More States Push COVID-19 Claims to Work Comp; Potential Cost Anyone’s Guess

Regulators and lawmakers in more states are demanding that workers who claim they were sickened by COVID-19 get a fair hearing, if not an outright presumption in their favor.

The Wyoming House of Representatives and Senate both passed a bill on Friday that creates a presumption that any workers’ covered by the state’s monopoly workers’ comp system had an increased risk of contracting COVID-19. Claimants will still be required to prove the disease was contracted from work.

Also last week, the Arizona Industrial Commission issued a “substantive policy statement” that workers’ compensation insurers cannot categorically deny COVID-19 claims.

“All claims must be reviewed and investigated in good faith,” the statement says. “Claim denials related to COVID-19, like any claim denial, must be ‘well-grounded in fact’ and ‘warranted by existing law’ (or based upon a good faith argument for the extension, modification, or reversal of existing law).

The commission said the statement is advisory only. It cites to several commission decisions that establish insurers may not unreasonably issue a notice of claim status without adequate supporting information.

Several states have gone much further. California Gov. Gavin Newsom issued an executive order creating a presumption that COVID-19 contracted by any employee who had to work from home was the result of on-the-job exposure. Employers are required to decided whether to accept or deny those claims within 30 days, but workers must submit medical confirmation that they were infected by the novel coronavirus within 14 days.

Administrative orders or legislation requiring coverage for first responders, health care workers or other essential workers have been issued by at least 11 other states so far. (That doesn’t include an emergency order by the Illinois Workers’ Compensation Commission that was rescinded after a court challenge.)

The Wyoming House File 1002 — which now moves to Gov. Mark Gordon’s desk — falls far short of creating a presumption that would ensure infected workers get benefits, said Michael C. Duff, a University of Wyoming law professor who wrote a treatise on the state’s workers’ compensation law.

Duff said in an email that the change in statute does not ease the claimant’s burden to prove medical causation.

“A presumption that the disease ‘arises out of and in the course of employment’ is a complete presumption of causation, not a partial one,” he said. “And I think—knowing the culture as I do—that the hearing officers are very likely to deny the claims.”

The bill also requires the state Workers’ Compensation Division to issue employers an 8.33% premium refund at a cost of $16.5 million. It includes no estimate for an increase in claims cost.

So far, actuarial estimates about the potential cost of COVID-19 claims have been all over the map.

Two of the nation’s largest rating agencies aren’t even guessing how much COVID-19 might cost in permanent disability benefits, despite evidence that the virus causes long-lasting ill health effects.

The National Council on Compensation Insurance did not factor any PD awards into its projection of potential workers’ compensation costs, which ranged from $2.2 billion best case to $81 billion worst case. NCCI released the projections along with a tool that one can use to change assumptions about the share of workers get infected, but none of those assumptions include any PD costs.

The New York Compensation Insurance Rating Bureau estimated that a creating a statutory presumption that COVID-19 is an occupational disease would cost $31 billion — more than three times the current total system costs of $8.7 billion. That estimate included $13.6 billion in death claims and $7.4 billion in temporary disability benefits, but no permanent disability.

“The long-term health impact of the COVID-19 virus is presently unknown,” the NYCIRB report says.

NCCI declined to projected any PD costs for the same reason.

A report by Bloomberg News last week suggests that there is reason to suspect COVID-19 will cause at least some permanent disability. Bloomberg reported that 14 recovered patients in Wuhan, China had not fully recovered normal functioning regardless of the severity of their symptoms. Another study of CT scans taken of 90 Wuhan coronavirus patients found that of the 70 discharged from the hospital, 66 had mild to substantial residual lung abnormalities.

Actuaries for the California Workers’ Compensation Insurance Rating bureau, unlike their colleagues at NCCI and NYCIRB, did venture an estimate on permanent disability claims.

WCIRB’s mid-range projection says 20,300 out of a total of 472,900 COVID-19 claims will result in permanent disability. The WCIRB assumed that 20 percent of the critical COVID-19 claims will have some form of PD, resulting in an average rating of 20% with an average cost of $22,000 in indemnity costs.

The total costs are projected at $100 million for permanent disability payouts and $100 million for temporary estimate.

On the scale of California’s system, PD appears to be a small impact. The big money goes to hospitalization costs.

The bureau projected 70,900 cases will result in hospitalization but not admission to an intensive care unit, costing $53,400 per claim. Another 20,300 cases will require intensive care, at a cost of $137,800 for each claim. However, 3,300 cases would result in death, costing $1.5 billion.

WCIRB projects total costs of $11.2 billion under its mid-range estimate.

Alex Swedlow, president of the California Workers’ Compensation Institute, said the WCIRB estimate looks reasonable to him. Swedlow said 80 percent of COVID-19 cases do not require hospitalization. Of the 20 percent who do need to be hospitalized, about a third will require admission to an intensive care unit.

He said actuaries have no real data on which to base any solid estimates on the percentage of cases that will result in permanent disability.

“The industry is trying to gets hands around basic issues of compenaiblity,” Swedlow said. “The data will tell us the degree that PD will become a real issue in this.”