic on the U.S. business and labor market will last far beyond an official declaration that the pandemic has ended."