Responding to the Impact of COVID-19 on Workers Compensation

The workers compensation system has faced extraordinary challenges in the past 12 months. They just aren’t the same issues we thought we would be addressing when the pandemic hit the US in March 2020.

Recession Risk

The acute crisis for the workers compensation system is the recession, which has devastated employment, especially in hospitality, retail, and travel services, as well as education and healthcare.

In fact, the US Census Household Pulse Survey for Dec 9–Dec 21 estimates that 50% of the US adult population experienced loss of household employment income (either themselves or a household member) since March 13, 2020. An estimated 31% expected a loss of household income between mid-December and mid-January. This drop in payroll, whether from reduced hours, wage cuts, or layoffs, means less workers compensation premium.

NCCI estimates that the drop in payroll contributes to an approximate 8% decrease in overall national workers comp premium for 2020 vs. 2019. That’s a significant issue for insurers and brokers. While it’s not an insurmountable challenge, it is a critical business risk.

It is also clear that the recession has struck workers, industries, and states unevenly. We have seen wide variations in impact depending on where people live, the work they perform, and how local officials have responded to the pandemic.

To help stakeholders navigate the months ahead, NCCI has created an online Employment Scenario Tool. This forecasting model allows users to explore employment recovery scenarios based on state or by industry sector.

Workers Compensation Claims

As the coronavirus spread, the primary worry became the potential for large claims to swamp the system, diminishing carrier financial reserves. Indeed, COVID-19 has taken an extraordinary physical and emotional toll on many workers, especially in healthcare and other work requiring close personal proximity.

Even though the pandemic has contributed to more than 365,000 deaths in the US, the workers compensation system has not been overwhelmed by claims to date. NAIC data through third quarter 2020 shows that total incurred losses have dropped approximately 7.5% compared with the same time period in 2019. While we recognize this is early data and more people will suffer work-related COVID-19 illnesses, carriers have generally suggested that during 2020 decreases in non-COVID-19 losses have more than offset increases directly attributable to the pandemic. For example, significantly reduced mileage has resulted in fewer work-related motor vehicle accidents and more remote work has limited the incidence of typical workplace slips and falls.

Workers who have contracted COVID-19 have generated some claim activity. To date, these losses are predominantly lost time from work. Medical can range from testing costs to intensive care hospital costs. From a recent NCCI analysis of medical payments in the first half of 2020, the top 5% of the COVID-19 medical claims are driving approximately 70% of the medical COVID-19 related payments. This early data validates that serious claims exist, but they are few relative to the total. Among other issues, we are closely monitoring the impact of co-morbidities and are considering the possibility of long-term COVID-19-related health concerns. So, we still have a long way to go to fully understand the claims story from this pandemic.

With losses reducing at nearly the same rate as premium, we can say with confidence that COVID-19 claims will not undermine the foundations of the workers compensation system.

Hunger for Data

If my conversations with industry stakeholders are a guide, there is an insatiable hunger for more information on how the pandemic is affecting workers, employers, and the workers compensation system. NCCI actuaries and analysts have prioritized the delivery of industry insights, tools and information such as:

We designed them to help all stakeholders make more informed decisions in a period of extraordinary uncertainty and remarkable change. We will continue to be vigilant and responsive to ensure that the system remains resilient and effective.

Essential Architecture of Commerce

The US and its workers compensation system continue to face challenging issues. It’s worth noting that just a year ago, a pandemic was not ranked as a top business risk for 2020. But now it is THE issue of our time.

This is a reminder that all of us in the workers compensation system have a duty to injured workers, our communities, and each other. We must face this crisis and prepare for challenges that may lurk around the corner.

Workers compensation is essential to the architecture of commerce in this nation. More than 100 years ago, the industry developed rapidly to create a safety net for workers. Our system balances the needs of employees and employers and has helped create much safer workplaces. The pandemic is another opportunity to renew our commitment to that noble calling: helping injured workers recover.

This article was originally featured in Carrier Management.

​This article is provided solely as a reference tool to be used for informational purposes only. The information in this article shall not be construed or interpreted as providing legal or any other advice. Use of this article for any purpose other than as set forth herein is strictly prohibited.


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