This article is current as of June 9, 2021
Most state workers’ compensation (WC) laws clearly state that a disease to which the general population is exposed is exempt from WC. On the surface, this exemption appears to limit the impact of COVID-19 on WC coverage. Many states, however, have “presumption laws” pertaining to occupational disease and employment. These laws have historically been applied to specific employee classifications and illnesses. States have been expanding these statutes recently to include claims related to COVID-19 as well as other employees. Presumption of exposure at places of employment will have implications on frontline first responders, but how about retail employees? Insurance is state regulated and the implications by state will complicate the estimation process for healthcare providers and other entities retaining workers’ compensation exposure at a time when COVID-19 has disrupted business as usual.
Actuaries predominately rely on historical claims development to predict future claim estimates. When new exposures hit the insurance market, actuarial estimates can become significantly more volatile until they are part of the history or are integrated in an alternative way. As a result, unpaid claim estimates are potentially underestimated for 2020 depending on the state in which an employee works. While few have made significant COVID-19-related adjustments to 2020 actuarial workers’ compensation estimates, engaging an actuary can help provide insight into the reserve landscape in 2021. Adverse development on historical reserves will have a direct impact on EBITDA.
The challenges could begin where presumptive claims intersect with the emergence of additional COVID-19 long-term symptoms. Several symptoms have already been identified as long-hauler symptoms. Although being discussed within the industry, current actuarial estimates generally do not contemplate longer-term complications from the virus. While these “long-haulers” currently represent a small subset of the exposed COVID-19 population, given the novel nature of the virus, the possibility of additional adverse long-term symptoms should not be ruled out.
Included below is a summary of legislative action from several states, chosen to represent the variety of positions to date. The steps taken by a given state may directly impact 2020 claims development during 2021 and beyond.
The Industrial Commission of Arizona issued a substantive policy statement effective on May 15, 2020 advising that claims handlers may not categorically deny COVID-19 claims. A denial of a COVID-19 claim must be well grounded in fact.
California State Bill 1159 (SB1159) enacted on September 17, 2020 is an extension of an executive order issued by California Governor Newsom in May 2020. SB1159 not only protects first responders and healthcare workers, but also provides an Outbreak Presumption for those required to work outside the home if their workplace suffers an outbreak. Employers with fewer than one hundred employees at a workplace will have suffered an outbreak if four or more required workers test positive.
Connecticut executive order 7JJJ issued by Governor Lamont on July 24, 2020 provided a rebuttable presumption to an employee missing a day of work due to COVID-19 and deemed essential by the Department of Economic and Community Development pursuant to Executive Order 7H. This executive order remained in effect for six months and has now expired.
Florida CFO Directive 2020-05 issued by Chief Financial Officer Patronis provides for WC benefits for frontline state employees who contract COVID-19. Frontline workers include firefighters, paramedics, corrections officers, healthcare workers and the national guard, unless the State can show, by the preponderance of evidence, that the employee contracted COVID-19 outside of his or her scope of employment.
Illinois House Bill 2455 (HB2455) became law on June 5, 2020. HB2455 creates a rebuttable presumption for individuals employed by essential businesses and operations, as defined in Executive Order 2020-10 dated March 20, 2020, as long as those individuals are required by their employer to encounter members of the general public or to work in employment locations of more than 15 employees. HB2455 applied to all cases tried with a COVID-19 diagnosis made before December 31, 2020. A similar law, HB4276, was signed on February 26, 2021, extending the reporting timeline.
Iowa proposed legislation HF121 provides coverage under the Iowa occupational disease law. If an employee can “show that the employee was exposed to a person infected with COVID-19 or a similar disease while in the workplace, there shall be a rebuttable presumption that the employee’s infection with COVID-19 or a similar disease is an occupational disease for which an employer is liable for compensation.” Iowa pending legislation HF138 provides a rebuttable presumption that an employer shall pay an employee with a COVID-19 infection that is “a personal injury arising out of and in the course and scope of employment, a minimum of two weeks of weekly compensation benefits pursuant to section 85.33, subsection 1, to allow for a period of recovery and to minimize infections of other employees.”
Minnesota Law 2020, Chapter 72, effective April 8, 2020, provides employees a presumption of an occupational disease covered by the Minnesota workers’ compensation law. The employee must be employed as a peace officer, healthcare worker or a person required to provide childcare to first responders or healthcare workers.
Nebraska pending Legislative Bill 441 (LB441) provides a rebuttable presumption for an essential worker who has suffered from an accident arising out of and in the course of his or her employment. Essential workers required to report to work are proposed to include healthcare workers, food processing employees, school employees, grocery store employees and childcare employees.
North Carolina’s two proposed house bills have failed to provide a rebuttable presumption. The presumption was proposed to include food service, retail and other essential personnel.
The Oregon Department of Consumer and Business Services (Workers’ Compensation Division) issued a temporary change to the state’s workers’ compensation rules on September 30, 2020. Insurers must perform a reasonable investigation before denying any claim related to COVID-19.
Wyoming SF1002 signed by Governor Gordon on May 20, 2020 provides a presumption that the risk of contracting the illness or disease was increased by the nature of the employment. Additionally, no COVID-19 injury was chargeable to an employer’s experience rating.
Based on this sample of the various regulations and legislation impacting workers’ compensation COVID-19 claims, the issue will likely remain complex during the immediate future as these regulations and plaintiff attorneys mediate the new status quo for such claims.
The uncertainty around the pandemic and the shelter at home orders have already been very disruptive to the WC claims process. Individual programs have experienced significant closures and treatment lags as a result of the restrictions on non-emergency medical services during 2020, with the additional reluctance by many to seek treatment out of an abundance of caution, even after hospitals reopened. These treatment lags are expected to have an impact beyond 2021, as it will likely be years before we can measure the final implications that delays to non-emergency treatments have on WC programs.