What to Expect in Workers’ Compensation Costs From COVID-19: NCCI

By | May 18, 2020

If only 10% of health care workers contract COVID-19 and all of their claims are deemed compensable, workers’ compensation loss costs for that sector could double or even triple in some states, according to an analysis by the National Council on Compensation Insurance.

NCCI recently released projections on the potential impact of the pandemic under various scenarios. In the worst case, 50% of workers are infected and 60% of their claims are deemed compensable. That would result in $81.5 billion in increased costs — or two and half times current workers’ compensation loss costs — for the 38 states and District of Columbia, where NCCI tracks claims data.

On the other hand, if eligibility is limited to first responders and healthcare workers and only 5% of those workers are infected, the increase in costs would be just $2 billion, assuming 60% of claims are paid.

NCCI said it used a range of scenarios to illustrate the potential impact of a state enacting legislation to expand eligibility to include COVID-19-related claims. The virus has spurred legislation in several states to ensure workers receive benefits.

Minnesota was among the first to amend its state law to create a presumption for health care workers and first responders who are sickened by the novel coronavirus. State lawmakers in California, New York, Ohio, Pennsylvania, Louisiana, Utah and Vermont have introduced similar bills to require compensation for COVID-19-stricken first responders, healthcare workers or “critical workers.”

Kentucky Gov. Andy Beshear issued an executive order creating a presumption that COVID-19 is compensable if contracted by first responders, healthcare workers and workers in several other essential enterprises, including grocery stores. The Illinois Workers’ Compensation Commission created a similar presumption with an emergency rule change, but the commission repealed that rule after business groups filed suit.

Potential Increases

The NCCI analysis examined potential increases in temporary disability income benefits and medical care costs with infection rates ranging from 1% of workers to 80%, and assuming from 20% to 100% of claimants will be awarded benefits. NCCI did not assume any impact on permanent disability benefits. The report says although the virus may cause permanent disability, there is no data about frequency.

A similar analysis by the California Workers’ Compensation Insurance Rating Bureau found that a conclusive presumption for all essential workers, as identified by Gov. Gavin Newsom’s March 19 stay-home order, could increase workers’ comp costs by $2.2 billion to $33.6 billion, with an approximate mid-range estimate of $11.2 billion. That amounts to 61% of the state’s total workers’ comp costs.

The New York State Compensation Insurance Rating Bureau projected that a proposal to make COVID-19 a compensable occupational disease would increase costs for New York by $31 billion — compared to current annual costs of $8.7 billion.

The NCCI data shows a similar potential for dramatic cost increases if a large number of COVID-19 claims are paid. But its data also shows the potential for a major impact even if more modest numbers of claims are paid.

According to NCCI, if only 1% of workers are awarded benefits for a COVID-19 claim, system losses will increase by 8%. But the impact varies by state: from a 4% increase in Montana to 25% in Texas.

If 10% of workers file a compensable claim, system costs will increase by 85% in the NCCI states. That ranges from 39% in Hawaii to 245% in Texas.

NCCI provided further scenarios for first responders and healthcare workers, who have received the most attention from state lawmakers. Healthcare workers make up 9.8% of the workforce in NCCI states; first responders make up 1.4%.

For healthcare workers, a 1% infection rate would increase costs by 16% for the NCCI states. But that ranged from a 7% increase in Hawaii to 65% in Texas.

A 10% infection rate produces more dramatic scenarios. NCCI projected a 237% increase overall. That ranged from 74% in Hawaii to 647% in Texas.

NCCI says the variations are extreme depending on the scenario.

About Jim Sams

Sams is editor of ClaimsJournal.com, the online resource and daily newsletter for property/casualty insurance claims professionals. ClaimsJournal is a member of the Wells Media Group. Sams can be reached at jsams@wellsmedia.com More from Jim Sams

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