The increase in Workers’ Compensation claims due to COVID-19 is predicted to cause a significant disruption to operations in terms of claims costs, volume and claims management. But what are the challenges the Work Comp industry is up against, and how can you help your employer clients better manage the frequency and severity of these claims as a result of the pandemic?
According to The National Council on Compensation Insurance (NCCI), assumptions for infection rates, hospitalization rates, compensability rates and fatality rates all come into play in an assessment of COVID-19’s potential impact range on the Workers’ Compensation system. While some assumptions have a more pronounced impact than others (and some contain a significant amount of variability), data reported to NCCI shows that if only 1% of workers are awarded benefits for COVID-19 claims, the Work Comp system will experience an 8% loss. However, if 10% of workers are awarded benefits, costs will increase by 85%.
The following presents key pandemic-related issues that could have a significant impact on the Workers’ Compensation system.
On a daily basis, Work Comp adjusters are accustomed to primarily handling injury claims and not as many illness claims, such as those created by the pandemic. With adjusters who may not be trained in the area of illnesses, claims are likely to take much longer to process and result in potential delays and higher costs. Moreover, the large volume of claims due to COVID-19 can stretch available resources, making it difficult for adjusters to manage the backlog of open claims.
For active claims, many injured workers are also experiencing a delay in recovery time as hospitals and clinics put nonessential surgeries and procedures on hold. According to NCCI, treatment delays can also impact injured workers who may not be able to access treatment because physical therapy clinics and other out-patient treatment facilities may be operating on a limited basis or may even have closed due to a lack of patients. As treatments are delayed due to stay-at-home mandates and medical services begin to slowly reopen, claim severity will likely be impacted and continue to drive up settlement costs.
Throughout the pandemic, there have been a multitude of essential workers who have put themselves in harm’s way to help others – and as a result, they may have been exposed to COVID-19. While compensable Work Comp claims are determined on a case-by-case basis, many states are working to expand eligibility determinations for essential workers. Currently, several states, including California, Kentucky, Louisiana, Minnesota, New York, Ohio and Pennsylvania, have already introduced legislation creating a presumption that COVID-19 is compensable for certain essential workers such as first responders and those who work in healthcare. This presumption of eligibility could lead to a significant increase in claim payouts. In fact, according to the Workers’ Compensation Insurance Rating Bureau of California, this presumptive eligibility legislation could increase costs by $11.2 billion, which is 61% of the state’s total current Work Comp costs. New York’s rating bureau estimates that the proposed legislation could increase the state’s Work Comp costs by as much as $31 billion.
Today, insurers are already experiencing a significant uptick in Workers’ Compensation claims. With everyone having to navigate this pandemic, it can be difficult to gauge just how much of an effect COVID-19-related unemployment will have on the industry. As we all adapt to these changes, your business clients will need to be proactive in managing claim volume and severity.
Staying informed about Workers’ Compensation issues and trends can help insurers, employers and stakeholders better manage emerging risks.
To learn how Worldwide Facilities can help, please contact Todd Pollock by calling 508-625-3547 or via email at firstname.lastname@example.org.