California Workers’ Comp Bureau Lowers Mid-Range Estimate of COVID Costs by $10B

By | May 26, 2020

The Workers’ Compensation Insurance Rating Bureau of California published estimated costs of allowing state workers to receive benefits for COVID-19 claims without proving virus exposure at work, dropping a prior mid-range estimate by $10 billion.

In a report published on Friday, WCIRB estimated the cost of COVID-19 claims filed by workers subject to the May 6, 2020 Executive Order N-62-20 issued by Gov. Gavin Newsom, putting it in the range of $0.6 billion to $2.0 billion, with a mid-range estimate of $1.2 billion.

The order provides for a rebuttable presumption of compensability for all workers directed by their employer to work outside their home applicable for the period of Mar. 19, 2020 to July 5, 2020.

The mid-range estimate of $1.2 billion, represents 7 percent of the $18.3 billion estimated annual cost of workers compensation claims in the system prior to the pandemic, WCIRB said.

WCIRB noted that its latest cost evaluation differs from an earlier evaluation of a potential conclusive presumption, which was published on April 20 in advance of the final order. In that analysis, WCIRB had developed a range of cost estimates extending from $2.2 billion to $33.6 billion, with a mid-range estimate of $11.2 billion.

In the new analysis, the highest estimate—$2.0 billion—falls below the lowest on in the prior report. The actual language of Newsom’s order allowed WCIRB to fine-tune several key assumptions, which help to explain the differences in the estimates:

  • The order is limited to an approximate four-month period, two of which have already elapsed.
  • The order applies to all workers working outside the home at the direction of their employer.
  • The order calls for a rebuttable rather than conclusive presumption of compensability.

“Our estimates reflect the potential cost impact arising from COVID-19 diagnoses during the time the order applies and do not reflect costs for potential extensions of the order or future legislation,” Friday’s report says.

The report also notes that the order requires a positive test for COVID-19 or a diagnosis of COVID-19 by a licensed physician that is confirmed by a positive test within 30 days. Given this, WCIRB’s cost estimates exclude any potential costs for workers who are quarantined, but have not been diagnosed with COVID-19.

Although a media statement announcing the new result states that the cost analysis reflects a rebuttable rather than conclusive presumption of compensability, in a section of the report that documents claims frequency assumptions, the analysts note that it is “unclear whether a significant share of claims filed by workers subject to the order will be rebutted” based on feedback from claims and legal experts. “As a result, the WCIRB did not reflect any offset for this provision” in its frequency estimates, the report states.

Comparing the two analyses side-by-side reveals that while the latest one assumes more California workers impacted by the order (8,335 in the May analysis, up from 6,772 in the April analysis), and while assumed claim costs for all claim types are higher, the May analysis assumes significant declines in the number of claims for mild, severe and critical claim types.

The number of mild COVID comp claims assumed in the May analysis, for example, are less than 7 percent of the number assumed in May (25,400 vs 378,300). Death cases are also lower but the assumed number of compensable deaths dropped by about 50 percent (1,600 vs 3,300).

Editor’s note: The original article appeared on Claims Journal.

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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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