COVID Did Not Send Shockwaves Through Workers’ Comp in 2021, but Policy Fluctuations May Still Come. Here’s Why
The annual Workers’ Compensation Fiscal Data Research Bulletin showing state workers’ compensation system payments and costs from 2011 to 2020 has been released by the National Foundation for Unemployment Compensation and Workers’ Compensation. The report is based on National Academy of Social Insurance (NASI) data.
As the industry emerges from the pandemic, the bulletin begins to reflect on the impact of COVID-19 and the recession of 2020 after the expansion of the economy from 2011 to 2019.
Douglas J. Holmes, president of the National Foundation for Unemployment Compensation & Workers’ Compensation, explained that while the impact on reported workers’ compensation data was not quantified, “the total cost of medical in 2020 went down largely because fewer people were working. This happens as a result of every recession, to some degree.”
Total indemnity (cash) benefits decreased by $314.86 million (-1.1%) from 2019 to 2020, but increased by $1.09 billion (3.9%) from 2011 to 2020. Total medical benefits decreased by $3.55 billion (-11.7%) from 2019 to 2020, and decreased by $2.97 billion (-10.0%) from 2011 to 2020.
The reduction in payroll employment during the pandemic appears to have reduced the number of on-the-job injuries and illnesses that were covered and compensable under workers’ compensation.
The cost per employee comparison by state was not significantly changed by the impact of COVID-19 in 2020. States had significantly different costs per employee — however, it should be noted that the benefit cost per covered employee is not a specific measure of costs to employers for comparable work across states and does not account for differences in industry mix, so the data should not be used to compare state to state.
Teasing the Threads Apart
Additional working assumptions based on the data this year, according to Holmes, included issues of injury determination and compensability related to COVID infection.
“A higher percentage of workers were working from home, and it might have been more difficult to determine if a COVID-19 illness was in the course of employment and arose from employment,” he said.
“Although there were some states that enacted presumptions of coverage and compensability with a positive COVID-19 test, in many cases the presumption was rebuttable or applied only on a temporary basis or to a specific group of workers (e.g. health care workers).”
Indeed, the National Conference of State Legislatures reported at the beginning of the 2022 that 11 of 28 states that passed presumptions in their workers’ compensation laws for COVID infection were rebuttable.
The National Council of Compensation Insurance (NCCI) fleshed this out further in its early 2022 report. Nine states enacted COVID-19 workers’ compensation presumptions (Alaska, California, Illinois, Minnesota, New Jersey, Utah, Vermont, Wisconsin and Wyoming) in 2020, followed by additional states with more specificity and exceptions in their presumptions.
Holmes said that the data also cannot fully reflect COVID because of other complicating factors. “In cases in which the circumstances showed that individuals were infected during employment and the illness arose in the course of employment, the illness would likely be covered and compensable,” he said.
“However, the medical expense associated with COVID-19 in most cases was likely to be minimal (med only) or for treatment over a short period of time. COVID-19 (as an infectious disease) may have been covered under sick leave or disability leave, and may not have been reported through the workers’ compensation system.”
In terms of state data, the national trend from 2019 to 2020 was a reduction in the average benefit cost rate. Only South Carolina (4.8%), Hawaii (2.5%), Delaware (1.4%) and Oklahoma (1.4%) saw increases. States with the greatest decreases in average benefit cost rate from 2019 to 2020 were Alabama (-20.9%) and North Dakota (-18.5%).
Viewed another way — by cost per covered employee — Wyoming, Washington, California and New York topped the list, with dollar amounts of $804, $799 $736 and $704, respectively. These states were followed closely by Hawaii, Alaska, New Jersey and West Virginia.
The states with the lowest cost per covered employee were in line with previous reports as well:
● Texas ($141)
● Arkansas ($158)
● Utah ($196)
● Indiana ($202)
● Michigan ($204)
● Tennessee ($206)
● Virginia ($228)
● North Carolina ($240)
Aside from the hard numbers, much has been made about the inflationary hazard threatening post-pandemic economic recovery, which could undercut current observations of a general decline, but likely not by much. For Holmes’ part, to the extent that the working patterns that developed during the pandemic continue (that is, more workers working from home), there may be a reduction in illness or injuries reported as occurring in the course of employment or arising from employment.
“A review of the data from 2021 and 2022 will be of interest on this question,” Holmes said. “Medical costs (as other costs) have increased as a function of general inflationary pressure in the economy, and will likely be reflected in the data for 2021 and 2022.”
Regarding medical inflation and the possibility of future changes in reported numbers, improved medical management may have a role, although this is difficult to quantify.
“Certainly, there are differences state by state and from industry to industry with respect to safety, transitional work, prescription drug formularies and treatment,” Holmes said.
“The pandemic experience may impact policy related to diagnosis and treatment. The report does show the general trend line for medical expenses by state over the 10-year period that may be some evidence of changes in management, however other variables make it difficult to draw conclusions based only on this data. Over time, working populations have changed and the nature of work has changed.”
While this report did not see shockwaves through it due to COVID, Holmes acknowledged that future reports may see fluctuations directly attributed to it.
“It is likely that some of the costs associated with COVID in 2020 were not reflected in payments in 2020. A more complete analysis should be provided with additional data from 2021,” he said.
The report is available for purchase here. &