COVID-19 impact analysis
Last year, the Workers’ Compensation Research Institute held its Annual conference in Boston at the Westin Hotel on 5 and 6 March. The ballroom was full. COVID-19 was talked about in the conference and on the breaks, but it was too new to be on the Agenda. Everyone was doing elbow bumps instead of hand shaking. Four days after the conference wrapped, Governor Charley Baker declared a Massachusetts State of Emergency. The WCRI conference was likely the last one held in the City before everything shut down.
At that time, per the Johns Hopkins University COVID-19 Dashboard, the nation had seen ~139,000 cases and 2,425 deaths. In Massachusetts, where the conference was held, there had been 4,955 cases and 48 deaths.
The following month, the National Council on Compensation Insurance (NCCI) issued a Research Brief titled, COVID-19 and Workers’ Compensation: Modeling Potential Impacts.
NCCI’s analysis projected a best case scenario, in which loss costs would increase $2 billion, and a worst case scenario, in which they would increase $81.5 billion, or 250% more than then current total loss costs. Willis Towers Watson also released a scenario-based analysis that suggested pretty much the same thing.
Also in April, the California Workers’ Compensation Insurance Rating Bureau (WCIRB) projected loss costs if conclusive (rebuttable) presumptions were provided to front line workers, something Governor Gavin Newsom actually did through Executive Order one month later, so the “if” became a “done.” The WCIRB report concluded costs would 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 prior to the impact of the pandemic.
A year later, at this week’s virtual annual conference, WCRI Economist Olesya Fomenko, Ph.D., reported results from her analysis of workers’ compensation claims in WCRI study states for Q1 and Q2, 2020. This period, ending 30 June, encompassed the pandemic’s first of what has been up to now three surges.*
Her data and presentation slides are preliminary, but more than likely will stand up to future scrutiny. Her findings confirmed what most students of COVID-19 were intuitively thinking. To wit, it does not appear that, at least through the study period of two quarters, COVID-19 would deal a death blow to the workers’ compensation industry. Claims in her analysis of 27 study states are plentiful, but relatively inexpensive. There is wide variation in the geographic distribution of claims, probably because COVID-19 surged at different times in different states. New York is not among the WCRI study states, but during the period of Fomenko’s analysis, it was the state with more COVID problems than any other. A lot more.
During the study period, Massachusetts, Connecticut and New Jersey had the most reported claims. Massachusetts claims were 42% of all reported claims in the study states and 59% of all lost time claims. Dr. Fomenko suggested that the presence of presumption laws, pay without prejudice (in the case of Massachusetts) and other compensability issues (in New Jersey) might is some way contribute to the high numbers in those states.
Looking at Massachusetts for a moment might be instructive.
At the top of this column we showed Massachusetts with relatively few cases as of early March, two-thirds of the way through Q1. Let’s look at Massachusetts now, at the end of Q1 a year later. The state has been hit hard, but has also rebounded. Here’s a look at the state by county:
As you can see, no county has had less than 3,000 infections, and three have had more than 10,000. But what came of those infections? How did the patients make out medically? Here is a look at cumulative cases from 9 March 2021 through yesterday, 29 March 2021.
There have been 17,130 total deaths since the beginning of the pandemic, but 97% of infected patients have recovered. Deaths are at 3%, which is less than the 5% predicted by the CDC one year ago. And this is the case for most of the country, and is one of the reasons Dr. Fomenko’s data shows claims to be relatively inexpensive.
NCCI Analysis
The WCRI studies define the concept of “early days.” So do those from the National Council on Compensation Insurance (NCCI). The point is, however, that analyses from both organizations appear to be congruent and complementary.
The lasting costs of COVID-19 to the workers’ compensation industry, aside from deaths, are going to come from permanent total and permanent partial disability awards. To that end, in October, 2020, NCCI published a Research Brief updating the Brief cited earlier in this column and titled, COVID-19 And Workers’ Compensation: Permanent Disability. These costs will be significant. NCCI’s analysis determined the average age of hospitalized COVID-19 patients at 49.5 years old. Average life expectancy allows for about 30 more years of benefits. The organization writes:
Given that severe cases are expected to have a higher likelihood of permanent disability, particularly PTD injuries, NCCI
assumed that all PTD claims would occur in this symptom grouping (infections and lung claims). Adjusting our PTD rate to between 0.0% and 1.5% to be applicable to only severe cases, we observe a PTD rate between 0% and 10% (= 1.5% / 15%) using the default Critical Care Rate from the NCCI Hypothetical Scenarios Tool.
Permanent Partial Disability cases are another matter. Here the frequency will be higher as well as the costs:
One interpretation of this assumption could be that moderate cases behave more like infection claims which tend to have a
near-zero PTD rate. If we compare the lung and infection PPD rates, we observe that lung claims have about twice the
likelihood of a PPD injury compared to infection claims. To the extent that moderate cases of COVID-19 behave like
infection claims and severe cases behave like lung claims, then a similar difference in the PPD rate may be expected. Under
this view, the Severe PPD rate would range between 40% and 50% with an implied Moderate PPD rate ranging between
20% and 25%.
With assumptions it clearly states contain wide variability, NCCI suggests the following COVI-19 benefits by injury type:
We’ll continue to follow the NCCI analyses as well as WCRI’s ongoing research.
Interview by John Ruser, PhD, with John Howard, MD, MPH, JD, LLM, MBA
John Howard is the longest serving Director of the National Institute for Occupational Safety and Health, three terms and counting. He is a legend in the field, and WCRI attendees got a good look at why during this wonderful interview by John Ruser. Howard, who has more letters after his name than there are years in elementary and high school combined, put on quite a show.
Some people are one inch wide and ten miles deep; others ten miles wide and one inch deep. Howard seems to know no inch or mile boundaries. His subject was The Future of Work, and he made a number of highly interesting and prescient points, even going so far as to describe Aristotle’s concerns about automation in the ancient world of 350 BCE.
Asked about fears of jobs disappearing because of Artificial Intelligence and automation, Dr. Howard pointed to a study showing that in 2018 there were 60% more jobs than existed in 1940. Jobs have always gone away, but they’ve been replaced, and then some, by new jobs.
He’s concerned about a safety ergonomic vacuum employers are going to have to manage somehow. He believes employers are facing a “real challenge” adjusting to the new Work From Home paradigm.
My question is: How do employers deal with, let alone manage, workers’ compensation claims bound to occur while working in the home. You’re at your desk or dining room table working, get up for lunch, fall down the stairs and break an arm. Is that compensable? Is your employer going to make you prove it actually happened while you were actually working, and not just taking Junior out to the back forty for a little tag football?
And what responsibility does an employer have with respect to OSHA’s General Duty Clause, the one about providing a safe and healthful workplace?
If anyone can figure this stuff out, my money’s on John Howard.
Conclusion
Under trying circumstances, WCRI did an admirable job of hosting its 2021 Annual Conference. I’m told attendees gave it high marks, as well they should have. At the end of the second day, Dr. Ruser announced next year’s conference as being back in Boston’s Copley Westin Hotel on 15 and 16 March 2022. And I have a suggestion: After this ridiculously stressful year, it would be helpful and probably appreciated to devote a session to the impact of COVID-19 on employee mental health. A lot has happened in the last year to the field of Behavioral Health. It seems to have fitted in quite well to the new paradigm called Telehealth. It would be interesting to learn about that.
* Yesterday, CDC Director Dr. Rochelle Walensky said, “We do not have the luxury of inaction. For the health of our country, we must work together now to prevent a fourth surge. I so badly want to be done. I know you all so badly want to be done. We are just almost there, but not quite yet.” Walensky said she is now feeling a sense of “impending doom.”
**The Future of Work: The Economist is presenting a discussion on 8 April, at 4 pm, EST. To reserve a place, go here.