by Kristie Kline, Lead MSA Analyst and Noel D. Sturtz, Client Program Manager
On March 11, 2020, The World Health Organization (WHO) deemed COVID-19 a pandemic. Two days later, on March 13, 2020, a national emergency is declared in the United States, with the U.S. having the world’s highest number of cases by the month’s end. The Centers for Disease Control and Prevention (CDC) subsequently announced additions to the ICD-10-CM Classification related to COVID-19, the principal diagnosis being U07.1 [confirmed diagnosis of COVID-19], along with COVID-19-related diagnoses. These additional diagnoses include contact with and suspected exposure to COVID-19 [Z20.822); personal history of COVID-19 [Z86.16]; multisystem inflammatory syndrome [M35.81]; other specific systemic involvement of connective tissue [M35.89]; and pneumonia due to coronavirus disease 2019 [J12.82].
COVID-19’s Impact on the Workers’ Compensation Industry
From the start, COVID-19’s impact on the Workers’ Compensation industry has been uncertain. An April 2020 research brief prepared by the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) looked at the potential cost impact of a conclusive presumption of compensability for frontline and other critical workers. Not surprisingly, the WCIRB estimated exposure would be highest among healthcare workers and first responders. Mild cases of COVID-19 (those requiring no hospitalization) were expected to cost the industry $0.7 billion. Severe and critical cases carried a combined price tag of $9 billion, while liability for those cases resulting in death was expected to come in at $1.5 billion. All told, the WCIRB identified a mid-range price tag of $11.2 billion, or 61% of the estimated $18.3 billion annual cost of claims in California prior to the start of the pandemic. The National Council on Compensation Insurance (NCCI) published similar findings in their April 2020 research brief, COVID-19 and Workers Compensation: Modeling Potential Impacts, where they estimated a potential impact of +$1.0 billion to +$16.2 billion for first responders and healthcare workers, for states where NCCI provides ratemaking services. While the presumptions and methodology differed between papers, predictions were dismal across the board.
Rebuttal of Presumption in California
As noted above, the WCIRB’s initial estimate was based on a conclusive presumption of compensability for frontline workers. Indeed, both the initial and ongoing conversation involved whether COVID-19 arose out of employment. As discussed in the April 16, 2020 article, Workers’ Compensation During COVID-19, in The National Law Review, “In a quick-spreading, airborne transmitted virus, it is difficult for many infected workers to conclusively establish how and/or where they were exposed…” That said, on May 6, 2020, California Governor Gavin Newsom issued an Executive Order providing for a rebuttable presumption of compensability. The Order was based on several criteria, including:
- The employee tested positive for or was diagnosed with COVID-19 within 14 days after a day that the employee performed labor or services at the employee’s place of employment at the employer’s direction (on or after March 19, 2020).
- The employee’s place of employment was not the employee’s home or residence.
- The diagnosis was made by a licensed physician, with the diagnosis confirmed by further testing within 30 days of the diagnosis.
- The presumption is disputable and may be controverted by other evidence, but unless so controverted, the [California] Workers’ Compensation Appeals Board is bound to find in accordance with it. The presumption shall only apply to dates of injury occurring through 60 days following the date of the Order.
Other states have issued similar directives addressing coverage in the Workers’ Compensation arena.
Adjusting Estimates & Expectations
Responding to this change, the WCIRB of California lowered its initial projection by $10 billion to a mid-range estimate of $1.2 billion.
The healthcare industry continued to account for the largest percentage of anticipated affected workers, consistent with national expectations. Current statistics bear this out. Recent data out of California indicates the state has recorded approximately 146,000 COVID-19 claims, with the largest number of claims, slightly more than 43,000, attributed to the healthcare sector.
While early estimates warned of possible large-scale losses associated with the pandemic, predictions have not yet become reality, likely due in part to fewer claims than anticipated and in part to industry reluctance to accept claims. A recent Wall Street Journal article, Why So Many Covid-19 Workers’ Comp Claims are Being Rejected, notes a significant percentage of COVID-19 claims have been denied – in some circumstances up to 56%. Other estimates put the denial rate at 37% nationally for COVID-only claims, as compared to pre-COVID denial rates of 11%. Cases in California are consistent with these estimates, with 35% of claims in denial status through May of 2021.
Of course, denials can reduce costs, but additional factors may include broader reputational concerns and limits of liability to consider. Claims managed under the umbrella of the Workers’ Compensation system generally preclude litigation, thus protecting the employer from high dollar awards available in the traditional tort realm. Early cases have already been filed in Illinois and Pennsylvania, with employers facing allegations of negligence resulting in injury and/or death due to COVID-19 transmission in the workplace. While outcomes cannot be predicted, significant awards are not out of the realm of possibility.
Still in Uncharted Territory
Accepting claims is also not without risk. The novel nature of the virus means that we are in uncharted waters when it comes to predicting the trajectory of recovery and future treatment needs. The understanding of COVID-19 continues to evolve from both a medical and public health standpoint. There are a variety of factors yet to be determined, including:
- the standard-of-care treatment
- length of time to recovery
- durability of immunity (and by extension, durability as a predictor of a safe return to work)
- latent effects
- impact on other organ systems
Two additional concerns facing the industry include potential losses associated with aggravation of preexisting conditions and the possibility that a claimant could become a “long-hauler” (someone who continues to suffer the effects of COVID-19 long after a typical recovery has run its course). It has been estimated that up to 10% of COVID-19 sufferers will experience prolonged symptoms, with instances found across all levels of disease severity – from mild cases to those requiring hospitalization with advanced care. In fact, early estimates indicate only 8% of COVID-19 long-haulers were hospitalized for COVID-19. The questions around longer haulers are substantial enough that the National Institutes of Health recently launched an initiative to study the causes, means of prevention, and treatment of those affected by long-haul COVID-19.
Finally, it’s worth noting COVID-19 may also indirectly affect claims. Data indicates fewer claims were filed due to stay-at-home orders, and underwriting companies are beginning to include “History of COVID-19” as a relevant diagnosis for rate age purposes. Increased costs associated with treatment delays and more frequent ergonomic injuries for remote workers, while tangential, could also impact costs.
Concerns Reflected in Recent Claim
Some of the concerns noted above are reflected in a recent claim addressed by MEDVAL. In the case, the claimant alleged she contracted COVID-19 through workplace transmission. The claimant was hospitalized with viral pneumonia, superimposed on a history of preexisting sleep apnea. The claimant initially remained stable but later deteriorated rapidly and required placement in the intensive care unit. The total hospital stay was just under two weeks, and supplemental oxygen was necessary upon discharge. To complicate matters, the claimant continued to experience symptoms after release, and was ultimately diagnosed with chronic respiratory failure and restrictive lung disease. Care was conservatively estimated at over $40,000 for the claimant’s 16-year projected life span.
Unfortunately, if we are certain of one thing about COVID-19, it is that uncertainty abounds. While understanding of COVID-19 has come a long way in the past year, the pandemic’s ultimate impact on the Workers’ Compensation industry may not be known for years. However, navigating the ongoing challenges through proper adherence to protocols and solid claim management can help maximize claimant results and manage costs, despite enduring uncertainty. As the situation evolves, we will continue to share insights into the ongoing impact of COVID-19 on Workers’ Compensation claims.
Please be advised that any and all information, comments, analysis, and/or recommendations set forth above relative to the possible impact of COVID-19 on Workers’ Compensation claims are intended solely for informational purposes and should not be relied upon as legal or medical advice. The positions expressed herein are opinions only and are not to be construed as any form of guarantee or warranty. Finally, given the extremely dynamic and rapidly evolving COVID-19 situation, comments above do not take into account any applicable pending or future legislation introduced with the intent to override, alter or amend current policy language.