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While it obviously presented challenges, 2020 is looking like it may not have been such a bad year for workers’ compensation insurers and insureds after all.
Insurers took in less premium but paid fewer claims. They managed to one of the lowest combined ratios in history. An increasing number of workers were able to be treated via telemedicine, meaning they did not have to travel. Injured workers, including COVID-claimants, appear to have received their medical care without much delay. And the vast majority of COVID-19 claimants needed only limited treatment.
On the down side, 2020 may have seen a return of opioid over-prescribing.
Experts from the industry’s data and rating organization, the National Council on Compensation Insurance (NCCI), recently shared their preliminary analysis of 2020 claims data. In a virtual roundtable, COVID-19 and Workers Compensation: Data and Insights, Donna Glenn, chief actuary at NCCI, was joined by colleagues Len Herk, executive director and senior economist; Raji Chadarevian, director of medical regulations and informatics; and Vicky Mayen, director and actuary, to discuss what early workers’ compensation data reveal about the nature of COVID-19 claims, medical care, claimants and costs to date.
NCCI looked at results through the third quarter of 2020 and extended those through the end of the year. NCCI uses data from private carriers and state funds in 41 jurisdictions but its data does not include many public entities such as first responders or health care entities including hospitals and nursing homes that are largely self-insured. The NCCI figures are calendar year and do not reflect the full costs of treating COVID-19 or other health conditions with long-term effects.
Overall for 2020, NCCI projects an 8% decline in premium to $38.6 billion, the lowest since 2014. That is accompanied by a 7.6% decline in losses and a favorable 86% calendar year combined ratio.
COVID-19 Claims
Worker claims due to COVID-19 have ranged from no symptoms to critical care, hospitalizations and, unfortunately, fatalities in some cases.
The overall COVID-19 claims picture is by no means dire. “The larger majority of the cases that we see are small and have only required the injured worker to miss work and quarantine or recover at home,” reported Chadarevian.
The workers’ compensation system typically sees few indemnity-only claims and that has continued. While there have been some indemnity-only claims from the COVID-19 experience, “hospitalization and the use of the intensive care unit are key cost drivers,” he said.
While about 80% of the COVID claimants received very limited treatment, 20% of the injured workers were admitted to the hospital, and those have been the costliest and most complicated cases. The typical COVID inpatient stay lasts on average about seven to eight days and costs just under $40,000, Chadarevian said.
“The most severe cases are ones where the injured worker needed to be in an intensive care unit for at least parts of their hospital stay,” he said. Overall ICU cases, which make up just under 20% of the hospitalized workers, last about 12 days on average and they cost just over $62,000.
There have been some extreme cases where workers were hospitalized for an extended period of time leading to costs far above the average. There has been one situation where an “injured worker was there for multiple months and the total costs exceeded a couple of billion dollars.”
The data reveal some demographics on those workers who filed COVID-19 claims. The large majority, almost 70%, are women. These claimants are also generally older than the typical injured worker, with a large share age 55 years and older.
Also, injured workers who contracted COVID-19 and required medical treatment were more likely to have comorbidities such as hypertension and chronic pulmonary disorder, Chadarevian said.
“This provides some perspective, but we recognize that this is not the whole story,” he cautioned.
Glenn said that COVID-19 claims are predominantly among frontline workers including first responders, healthcare and other essential workers. However, she said, teachers are another class of workers that’s has been “significantly” impacted.
“They are the ones that are showing up earlier in the data,” Glenn said, affirming Chadarevian’s observation that many of those hospitalized also are older and have comorbidities.
Medical Care
While the workers’ compensation industry may be slow to hop aboard the latest health care trends, the pandemic has accelerated its use of telemedicine in what panelists suggested could be a lasting change.
Chadarevian said NCCI medical data shows that the share of active claims with at least one telemedicine service has increased from “almost nothing” at less than a third of a percent before 2020 to approximately 14% in the second quarter of 2020. The usage varies by state from about 5% in Arkansas to more than 30% in Maine.
The most notable increase in telemedicine in workers’ compensation has been for evaluation and management, things that are done in office visits, at almost 12%. There has also been an increase of 10% in the use of telemedicine for psychological evaluations.
While some in the industry have been concerned about delays in medical treatments for injured workers due to the pandemic, NCCI said its early analysis shows only minimal delays.
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At the same time, the share of active claims with either major or minor surgery remained steady (between 12% and 13%) over the last two years and into the second quarter of 2020, with no apparent delay in procedures performed. There is, however, some preliminary indication that the mix of surgeries may have changed, according to Chadarevian.
There is a “potentially troubling trend” in prescribing patterns, Chadarevian continued. The drug share of medical costs started to climb in 2020 back to levels not seen in a couple of years. “This seems to be partly driven by opioid experience. The use of opioids had been declining at roughly 3% per quarter since 2018, but in 2020, the use of opioids started increasing,” he said.
In the second quarter, opioid utilization was up 10%.
“This is a signal of what I would call a very concerning trend,” said Glenn.
At the same time, Insurance Journal has reported some are concerned that quarantine and social distancing have disrupted treatment and recovery services for those battling addiction who may also be more susceptible to COVID-19 than other workers.
NCCI also said active medical claims with at least one medical service or encounter in the workers’ compensation system went down in the second quarter by 15%. New claims in the second quarter decreased about 26%, but even activity on older claims dropped about 9%. This was a time when many businesses were closed or had restricted activity.
“There’s clearly more to it and the story will continue to develop with additional data,” he said.
Loss Data
While workers’ comp incurred loss data can vary from quarter to quarter, the change in the second quarter last year with its lockdowns and virus spread was even more dramatic.
According to Mayen, for private carriers countrywide, direct incurred loss has increased by almost 9% in the first three months of 2020 compared to the first three months of 2019. Then they “decreased drastically” in the second quarter, bringing the cumulative incurred loss change through second quarter to about negative 8%.
An NCCI survey last fall of large private workers’ comp carriers suggested that decreases in non-COVID loss dollars appear to have more than offset increases directly attributable to COVID. Mayen said these NCCI survey results are consistent with the decline in incurred loss as observed during the second quarter of 2020. Since the second quarter drop, after which the economy began to show signs of recovery, cumulative changes through third quarter 2020 appear to have stabilized at negative 7.6%.
Mayen estimated that given the reductions in both the losses and premium and assuming that expense ratios will remain at the same level as 2019, the industry will have an 86% combined ratio for workers’ comp calendar year 2020. That, she said, would be the third lowest combined ratio in history and the seventh consecutive year of underwriting gains.