Workers Compensation: Lessons Learned From the Pandemic

The COVID-19 pandemic has taught us tough lessons. We have learned the strengths and limitations of globalization, our public health systems, and our ability to respond during a crisis.

In the US workers compensation (WC) system, the pandemic has reinforced the necessity of workplace safety, the flexibility required of employers, employees, and policymakers, and the vital role that our system plays in the economy. It has also taught us lessons about being alert and watchful for future issues.

Strength and Resilience

Frontline healthcare workers and first responders, along with many in the essential workforce, have demonstrated remarkable courage and selfless sacrifice during the pandemic. They have confronted the disease face to face, at times without widespread availability of needed personal protective equipment or a full understanding of the virus itself. Their resilience and professionalism in caring for COVID-19 patients created many of the indelible images from the crisis.

Frontline healthcare workers also felt the direct impacts of the pandemic on a personal level. According to NCCI data, nearly 75% of reported COVID-19 WC claims have so far involved workers at nursing homes, hospitals, and other healthcare settings, plus first responders.

In all, data from NCCI states presented during the 2021 Annual Issues Symposium shows 45,000 COVID-19 claims and $260 million in workers compensation losses in Accident Year 2020; that is an average severity of nearly $6,000.

While this claim total is significant and the pandemic has been devastating for families, we have not seen the number of claims that some feared might severely strain the WC system. While premiums declined 10% in 2020, the calendar year combined ratio for private carriers was 87% and the reserve redundancy grew to $14 billion, both signs of strength and resilience in our system. This is the fourth year in a row with a combined ratio of less than 90.

Flexibility and Responsiveness

Healthcare providers and policymakers rapidly adjusted to the challenges of the pandemic. For example, the medical community quickly adopted telemedicine. It required swift action by policymakers and regulators to make telemedicine more accessible. Now, there are signs that telemedicine may have an expanded long-term role in our healthcare system.

At the onset of the pandemic, some outlets for medical services either closed or limited their services to telemedicine and, in the case of hospitals, had to defer nonessential surgeries. This created concerns that injured workers might not receive prompt, necessary care—which may impede their recovery and drive higher claim costs. However, NCCI research shows that COVID-19 had limited impact on time to treatment. The pandemic caused treatment times to slow during the first surge of the virus in the second quarter of 2020, but by the third quarter, time to treatment recovered to prepandemic levels.

Staying Alert to Future Risks

The pandemic is not over, but it currently appears to be receding in the US as we enter the summer months of the second year. It is vital that we remain vigilant about the risk of a potential new surge or a new COVID-19 variant, the impact of vaccines, and the speed of economic recovery.

Increases in the April and May Consumer Price Index (CPI) have sparked conversations about inflation. Inflation in the US has been benign for many years with the Federal Reserve Board helping maintain core inflation at or below 2% annually. As the economy has recovered quickly in 2021, prices have spiked for used cars, lumber, and other goods, leading some commentators to express concern that inflation might upend the recovery.

While we have experienced several months of consumer price increases as well as rising demand for labor, these may be more likely short-term market adjustments in the rapidly recovering post-COVID economy than a signal of persistent and broad-based future inflation. It could be a risk on the horizon, so we will closely watch the data as well as the actions of the Federal Reserve in the coming months.

Two of the critical economic components for workers compensation, such as the costs related to insurers writing and employers obtaining the coverage, are workers’ wages and medical costs. Employment has been ramping up rapidly after the pandemic recession, and there are some signs of rising wages. On the medical side, 2020 data for NCCI states shows a shift in the overall distribution of claims because of the pandemic, but no rapid increase in medical costs. In fact, compared with 2019, NCCI estimates that the 2020 change in average medical lost-time claim severity will moderate—somewhere between plus or minus 2%.

It is critical for NCCI and other stakeholders to remain alert to identify long-term trends that could impact the health of the WC system.

Making a Difference

The workers compensation system has responded swiftly and effectively in a moment of crisis. Insurers, policymakers, regulators, employers, and other stakeholders have worked together and embraced innovations to make workplaces safer, provide treatment, and pay claims. Together, they have made a difference in the lives of the people they serve. We must remain focused so that we may continue to deliver the help and support for injured workers and their families.

This article was originally featured in Insurance Journal.

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