On the Front Line
Presumption rules for essential workers and front-line employees with COVID-19 in some states shift the burden of proof to employers, but are they also driving up workers’ compensation claims and costs?
- Lori Chordas
- November 2020
STANDING AT THE READY: Workers and first responders in New York City were on the front lines of the COVID-19 pandemic that some reports are calling the largest mass fatality incident in the city’s modern history.
AP Photo/John Nacion
- The 911: A rising number of essential workers are claiming to have contracted COVID-19 on the job.
- Making a Diagnosis: The advent of presumption laws in some states is shifting the burden from employees to employers to disprove those claims.
- A Bitter Pill to Swallow: There are some concerns that state causation presumptions will drive up the number of workers’ compensation claims and add a significant financial burden on payers.
As the COVID-19 pandemic rages on, more than 174,400 physicians, nurses and other U.S. health care providers on the front lines of the unprecedented crisis had as of early October been infected by the virus, with 744 dying of the illness, according to the Centers for Disease Control and Prevention.
That's a significant rise from the roughly 62,000 infections and 291 deaths the CDC reported at the end of May.
Other essential workers on the battleground of the outbreak also have been hard hit by COVID. On Oct. 1, e-commerce giant Amazon announced 19,816 employees at Amazon and its Whole Foods subsidiary had tested positive or had been presumed positive for the virus.
The nature of their job puts front-line workers at increased risk of contracting COVID-19. Infectious diseases, however, often are not covered by workers' compensation and are categorized as “ordinary diseases of life.” Proving an employee's infection originated in the workplace can be difficult.
To make it easier for front-line workers to receive workers' compensation, some states have expanded coverage to include COVID-19 and removed the burden of proof from employees. Legislatures in those states have passed bills and governors have issued executive orders that presume first responders, health care workers and other essential employees contracted COVID on the job and are entitled to workers' compensation benefits, including lost wages and medical benefits.
In states like Alaska, the presumption is conclusive, leaving employers without any recourse to debate causation.
But in most states, including New Jersey and Minnesota, presumption rules are rebuttable, allowing employers to argue that a COVID-related claim was caused by conditions experienced outside the course of employment.
In California, Gov. Gavin Newsom created a rebuttable presumption through an executive order on May 6. Under his order, if an employee was required to visit the workplace between March 19 and July 5 and was diagnosed with COVID within 14 days of doing so, they were presumed to have contracted the virus on the job and could file a workers' compensation claim.
The California legislature enacted a bill on Aug. 31 that expanded Newsom's order and codified the presumption of compensability of COVID claims for first responders and certain health care workers from July 6 to Jan. 1, 2023.
While proponents of presumptions are singing the praises of state actions, others are concerned that the measures will drive up workers' compensation claims and place a significant financial burden on payers.
In April, the National Council on Compensation Insurance published a white paper that estimated COVID's impact on the workers' compensation system under various hypothetical scenarios. The paper showed that the potential impact of COVID could climb as high as $81.5 billion.
That amount, according to NCCI, would translate to an additional 254% of workers' compensation payouts due to the virus.
The Workers' Compensation Insurance Rating Bureau of California also has provided its take on projected costs based on a July study of front-line worker claims in the state. The bureau also has provided its take on projected costs, concluding in April that the annual cost of COVID claims by California's essential critical infrastructure employees under a conclusive presumption could range from $2.2 billion to $33.6 billion, “with an approximate midrange estimate of $11.2 billion, which is equal to 61% of the annual estimated cost of the total workers' compensation system prior to the impact of the pandemic,” according to an issue brief by the American Academy of Actuaries.
So far, insurers have accepted only a “fairly minor” number of workers' compensation claims stemming from the pandemic and state presumption rules, said Joseph Paduda, a principal for consulting firm Health Strategy Associates.
This year in California, he said, less than 7% of the state's overall workers' compensation costs will be associated with COVID, according to projections by the state research board.
But estimates like those could change, as little is still known about the unprecedented virus that began its wide spread across the U.S. in March.
Threats of a second wave of the pandemic in the coming months, the possibility of reinfection and potential long-term health issues among those infected with COVID could eventually drive up workers' compensation claims, costs and rates.
So far insurers have accepted only a “fairly minor” number of workers’ compensation claims stemming from the pandemic and state presumption rules.
Health Strategy Associates
State of Affairs
Workplaces have been ground zero for the pandemic.
During the first 100 days of the outbreak, more than 11,500 grocery store workers in the U.S. were infected or exposed to the virus, and at least 82 died, according to United Food and Commercial Workers International.
In California, more than 11,090 health care workers in nursing homes and long-term care facilities as of mid-July tested positive and 102 died as a result of COVID, according to data from the state health department. California is one of roughly 17 states that by early October had created a presumption of coverage to varying sectors of employment that removes the requirement that essential workers infected by COVID have to prove that they contracted the illness on the job.
On Sept. 14, New Jersey Gov. Phil Murphy signed into law what many consider the broadest of all state presumptions. Retroactive to March 9, S.B. 2380 creates a rebuttable presumption of compensability for a broad set of COVID-positive essential workers. According to the bill, the presumption can only be refuted by a preponderance of the evidence showing the essential worker was not exposed at their workplace.
Illinois also has a rebuttable presumption of workers' compensation coverage, specifically for first responders or front-line workers who are exposed to or contract COVID. Gov. J.B. Pritzker signed the measure in June after an emergency rule that included similar language was withdrawn by the Illinois Workers' Compensation Commission earlier in the year.
Shifting the Burden
State causation presumptions have become “a real game-changer” for workers' compensation, said University of Wyoming law professor Michael C. Duff.
Rarely in workers' compensation does the burden of proof rest on the shoulders of employers—something Duff calls a challenging task for that cohort.
“Causation with respect to disease is difficult,” he said. “When we think about diseases that have historically been covered under workers' compensation or tort law, they are often illnesses like black lung and asbestos among coal miners and ship workers. But along comes COVID, an infectious disease that doesn't look like an occupational disease and is something the general public is at risk of contracting. Workers' comp wasn't designed to cover a disease like COVID that appears to be both occupational and infectious, depending on the circumstances in specific workplaces,” he said. “In fact, we don't know quite how to think about it.”
States have different standards for refuting workers' claims.
In California, rebuttable evidence can include workers' recent personal travel logs, employees failing to comply with state social distancing mandates and employment records indicating an employee was working from home during the incubation period, Trindl Reeves, chief sales officer at Marsh &McLennan Agency West, said.
“Also employers who see on social media sites like Facebook that an employee with COVID was at the beach or attended a large family gathering prior to testing positive can use that to make the argument against definitive contact at work,” she added.
Employers often have 90 days to deny a workers' compensation claim. But California's presumption rule limits that investigation and rebuttal period to 30 days, “adding a burden for employers because by the time they do all their investigation, COVID testing and retesting, it's hard for them to overturn those cases,” Reeves said.
Measures like that, however, haven't stopped some employers from attempting to deny workers' claims.
Earlier this year, global meatpacker JBS denied several families' applications for workers' compensation benefits after three employees of its slaughterhouse in Colorado died from COVID infections, according to news reports. The employees were among six workers at the facility with fatal infections.
In denying the claims, JBS said the employees' infections were not work-related. However, according to reports, the family of one worker contends that he had only been to work and church prior to contracting the virus.
In Minnesota, 930 claims involving COVID have been filed by meatpacking employees as of Sept. 11, according to news reports. Of those, 717 claims were rejected and 213 were under review.
Colorado also has seen a large swath of COVID-related claims. However, news reports cite, 69% of the 2,294 workers' compensation claims for the virus were denied as of Sept. 12.
While state laws differ on their rebuttable standards, they also have their own take on the classifications of employees covered by the presumption.
Arkansas, Utah and Minnesota are among those with narrow definitions that limit compensability to first responders and front-line health care workers, while other states such as New Jersey, California and Kentucky currently more broadly define “essential” employees.
Under Kentucky's governor-issued executive order, commercial insurers and self-insurers are required to provide temporary total disability benefits to a wide range of essential workers that include first responders, grocery store employees, correctional officers, military members, domestic violence shelter and rape crisis center employees, child advocacy workers and others, University of Wyoming's Duff said.
He said states also differ on compensability. “Alaska and California appear to offer compensation to all employees who develop the virus,” Duff said. Washington state provides benefits to employees during their time of quarantine after exposure, while Kentucky offers temporary total disability benefits to workers removed from work by a physician due to occupational exposure to the virus.
“In short, there is a wide variety of coverage across the country and it may well change depending on whether the virus diminishes or intensifies,” he said.
State causation presumptions have become “a real game-changer” for workers’ compensation.
Michael C. Duff
University of Wyoming College of Law
Feeling the Effects
As insurers, employers and other stakeholders continue to wrap their heads around state presumption rules and the potential impact they may have on costs and rates, many questions still remain unanswered, said Dave Heppen, who chairs the American Academy of Actuaries workers' compensation committee.
“But one thing we know for certain is that one way or another we have new claims that entered into the workers' comp system and that, no doubt, has some impact on costs,” he said.
AmTrust Financial Services, the seventh-largest workers' compensation writer based on 2019 direct premiums written, according to BestLink, has not yet pinned a definitive cost on the increasing number of COVID-related workers' compensation claims it received during the height of the pandemic.
By mid-September, the number of those claims had started to “level out a bit,” senior vice president of workers' compensation strategy Matt Zender said.
One of the concerns with state presumption rules is that they're “inconsistent with the principles of the workers' compensation system, which provides coverage for workplace injuries, even in the absence of fault by the employer,” said Steven Bennett, assistant vice president and counsel for the American Property Casualty Insurance Association's workers' compensation program.
“To require the no-fault workers' compensation system to provide indemnity benefits and medical coverage for pandemic diseases, even without sufficient proof the disease was contracted at the workplace, could threaten the viability of the no-fault system,” he said.
Bennett also pointed out “coverage for diseases common to the general public are not included in premium determinations. If presumptions are adopted in certain states, it is critical that the costs of such presumptions be included in the state's rate base.”
COVID has had a large hand in the Workers' Compensation Insurance Rating Bureau of California's decision to propose a slight increase in rates next year. In August, the WCIRB submitted its Jan. 1, 2021 pure premium rating filing to the state insurance department, proposing advisory pure premium rates that average $1.56 per $100 of payroll, a 2.6% increase over this year's rates.
While that is only a minimal increase, MMA's Reeves said, “it's big news in California because it's the first workers' compensation recommended rate increase the state has seen in years.”
In September, the WCIRB amended its filing, proposing individual advisory pure premium rates by classification to reflect updated information on the frequency of COVID claims by industry sector. In a statement, the bureau said the amounts, while averaging $0.06 per $100 of payroll as in the original filing, range from $0.01 per $100 of payroll for the information industry sector to $0.24 per $100 of payroll for segments of the health care and social assistance industry sectors.
The impact of COVID on total workers' compensation claims remains somewhat unclear. But shuttered businesses, the result of state- and federal-mandated shutdowns, along with the rising number of employees working from home may mean less total workers' compensation claims than there otherwise would have been, Heppen said.
However, one thing that is more certain is that the rising use of telemedicine during the pandemic has brought about some added savings into the sector, Max Koonce, chief claims officer at Sedgwick, told AMBestTV. “For years, telemedicine has been available in the workers' compensation environment, but there just hadn't been a big push from a regulatory or a utilization standpoint,” he said.
But since the spread of the virus in March, utilization of telemedicine has increased tenfold and “has become a very viable avenue to help with the continuity of care, and thereby the recovery of the individuals that were in the workers' compensation environment,” said Koonce of Sedgwick, a provider of technology-enabled risk, benefits and integrated business solutions.
The Road Ahead
Perhaps not since the events of Sept. 11 has a crisis like the global COVID pandemic forced stakeholders to reevaluate how workers' compensation works and examine potential changes needed to the system, said Jeff Eddinger, senior division executive for NCCI.
“Prior to Sept. 11, no one really thought terrorism was a workers' compensation peril or something workers' comp insurers had to think about,” he said.
“But immediately following the event, insurers began to gather data to see where they had insureds in large buildings or near landmarks, and it suddenly made them change the way they thought about how they would mitigate terrorism as a peril. Now COVID is changing the way we look at pandemics and their future place in workers' compensation coverage.”
Insurers now are paying close attention to presumptions and how states rules “need to be adhered to in order to make sure that we're taking care of each claim appropriately,” AmTrust's Zender said.
“We're also working with employers, perhaps closer than ever, because the fact patterns that will determine the road to compensability are different than what we've historically seen. And we have to look to employers to tell us what controls they had in place to protect their workers,” he said.
The industry expects that as more data becomes available it will provide some of those answers.
Organizations like the Workers' Compensation Research Institute hope to be at the forefront of that data collection and “measuring the impact of the disease in terms of the composition of COVID and other kinds of claims,” said Dr. John Ruser, CEO of the WCRI. He said one of the concerns going forward is whether COVID will continue impacting claims long into the future.
“During the pandemic, there were delays in some medical services such as elective surgeries,” Ruser said. “Some workplace injuries require orthopedic surgery and there was a period of time when those surgeries weren't being performed. Also some injured workers may have found it more difficult to find a primary care physician during the early parts of the pandemic, which also may have resulted in delays in care. So the question now is to what extent does that delay in care, along with potential long-term health effects that COVID patients may experience, result in extended duration of disability or additional claims costs.”
While that answer is still anyone's guess, Health Strategy Associates' Paduda remains optimistic.
“I'll be the first to admit that early on I was worried about the impact of this on workers' comp. But so far those concerns haven't panned out,” he said.
Paduda expects a “significant drop in premium and payroll exposure will hit insurers, third-party administrators and other payers. This will be essentially problematic for insurers and TPAs serving industries like retail, tourism, hospitality, passenger transportation and others that were shut down during the pandemic.”
This year, he anticipates a 20% drop in claims “and probably another 10% decline next year, along with a 20% drop in premium.”
As the pandemic continues to unfold, leaving many unanswered questions in its wake, University of Wyoming's Duff said a continuation of the outbreak into the new year could spur the need for some type of workers' compensation federal reform or force states to “start backing off in fear of losing insurers or employers being charged rates they can't afford.
“That's why it's important to get ahead of the crisis now, whenever possible, and project how it might impact the sector going forward,” he said.
“Is it unreasonable to think a pandemic like this will never happen again? Probably not,” Duff said.
“Does everyone need to find ways to anticipate these events? Definitely,” he added.
AMTrust Financial Services Inc. (AM Best # 051002)
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