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

By | May 6, 2020

NCCI recently released projections on the potential impact of the pandemic under various scenarios. In the worst case, 50 percent of workers are infected and 60 percent 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 percent of those workers are infected, the increase in costs would be just $2 billion, assuming 60 percent 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 for coronavirus infections.

Analysts Tally Workers’ Comp Cost of Exposure to COVID-19

Analysts are still fine-tuning and comparing to generate better estimates.

Employers Pushing Back as States Expand Work Comp to Cover COVID-19

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 The Illinois Workers’ Compensation created a similar presumption with an emergency rule change, but the commission repealed that rule on Monday after business groups filed suit.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 percent of workers to 80 percent, and assuming from 20 percent to 100 percent 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 percent 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 in the state would increase costs in that state by $31 billion — compared to current total 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 percent. But the impact varies by state: From a 4 percent increase in Montana to 25% in Texas.

If 10% of workers file a compensable claim, system costs will increase by 85 percent in the NCCI states. That ranges from 39 percent in Hawaii to 245 percent 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 percent of the workforce in NCCI states; first responders make up 1.4 percent.

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

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

NCCI noted that the variations are extreme depending on which scenario is deemed realistic.

“However, there is a reasonable likelihood for COVID‐19 to result in significant WC claim costs during Accident Year 2020,” the organization said.

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

Was this article valuable?

Here are more articles you may enjoy.