6 Workers’ Comp Issues Shaping the Regulatory Landscape Across the U.S.

The ongoing impacts of COVID-19, cannabis legalization and medical cost containment are among the key regulatory and legislative issues that states across the country are grappling with, according to NCCI.

By: Annemarie Mannion | September 25, 2022

The ongoing impacts of COVID-19 in the workplace, cannabis legalization and medical cost containment are a few of the top issues that states across the country are grappling with, according to a report that follows compensation-related legislative activity.

This is the tenth year the Regulatory and Legislative Trends Report has been compiled by the National Council on Compensation Insurance (NCCI).

The 2022 report highlights workers’ compensation-related legislative activity and trending issues throughout the country.

By the Numbers

As of July 31, the report tracked 844 state and federal bills, including 447 bills in states where NCCI provides ratemaking services.

To date, 98 bills were enacted.

In addition, NCCI monitored 243 proposed workers’ compensation-related regulations. As of July 31, 95 of those proposed regulations were adopted.

“As in prior years, medical cost containment was the top theme of the regulations adopted, including medical fee schedules and treatment guidelines, while several of the adopted regulations addressed claims reporting requirements, surcharges, and assessment,” said Laura Kersey, executive director, regulatory & legislative analysis for NCCI.

1) COVID-19

NCCI followed more than 118 bills related to COVID-19 and insurance this year.

Laura Kersey, executive director, regulatory & legislative analysis, NCCI.

“This year we continued to see states focused on COVID-19 legislation, including COVID-19 workers’ compensation presumptions,” Kersey said.

The report found that during 2020 and 2021, 18 states established COVID-19 presumptions through legislation, directives, and/or emergency rules.

Generally, these are presumptions that an employee’s exposure to, or contraction of, COVID-19 is work-related or is a compensable injury or disease.

Most of these presumptions contained expiration dates or sunset provisions tied to the end of the state of emergency or another specified date.

The report noted that several states proposed legislation this year to extend the expiration dates for COVID-19 workers’ compensation presumptions, while some states considered legislation to establish new COVID-19 presumptions.

In addition, several states considered legislation to establish a broader infectious disease workers’ compensation presumption that could be applicable beyond the COVID-19 pandemic.

2) COVID-19 Vaccines

A new trend emerging in 2021 and the beginning of 2022 involved workers’ compensation and COVID-19 vaccinations.

Several states proposed legislation that would either establish a workers’ compensation presumption for an employee’s adverse effects from an employer-mandated COVID-19 vaccination or would specify that injuries from required COVID-19 vaccinations should be compensable under the workers’ compensation law.

In addition, a few states proposed legislation that would create a private right of action against an employer for certain injuries or death resulting from an employer-mandated COVID-19 vaccination.

While the issue of workers’ compensation and COVID-19 vaccinations merits watching, it did not gain momentum during the legislative season and to date none of the bills have been enacted, Kersey said.

3) Mental Health

Another hot topic cited in the report is mental health.

“Workers’ compensation for workplace related mental injuries continued to be a key topic this year, including legislation addressing post-traumatic stress disorder,” Kersey said.

Of the 61 bills NCCI monitored regarding workers’ compensation and mental health, 46 of the bills were related to post-traumatic stress disorder.

A new law in New Hampshire, for instance, reestablishes a commission to study incidence of PTSD in first responders and ensures that mental health training is available for first responders, law enforcement, fire service, emergency medical service and corrections personnel.

In Florida, a new law extends workers’ compensation benefits for PTSD to correctional officers under certain circumstances.

4) Cannabis

While marijuana is still illegal at the federal level, states continue to legalize it in various forms through legislation and ballot measures. States also continue to debate issues around reimbursement for medical marijuana in workers’ compensation.

So far this year, two states — Rhode Island and Maryland — have passed legislation to legalize the recreational use of marijuana.

However, the Maryland legislation requires voter approval of a state constitutional amendment before recreational marijuana will be legal in the state.

Mississippi enacted legislation legalizing the medical use of marijuana, which also provided that workers’ compensation insurers are not required to reimburse for medical marijuana as a workers compensation treatment.

Rhode Island and South Dakota also enacted legislation this year stating that reimbursement is not required.

New Jersey and New York are considering proposals that require workers’ compensation coverage for medical marijuana treatment under certain circumstances.

5) Single-Payer Health

The idea of a single-payer health insurance system has been discussed at both the state and federal levels for years.

To date, no state has fully implemented such an approach, but several jurisdictions, are studying the issue.

Kersey said bills that include a reference to workers’ compensation are of particular interest.

In most states that reference workers’ compensation, the legislation generally contains similar language directing a board of the new state single-payer healthcare program to develop a proposal for coverage of health care items and services currently covered under the workers’ compensation system, including whether and how to continue funding for those health care services currently covered by the workers’ compensation system and whether and how to incorporate an element of experience rating.

Four states, California, Kansas, New York and Rhode Island, considered or are considering single-payer health insurance proposals with a workers’ compensation component.

6) Independent Contractors/The Gig Economy

States continue to debate legislative proposals that provide criteria for determining whether a worker is classified as an employee of a company or as an independent contractor.

This year, two states considered legislation to establish a test for determining worker status, similar to California’s three-part test, also known as the ABC test.

In Rhode Island, proposed legislation would have created a three-part test to determine whether a worker is an employee or an independent contractor, similar to California’s ABC test. The bill was held in Senate committee.

Vermont also considered a multi-prong test for determining whether a worker is an employee or an independent contractor, but the bill did not advance this session.

Three states enacted legislation related to the gig economy.

In Alabama, for instance, a new law excludes certain marketplace contractors (gig workers) who work for marketplace platforms such as Uber, Grubhub, Shipt and others from the definition of employment and considers them independent contractors.

Information By Region

The report also highlights legislative activity and trending issues in four zones — the Midwest, the Northeast, Southeast and West.

Kersey said two interactive elements are helpful for users who want to tailor the information they seek.

One interactive feature enables a countrywide view of workers’ compensation legislation enacted in 2022 that can be sorted by state, zone and topic of interest.

Another interactive feature is the Loss Cost/Rate Filing Interactive Dashboard that allows users to navigate filed and approved loss cost/rate information based on the 2021-2022 filing season.

A “Show Me How” button at the top of each dashboard provides more information about interacting with the dashboards.

Kersey said the interactive features allow users to “customize their experience and interact with workers compensation information in new ways.” &

Annemarie Mannion is a freelance writer. She can be reached at [email protected].

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.

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