That is the million-dollar question – or more accurately, the billion-dollar question – for insurance carriers and employers trying to find their way through uncharted territory with the coronavirus pandemic.
The number of states moving to grant workers comp eligibility to frontline and essential workers who fall ill with COVID-19 is growing, and so too, is speculation about how much the accompanying benefits payments will weigh on the system.
Estimates range from just under $3 billion on the optimistic side to over $80 billion on the take-a-wild-guess side. Either way, at this point, the answer, like nearly everything else connected with COVID-19, is just speculation.
The final cost will largely depend on the course that the pandemic takes, along with the course that states take in granting eligibility. If the pandemic steadily subsides, and the number of severe illnesses and deaths that result among workers remains about where it is, there is every reason to believe that costs to the system will remain manageable.
If, on the other hand, the pandemic brings a second or third wave, and front-line workers in hospitals, nursing homes and meatpacking plants are hit with major outbreaks that leave large numbers hospitalized, the costs will soar.
It also will depend on how easy or hard states make it for workers to claim workers comp benefits related to COVID-19. Because workers comp is a state-based system, every state (and U.S. territory) is developing its own rules for who is or is not eligible for benefits, and how easy or hard it is to qualify for those benefits.
Some states are sticking with their status quo, in which infectious diseases are traditionally not eligible for workers comp under any circumstances. Other states are not only making COVID-19 a qualifying occupational disease for claims, but granting a “presumption” for certain ill workers that the disease was contracted on the job — without requiring them to prove it.
In other words, it’s anyone’s guess at this point what the impact on workers comp costs — and by extension insurance premiums — will be.
“There is a substantial amount of uncertainty when determining the ultimate impact of COVID‐19 on (workers comp) expected losses either on a national, state or occupation‐specific level,” the National Council on Compensation Insurance (NCCI) said in a recent research brief. “Depending on the number of infected workers, severity of symptoms, and compensability standards, the degree of variation in estimated impacts may be extreme.”
The brief pegged a potential range of impacts from COVID-19 claims for all workers in the nation at anywhere from $2.7 billion to an eye-popping $81.5 billion. Only time will tell.
How Much Will the Average Workers Comp Claim Pay Out?
The ultimate costs to employers and insurers from COVID-19 will largely depend on how many claims result from relatively mild cases of the disease and how many result from serious cases that land workers in the hospital or, in worst-case scenarios, result in death.
The workers comp system is set up to handle medical bills and lost wages, so COVID-19 claims will reflect those two factors. The NCCI brief estimates that claims for mild forms of the illness that do not result in hospitalization will average around $1,000 in medical costs and $688 in wage replacement. Compared with most workers comp claims for injuries and illness, those costs would rank as relatively modest. That’s why some attorneys believe that the ultimate toll to the system will be far from catastrophic.
“Right now, there are a lot of people getting diagnosed with COVID who are getting better in two or three weeks,” said Atlanta attorney Tom Holder, who is the immediate past president of the Workers’ Injury Law and Advocacy Group, which advocates for the interests of injured workers nationally. “We’re not saying that’s minimal, but a case like that doesn’t put a huge burden on the system.”
Mark Berg, a Concord, California, attorney who has been practicing in the workers comp arena for a quarter century, agrees. “If you get into a car accident and have an injury, you’re going to receive much larger amounts of temporary disability and higher rates of limited disability,” he said. “I think per claim, the costs are not going to be that great (for COVID-19).”
For those workers who do get seriously ill and wind up in the hospital, however, the average claim cost is expected to soar. The NCCI brief pegs the average cost of such a claim at $25,500 for medical bills and $3,146 for lost wages. Given the current trends with the pandemic, those types of claims are expected to remain relatively rare, but given all that is unknown about the disease and its trajectory over the next several months or years, they could quickly add up if the situation takes a turn for the worse.
How Prepared is the Workers Comp Insurance System to Handle Coronavirus-Related Claims?
Despite the hand wringing and warnings of doom by employers and insurers that extending coverage of COVID-19 under workers comp laws will swamp the system, all indications are that the industry is more than equipped to weather whatever deluge of claims comes.
During a recent symposium on the issue, the NCCI’s chief actuary, Donna Glenn, noted the “unprecedented financial strength and consistent performance” of the workers comp system and declared that it “is well positioned to face the COVID-19 stress.”
Even if the worst-case scenarios develop with the pandemic and resulting claims, few expect that an industry fresh off record profits will crater. At the symposium, Glenn said that 2019 marked the sixth year of underwriting gains for carriers.
Another factor that could limit the blow to the industry is the fact that the pandemic has largely shut down operations at many non-essential workplaces across the country. With more employees working from home, or furloughed from their jobs, there is less opportunity for them to suffer the types of on-the-job injuries such as injured backs and sprained ankles that often lead to workers comp claims. A reduction in those types of claims could at least partially offset the costs stemming from coronavirus-related ones.
And if the worst were to befall the workers comp industry from COVID-19, Holder is confident the federal government would come to the rescue.
“We know that insurers are going to look to get government bailouts if there’s a real problem,” he said. “We know our government is very interested in protecting businesses.”
Will Workers Comp Premiums Rise Due to COVID-19?
This is certainly a concern of many employers and business interest groups. A basic tenet of the insurance industry is that whenever claims and payouts rise, premiums are sure to follow suit.
“I do think it’s a concern,” Berg, the California attorney, said. “I run a small business and my wife runs a small business, and workers comp rates are not cheap and I do think there is a chance that will impact the rates.”
The concern is particularly acute in states like California, which has granted arguably the most liberal extension of workers comp benefits to workers impacted by COVID-19. An analysis by the California Workers’ Compensation Insurance Rating Bureau found that California’s move could increase workers’ comp costs anywhere from $2.2 billion to $33.6 billion. Gov. Gavin Newsom’s executive order, which grants a presumption that any employee working outside the home who contracts COVID-19 did so on the job, allows insurers to “adjust the cost of their policies.”
Meanwhile, in the state hit hardest by the pandemic, New York, a similar analysis by the New York State Compensation Insurance Rating Bureau projected an increase in workers comp costs that could exceed $31 billion, compared with current annual costs of about $8.7 billion, if that state were to make COVID-19 a compensable occupational disease.
Of course, the impact on claims, and therefore premiums, is likely to be much more modest in states that are more cautious or reluctant to extend workers comp eligibility for COVID-19, or have more limited outbreaks of the disease. So the impact on premiums could vary considerably from state to state.
“I think states are going to debate whether the cost of covering those types of infections is worth the peace of mind of employers and employees having that backstop behind them on a state level,” said David Langham, a deputy chief judge in Florida for workers compensation claims, in a recent webinar on the topic.
From the Employers Perspective: Workers Comp Covering COVID-19
It’s easy to assume that covering COVID-19 under workers comp is a boon for employees and a bust for employers. Workers can receive compensation for medical bills and lost wages tied to an infectious illness, which traditionally has not been available to them, and businesses face the prospect of more claims and, as a result, higher workers comp premiums.
That’s how it may turn out in some cases, but it’s not quite that simple. A strong argument can be made that covering COVID-19 under workers comp also offers important protections to employers, especially in workplaces that are hit with serious outbreaks, such as meatpacking plants and nursing homes.
The reason is simple. Workers comp is a no-fault system that largely protects employers from being sued for negligence in the operation of their workplaces in exchange for guaranteeing limited benefits to employees who get injured or sick as a result of their work. The liability protection provided under workers comp was one of the primary reasons that businesses signed onto the system over a century ago, something that has come to be known as the “grand bargain” between workers and employers.
Holder points to the hypothetical example of a meatpacking plant that suffers a devastating outbreak of COVID-19 that results in multiple worker fatalities.
“Does that plant really want wrongful death suits brought by those deceased workers. …that could be devastating to that business,” he said.
Workers whose COVID-19 illness is covered by workers comp can still theoretically sue employers for “gross negligence” if they can show a blatant and thoughtless disregard for worker safety, but those cases are historically difficult to prove even for standard workplace injuries, let alone an infectious disease that is invisible to employers and workers alike until symptoms arise.
However, in situations where COVID-19 is not covered by workers comp, employees would be free to sue on the standard grounds of negligence, which is a much lower bar to clear. And that lower bar may be particularly important when trying to bring a case related to a disease that acts in mysterious ways.
“The difficulty everyone points to with this damned disease is that so many of the cases appear to be asymptomatic,” said Mark Aldrich, professor emeritus of economics at Smith College in Massachusetts, who has written extensively on the history of workplace safety. “They’re like a landmine. You don’t know they’re there until they go off.”
Aldrich says COVID-19 is the first example he knows of in the history of workers comp of an infectious disease being widely covered by the system.
From the Employees Perspective: Workers Comp Covering COVID-19
Workers comp lawyers Holder and Berg both agree the pros of covering COVID-19 under workers comp far outweigh the cons for most workers.
The pros, of course, come down to guaranteed and often swift payments for medical bills and lost wages stemming from a COVID-19 diagnosis. These pros are that much greater in those states that are offering “presumptive” benefits to at least some categories of workers, saving them the trouble of having to prove they caught the disease on the job.
The con, as alluded to earlier, is the “grand bargain” tradeoff that limits workers’ ability to sue their employer for negligence and potentially win a much larger sum for things like pain and suffering and punitive damages. Both attorneys, however, envision those situations as being relatively few.
Holder says the vast majority of workers “are better served by a system that will promptly get them medical care and lost wage benefits.”
And in particularly egregious cases, workers will still have an avenue to sue if they can show that their employer was grossly negligent in protecting them from the dangers of COVID-19. One hypothetical example could be a meatpacking plant where a worker proves that the company pressured employees to come to work while clearly sick, failed to provide masks and other basic protective gear, and ignored basic social-distancing guidelines despite confirmed cases of the novel coronavirus on site.
“I don’t think it will be a great number, but I do think that will be a consideration and there will be such claims (for gross negligence),” Berg said.
About The Author
Craig Lazzeretti is a career journalist based in the San Francisco Bay Area. He spent 25 years with Bay Area News Group (publisher of The Mercury News and East Bay Times) in various roles, including as a business/personal finance editor and an assigning editor on its Pulitzer Prize-winning coverage of the 2016 Ghost Ship warehouse fire. Since 2018, he has worked as an independent writer and editor, contributing to the USC Annenberg Center for Health Journalism, the sports website StadiumTalk.com and the nonprofit California news site CalMatters, among other outlets. Craig can be reached at firstname.lastname@example.org.
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