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COVID-19 WC - Actuarial Key Considerations

COVID-19 has altered the way people work. Some organizations—like hospitals, PPE manufacturers, and grocery stores—are experiencing a dramatic uptick in demand. Others—like restaurant, retail, and travel industries—are struggling to make ends meet. All face a similar problem: uncertainty regarding their workers compensation costs.

COVID-19 Key Considerations for Retained Workers Compensation Claims

The following is a list of key considerations in evaluating the impact of COVID-19 on workers compensation claims – both directly related to COVID-19 infection and indirect impacts from economic and societal changes:

Compensability of COVID-19 Claims

Generally speaking, to be compensable and subject to workers compensation benefit eligibility, a claim must arise out of the course and scope of employment and be caused by conditions particular to work. The eligibility criteria leave a big question mark regarding the compensability of claims from employees infected with COVID-19. The ultimate determination depends on statutes, regulations, and court interpretations specific to an individual jurisdiction. Additional considerations: 

  • Some jurisdictions have different standards for different diseases. 
  • Some jurisdictions exclude ordinary diseases of life, such as influenza, from coverage. 
  • Specific employee classifications, most notably those involved in healthcare with direct patient contact, and public safety officers, may have lower thresholds of compensability than other employee classifications. 
  • Some jurisdictions have implemented material policy changes that impact the compensability of COVID-19 related claims. For detailed information on these changes, please review our accompanying COVID-19 WC Legislative Update document.
The claims process is likely to lengthen during this pandemic, leading to an increase in claim severity resulting from the postponement of workers compensation hearings and mediations, and limited claimant access to doctors, nurse case managers, and medical services. Reduced availability of transitional duty jobs may also serve to increase claim costs for claimants who would have otherwise been able to return to work.

Claim Frequency and Severity

Societal and economic impacts on workers compensation claim frequency and severity may include the following:

  • Health Care Coverage Some states have mandated that health insurance must cover testing and emergency room/ urgent care visits related to COVID-19 without deductibles or copays. These types of measures may serve to temper workers compensation claim activity related directly to the illness. Actions taken by individual employers may have the same impact. 
  • High Demand Industries and Essential Services The hiring of new employees to meet growing demand in some industries could lead to an increase in claims, as claim incidence rates associated with new employees are typically higher than those related to longer-tenured employees. Additionally, employees performing work to which they are not accustomed may lead to higher average severity of claims. The new demand for these workers may lead to longer working hours, which may increase the number of claims. Essential businesses may also see an increase in mental stress claims. Compensability of mental stress claims varies by jurisdiction. 
  • Economic Impacts Sectors most affected by sudden job loss and furloughs may see an increase in workers compensation claims as employees seek to supplement their lost income. Potentially offsetting this increase, remaining employees may file fewer claims due to concerns over job security. The overall impact is unknown at this time. An economic downturn may also lead to an increase in claim severity. For example, employees may be more likely to involve attorneys in their claims, and claimants who are already receiving temporary disability benefits may attempt to extend those benefits.

Employers Liability

Employers liability may serve as a remedy for an employee who believes the infection was the result of employer negligence. If an employee’s family member contracts COVID-19 from the employee after the employee contracted the virus at work, an employers liability claim may arise.

Teleworking Companies

With a material shift to a teleworking environment, employers may see an increase in claims for injuries related to non-ergonomic work stations and other potential safety hazards in employees’ homes. Compensability of incidents related to these issues will vary by jurisdiction. Less exposure to other work-place hazards may have a counter effect. 

Claims Handling Considerations

The claims process is likely to lengthen during this pandemic, leading to an increase in claim severity resulting from the postponement of workers compensation hearings and mediations, and limited claimant access to doctors, nurse case managers, and medical services. Reduced availability of transitional duty jobs may also serve to increase claim costs for claimants who would have otherwise been able to return to work. 

Cost Shifting:  Workers Compensation and General Healthcare/Disability

For larger firms that retain risk, a significant portion of workers compensation costs as well as a significant portion of general healthcare/disability costs may both be retained by the firm as self-insurance (or some financial equivalent).  In these situations, the emergence of COVID-19 creates a real and material additional cost to firms due to employee illness, regardless as to whether that cost materializes as a workers compensation cost, or as a general healthcare/disability cost. 

The specific “bucket,” workers compensation or general healthcare/disability, where the cost of an employee’s illness falls, as well as the portion of that cost which is funded by the firm, will depend on workers compensation law as well as the firm’s specific general healthcare/disability benefits program.  Therefore, as various jurisdictions amend their workers compensation laws to accommodate COVID-19 as a workers compensation claim for certain employees, it is important to remember that estimates of the additional workers compensation costs of these law amendments do not necessarily represent new additional costs to the firm.  Rather, at least a portion of these additional workers compensation costs would likely have been paid for by the firm as a general healthcare/disability cost prior to the law amendment.

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See our summary of COVID-19 workers compensation regulatory updates here

COVID-19 WC - Actuarial Key Considerations


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