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There’s nothing new about the fact that COVID-19 has exacted a huge toll on many workers, especially those in healthcare and other jobs requiring close personal proximity. What is new is that the toll on the workers’ compensation system has been far less debilitating than many had feared.
As it turns out, while the pandemic has contributed to more than 500,000 deaths in the U.S., workers’ compensation claims for COVID-19 illnesses and deaths were more than offset by declines in non-COVID claims.
The explanation for this is simple: more remote work meant fewer people on the roads and, consequently, fewer collisions and fewer workplace injuries.
But there’s more to it than that.
A Closer Look at Claims
First, the data suggest that insurance carriers are denying a sizeable number of claims related to COVID-19. Perhaps not surprisingly, denials are lower in states with rules in place to automatically sign off on claims from some front-line workers.
In Texas, for example, where no presumption of eligibility for COVID-19 exists, more than 32,000 claims related to the pandemic were filed through Dec. 6. Insurers denied 45% of those in which workers produced a positive COVID-19 test, according to the state’s Department of Insurance. In California, which has a broad presumption law for certain lines of work, workers filed 93,470 claims related to COVID-19 through the end of December, resulting in denials for 26%.
This state-by-state disparity isn’t likely to go away until we clear up some lingering legal ambiguity over whether COVID-19 qualifies as an “occupational disease” arising directly out of some work environments. Typically, an illness can only be covered by workers’ compensation if it is specific to a profession and not, for example, the flu acquired from a sick co-worker.
Meanwhile, although no national data exist on the number of COVID-19-related claims and payouts, several states have released data suggesting the majority of such claims have been relatively inexpensive for the insurers.
The Impact on Rates
None of this is meant to suggest that COVID-19 hasn’t posed challenges to insurers.
The drop in payrolls triggered by lockdowns and restrictions on commerce have meant less workers’ compensation premiums for the carriers. According to NCCI, a national workers’ compensation data tracking organization, we’re talking about a roughly 8% drop in premiums collected.
How will all of this affect workers’ compensation premiums this year and next?
As we reported in The Mahoney Group’s 2021 Market Report and Forecast, workers’ compensation rates saw a slight uptick over the past couple of quarters and are expected to continue inching up.
The rate changes won’t be dramatic but for many employers, gone are the days of declines in their workers’ compensation premiums.
Companies will, as always, want to keep a close eye on their Experience Modification Factor.
A few tips to help keep your workers’ compensation costs down:
- Make sure your risk management and safety and training programs are up to snuff. Remember, an ounce of prevention truly is worth a pound of cure. Studies have shown that every $1 invested in injury prevention results in a $2 to $6 return for businesses.
- Employers should also take care when hiring, even during a time of labor shortages, to weed out candidates who could pose either a safety or moral hazard risk to the company.
- Make sure your return-to-work program is designed to help injured employees return to work as soon as possible.
As in most insurance matters, the details matter. If you’d like to learn more about risk control strategies to help you weather the current climate, please don’t hesitate to reach out to us.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the nation. As an employee-owned organization, we’ve been protecting what’s yours since 1915. Contact us at news@mahoneygroup.com or 480-730-4920.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.