How COVID-19 is Changing Workers’ Compensation Insurance

The National Council on Compensation Insurance will now allow the COVID-19 pandemic to be treated as a catastrophic event in workers’ compensation loss cost and rate filings.

“We had specifically listed some perils that we were charging for. We had listed domestic terrorism, earthquakes, catastrophic industrial accidents, and in addition to those we are going to include pandemics and any other catastrophe resulting in $50 million dollars in losses,” said Jeff Eddinger, senior division executive of the NCCI.

Workers’ compensation, which is not run by the federal government, but by individual state statutes, is a no-fault system intended to cover medical treatment and loss of wages for any employee who sustains an injury on the job.

If an employee sustains an injury on the job they can file a claim, and if the claim is found compensable, the workers’ compensation insurance provides the employee paid time off in the form of two-thirds of their average weekly wage, and coverage of all medical treatment to heal from injuries sustained in the course of and arising out of employment. 

“In workers’ compensation there are more than 600 individual job classifications, and when an insurance company goes to write a policy for an employer, they have to say what does that employer do? If they work for a restaurant, we assign them to restaurant code and payroll, and multiply by the rate for restaurants,” said Eddinger. 

Each year, the NCCI files rates in 38 states based on job classifications, and this is reviewed each year by the council for anything that might cause the rate to change. 

“For example, how many injuries happened at Costco last year? Slips, falls, back strains, those things are different every year, and every year we have to add up all those claims for every employer and job classification, and determine whether the rate should go up or down for individual job classification,” said Eddinger. 

However, for the first time in over 10 years the largest rating organization in the country decided to establish a separate rate, independent of job classification, for any COVID-19 claim filed. 

There is only one other time in history where a separate rate independent of job classification was established. 

This was shortly after the 9/11 terrorism attack in New York City. The council worked to address funding for terrorism and successfully got 38 states to adopt an independent rate for workers compensation claims for terrorism to exist independent of a normal workplace injury. 

A few years later, the council introduced another additional rate for earthquakes, catastrophic industrial accidents, and domestic terrorism, and which will now include the COVID-19 pandemic, and any other future pandemics. 

This additional rate will equate to one penny for one hour of work charged for catastrophes other than terrorism.

“If one of these events happens, we will not include the claims data in our rate making because there is this separate charge that exists. We made our decision for our 38 states and will have to see how other independent states will handle theirs,” said Eddinger.

Since every state makes its own rules regarding workers’ compensation insurance, there are still five states which have not yet added on this additional rate for catastrophes like COVID-19, and those states are Florida, Texas, New Mexico, Missouri and Virginia. 

“For the five states that don’t have it, we want to introduce it, and feel it’s necessary to have something in place,” said Eddinger.

Eddinger said that there have already been 45,000 workers’ compensation claims filed by employees for COVID-19 injury, totaling $260 million in incurred losses, which amounts to about $6,000 total per claim.

There’s also been a shift in the types of claims filed, as typically what is called “medical only” claims get filed, meaning the individual did not lose time from work, but did receive treatment for their workplace injury.

“Before COVID when you look at the distribution of claims, the vast majority of them, 75%, are medical only, meaning you get a small injury at work and get stitches, or soothe a burn. The medical expenses are involved, but you don’t miss time from work,” said Eddinger. 

However, Eddinger said that those who have been filing COVID-19 claims will typically not check into the hospital or clinic due to mild symptoms, and the majority of the funds from workers’ compensation insurance go to paying for their time off work during quarantine to recover. 

Still, there are a small percentage of COVID claims which have been very costly, and these usually involve individuals with pre-existing conditions like obesity or diabetes. These claims can cost hundreds of thousands of dollars, and although Eddinger said this accounts for only 1% of the claims filed so far, they account for about 60% of the total losses. 

“The purpose for that separate penny is to fund for things like that,” said Eddinger. 

The first filing by the council was released on July 9, and the majority of those rate filings will become effective by January 21, 2022, once state insurance departments review and approve them. 

“Starting now we will probably submit three or four filings each month, so the process can take several months,” said Eddinger.