Coronavirus reverberates through workers' compensation market

Coronavirus reverberates through workers' compensation market | Insurance Business

Coronavirus reverberates through workers

Workers’ compensation insurers have had a lot on their hands as they manage the fallout from the coronavirus outbreak on businesses across the United States while navigating the evolving regulatory landscape. In Illinois for example, the state’s workers’ compensation commission voted unanimously at the end of April to repeal a controversial emergency rule that created an automatic presumption that frontline workers who contracted the virus got it at work, even if they were working remotely or hadn’t been on the job.

Read more: Workers’ comp liabilities facing work from home employees

The National Association of Mutual Insurance Companies (NAMIC) applauded the repeal, with Andrew Perkins, NAMIC regional vice president – Great Lakes, noting, “The emergency rule was an overreach, both procedurally and legally, and its revocation was in the best interest to ensure a fair process and help employers around the state.”

In other states, the impacts of the COVID-19 outbreak on the workers’ comp insurance marketplace have been varied.

“So far, the impact has been pretty modest on our book of business,” said Jonathan Tudor, senior vice president of communications at State Compensation Insurance Fund in California, adding that the insurer had only seen about 20 claims from insureds a few weeks back. “We haven’t denied any COVID-19 claims and the only claims that hadn’t gotten through turned out to not be COVID-19, so, in other words, an injured worker had made a claim and thought they had COVID-19 and it turned out that they did not … That’s been good for injured workers and it’s good for us so far as an organization – it reflects well on the safety precautions that our employers have put into place.”

In the meantime, State Fund has announced $165 million in additional funding to support businesses and workers impacted by the COVID-19 crisis. These have included doubling the size of its essential business support fund to $50 million.

“It’s a fund that employers can apply to for reimbursement of expenses related to safety improvements and workplace safety measures related to COVID-19,” said Tudor. “The most obvious example would be personal protective equipment (PPE), so things as simple as face shields and masks would be reimbursed and if you have a large organization with quite a few employees, that can be a significant expenditure.”

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State Fund also created a ‘Returning California to Work’ COVID-19 safety protocol fund, which will provide businesses that were not deemed essential by Governor Gavin Newsome’s executive order with grants to help offset the costs of safety-related expenses related to protecting their workforces from COVID-19.

Looking further ahead, the coronavirus pandemic is likely to have a significant impact on the workers’ compensation landscape due to its effect on workplaces.

“For individuals who are not working from home, there’s a heightened exposure potentially for workers’ compensation claims,” said Mike Hessling, CEO, North America, at Gallagher Bassett, during a recent webinar hosted by The Risk Institute at the Ohio State University. “In addition to increased exposures, we expect to see average claims costs increase. You can imagine for someone going out with a COVID-19 exposure, they may be quarantined for up to two weeks or more. There’s potential for ICU or even fatalities with COVID-19, and all of those drive average claim costs up.”

The GB team also expects to see more litigation associated with COVID-19 as regulations continue to change and test what is or isn’t compensable. Meanwhile, for employers, it’s challenging to anticipate what the COVID-19 risk means for their actuarial projections, so their balance sheet accurately represents their financial exposure, given the changing dynamics of workforces.

Read more: How workers’ comp carriers are responding to the pandemic

“From a carrier and claim service organization standpoint, this also has implications. The first is the need to stay constantly aware of the changing regulatory landscape,” said Hessling, highlighting a study from California around the implications of COVID-19 being considered compensable under workers’ comp, which could be more than 60% of the anticipated workers’ compensation spend for that state. “That’s an area that we’re continuing to monitor because that requires us to also apply that same type of regulation to claims we’re handling. It also means that we need to touch claims potentially more than one time.”

As an example, claims that were received in mid- to late March that wouldn’t have been compensable under workers’ comp may now need to be revisited following a change in state regulation. Because this is an evolving regulatory environment, GB likewise needs to have defense counsel more involved with employers to talk about the implications of accepting or denying claims.

Moreover, the fact that 36 million Americans have lost their jobs over the past two months, with three more million people filing new claims for unemployment benefits the week of May 05, has dramatic implications for workers’ compensation.

“We can expect to see a reduction in total workers’ compensation exposures for many industries as people are having to furlough or reduce their overall workforces,” said Hessling. “As we see the unemployment numbers rising, that has implications for potential workers’ compensation total volumes … We would expect as well that with the claims that do exist, claim durations will likely be extended [and] claim costs will be increased.”

As a result of these impacts on the workers’ comp space, Hessling added, “It’s going to be critically important that [businesses] have ongoing conversations with carriers and claims service providers to make sure forecasts associated with claim volumes accurately represent [a] picture of what [their] workforce will look like over the course of the next 12 to 18 months.”