Regulatory and legislative activity
In response to COVID-19, there have been a host of changes to state laws, either through legislative or executive action, relating to presumptive coverage, telehealth, utilization review, premium payment and cancellation relief, screening and testing, hearings, and more. This is a fluid situation and, to some degree unexpected expansion of coverage and compensability. The NCCI has an excellent resource that provides weekly updates by state.
One area to watch closely is the extension of presumption of coverage for COVID-19 to include first responders and health care workers and, in some cases, other essential workers such as grocery employees. When state policy is amended so that COVID-19 infections in certain workers are presumed to be work-related and covered under workers’ compensation, the presumption places the burden on the employer and insurer to prove that the infection was not work-related, thus making it easier for those workers to file successful claims.
Minnesota, Wisconsin, and Alaska enacted legislation covering first responders and in some cases, health care workers. Executive actions to implement presumption policies for first responders and health care workers in response to COVID-19 were issued in Arkansas, Florida, Illinois, Kentucky, Michigan, Missouri, North Dakota, and Washington state.
In Illinois coverage was initially even broader; however, a County Circuit Court Judge issued a temporary restraining order against the emergency changes made by the Workers’ Compensation Commission. The Commission then voted unanimously to repeal the rule, citing the “uncertainty and expense of litigation.” The changes would have created a presumption that work is the cause of COVID-19 if contracted by any “frontline worker” identified in Gov. J.B. Pritzker’s March 20 stay-at-home order, including workers at grocery stores, laundries, banks and hardware stores, among other businesses. The lawsuit argued that the commission exceeded its authority and that the legislature would be the proper body to implement such changes. Some speculate that the repeal may lead to an executive order.
Kentucky created a COVID-19 presumption for workers in grocery stores, child-care centers, domestic violence shelters, and rape crisis centers, in addition to first responders and healthcare workers. However, it requires the same evaluation as other claims as to whether the disease acquisition occurred in the course of and scope of employment.
Action is also under consideration in Louisiana, Massachusetts, New Jersey, New York, Pennsylvania, Puerto Rico, Ohio, Vermont, and Utah. For more information.
Employers and insurers are concerned that these presumption policies will increase insurance costs for employers at a time when businesses are already facing significant financial challenges. A recent study by the National Council on Compensation Insurance (NCCI) estimated that 49 million to 62 million workers could potentially qualify as essential workers who could be eligible for workers compensation relating to COVID acquisition. Costs could range from $1 billion to $80 billion in the 38 states it serves.
The California Workers’ Compensation Insurance Rating Bureau (WCIRB) was asked to provide the cost impact of a conclusive presumption for health care workers, firefighters, EMS and rescue employees, front line law enforcement officers, and other essential critical infrastructure (ECI) employees. The results were staggering. As reported in their Research Brief, the annual cost estimates of COVID-19 claims range from $2.2 billion to $33.6 billion with an approximate mid-range estimate of $11.2 billion, or 61% of the annual estimated cost of the total workers’ compensation system before the impact of the pandemic.
Similarly, the New York Compensation Insurance Rating Board conducted a legislative analysis of the potential cost impacts of COVID-19 virus exposure as an occupational disease. It estimated in late March that presumptive COVID-19 coverage could cost the system more than $31 billion – more than triple the state comp system’s current annual losses in both the insured and self-insured markets.
Reporting payroll of furloughed workers, class code changes, repurposing operations
NCCI
On April 23, 2020, NCCI published Item B-1441 – Revisions to NCCI Manual Rules Related to the COVID-19 (Coronavirus) Pandemic. This was filed to all NCCI states and submitted to the independent bureau states for their consideration. The states that have adopted these rules as of April 30 include Alabama, Arkansas, Colorado, Connecticut, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Montana, Nevada, New Hampshire, New Mexico, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, and West Virginia. Wisconsin, which is an independent bureau state, was the first state to approve new rules. Michigan has indicated they are adopting the rule for their residual market and carriers operating in Michigan can adopt the rule.
The key points are:
- These rules will apply beginning March 1, 2020. Any policy that was effective on 3/1/20 is covered by these rules. It will be effective retroactively to March 1, 2020 and will expire on December 31, though this date may be adjusted as circumstances warrant.
- Employers that have furloughed employees, but continue to pay them, are allowed to exclude these payments from the premium calculation and payroll is reported to code 0012. To do so, the employer must keep “separate, accurate, and verifiable records” to provide the insurance company auditor when the policy expires. Without these records, the insurance company will have to include the pay in the premium calculation.
- This includes paid sick leave or paid FMLA approved by congressional action in response to the crisis.
- Payroll reported to code 0012 is also excluded from Experience Rating
- This rule is only applicable when an employee is not performing ANY duties. If the worker is performing tasks in service of the employer, the payroll will be reported to the appropriate classification, and premium will be charged appropriately.
- This filing did not address treatment of COVID-19 claims on the experience mod, although it is expected to be addressed in the future.
Another consideration is class code changes now that so many employees are working from home. Kevin Ring, the Lead Analyst for the Institute of WorkComp Professionals, notes whether a class code assignment can change depends on the circumstances. If the employee was already classified in 8810 (Clerical Office), the classification would change to 8871 (Clerical Telecommuter).
For other employees to qualify for a change in classification, the job must change. For example: You operate a manufacturing facility and have an employee who programs CNC machines for your manufacturing process. The job consisted of not only writing programs but inspecting parts to ensure the program is working correctly. As a result of the crisis, this employee is now working from home writing programs. This employee could have their payroll re-classified into 8871 because they are currently doing a purely clerical job, with no exposure to the manufacturing shop.
Some classifications include clerical employees in their definition. In these cases, reclassifying employees who are now working from home would not be allowed.
Stay current on NCCI updates here.
WCIRB – California
The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) has made a special regulatory filing to the California Insurance Commissioner. Major provisions include:
- Exclude COVID-19 claims from experience rating
- Exclude payments to employees who continue to be paid while not working
- Allow assignment of classification 8810 for temporary change in duties
Stay current on California updates here.
New Jersey has adopted similar changes.
Also, manufacturers that shift gears and repurpose their operations to meet changing customer demand, or to produce gowns, masks, and ventilators amid the COVID-19 pandemic, need to be sure that their insurance coverage is appropriate. Creating a new or different product can change the company’s risk profile and exposure base. While some companies may have government immunity under the Defense Production Act, it’s important to seek counsel to better understand the liabilities involved.
There are a lot of moving parts right now, including premium reductions, class codes, industry classifications,payroll changes, and the impact on the Mod. It’s critical to discuss your situation with your Certified WorkComp Advisor to find the best moves for your business.
Claims/premium impact
In a national survey of 15 workers’ compensation insurance carriers by Health Strategy Associates, respondents said on a scale of 1-5 (with 5 being extremely significant), COVID-19 will have an impact of 4.4 on the industry. The largest impacts are projected to come from an increase in death claims and delayed return to work. The rapidly changing legislative environment combined with the uncertainty of the future makes it difficult to know what the long-range impact of COVID-19 will be on workers’ compensation. However, this is what we do know:
- In the short-term, carriers are being impacted by premium reductions, declining employer payrolls, premium leniency, and cancellation policies.
- The impact will vary significantly by industry. Some industries will experience increased claims due to the disease, while others will see a decrease stemming from shelter-in-place orders and a home-based workforce.
- Employees will be filing workers comp claims related to the COVID-19 pandemic, but it remains unclear what proportion of the claims will be compensable. Largely, this will be determined by what is covered by the emergency legislative and regulatory action in the state and litigation. For covered industries, workers’ comp could be responsible for medical treatment, total temporary disability during quarantine and/or recovery, a settlement if the worker suffers permanent damage to the lungs or other organs from COVID-19, or worse, a death benefit.
- In other cases, it is very much a gray area right now. The industry is adapting to a seismic shift from injury-based to disease-based claims, which are much more complex. Because of the community spread, it will be very difficult to prove that COVID-19 was contracted at work; however, when multiple co-workers become sick, a stronger case exists for employees. Some pundits suggest it will be an emotionally-charged issue and employers face tough decisions. It is expected the coverage will differ significantly across states.
- Expect more lawsuits alleging liability for a worker’s acquisition of COVID-19 in the workplace. Recently, a wrongful death suit was filed against Walmart in Illinois by the family of an employee who died of COVID-19, alleging that the company failed to adequately clean the facility, hired new workers without adequately screening for COVID-19, and failed to follow relevant guidelines for maintaining a safe workplace.
- The duration of open claims for injured workers is rising. Access to care is limited as the medical system is overtaxed with seriously ill COVD-19 patients and, when available, injured workers are unwilling to get treatment they need because of COVID-19 risks. Modified work is unavailable in many industries and in wage loss states indemnity benefits often cannot be stopped without a return to work. The adjudication of work comp cases is on hold in many states. The longer the delay goes on, the more likely the injured worker’s treatment is to get off track, raising the cost of the claim.The quick ramping up of telemedicine has helped, but not all workers comp injuries are appropriate for telemedicine.
- The interaction of leave and unpaid leave claims instituted by employers responding to voluntary or government-mandated programs and workers’ comp should be examined. Should an injured employee forgo workers’ compensation and instead collect benefits under one of the new federally funded programs related to COVID-19?
- The dramatic increase in the number of people working from home (WFH) in response to the outbreak creates additional challenges. There is very little case law regarding what constitutes a compensable claim when working at home.Employers had little time for home assessments and increased ergonomic training. As a result, employers may see a spike in common ergonomic injuries such as carpal tunnel syndrome, tendinitis, lower back injuries and more.
For additional information and resources on Coronavirus, go to the Duncan Financial Group COVID-19 Resource Center Online
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