The pandemic caused by COVID-19 has had a great impact on businesses and workers all over the world. With most businesses closed in 2020, the unemployment rate shot up.
As of February 2, 2021, the New York Times coronavirus restriction tracker at the state level shows that, in almost all of the states, most businesses, except for bars and nightclubs, are now open. These businesses, however, are required to limit their capacity and impose social distancing measures.
As most states begin to open, it is nice to think that the worst is over. Unfortunately, some serious threats and uncertainty remain. These include the emergence of the new strain of the virus, the slow vaccine rollout, the effectiveness of the vaccine, and the long term effects of the disease. The virus still has the upper hand and it continues to challenge business ownersーas if these businesses had not enough to worry about. The cost of workers’ compensation is one of the challenges that these businesses face.
What is Workers’ Compensation?
The workers’ compensation program aims to provide benefits to employees who become ill or injured on the job. Through it, workers are provided with cash benefits and necessary medical care. In return, the employers have the assurance that they will not be sued by their employees for the injuries and illnesses incurred on the job. Most states except Texas, require employers to pay workers’ compensationーdetails and coverage may differ per state. The federal government administers separate worker's compensation programs for federal employees or their dependents who experience work-related injury or occupational disease.
What is the effect of COVID-19 on Workers’ Compensation cost?
Under the old compensation program, coverage for communicable diseases has been rare. The burden of proof that the illness was acquired in the scope of employment has always been on the employee. However, with the ongoing pandemic, most states have turned to workers’ compensation to extend the coverage for COVID-19. Over the last few months, several policymakers have amended their state policy and implemented “presumptive compensability”. The new regulation presumes that COVID-19 diagnosis to workers in high-risk employment such as health care personnel and first responders are work-related, therefore covered by the program. Employers and insurers now have the burden to prove that the infection did not happen at work. This makes the filing of
successful claims easier for those workers. Many employers and insurers do not favor the expansion of the workers’ compensation coverage for COVID-19 due to concerns over cost. With the contagious nature of the coronavirus, one infected employee could easily lead to a widespread infection through the workforce resulting in more claims. In addition to claims for work-related exposure to COVID-19, an influx of post-traumatic stress and mental health claims could also be on the way.
Jeff Eddinger, senior division executive of National Council on Compensation Insurance said that for the most part, COVID-19 claims are mostly inexpensive. He added that there are small outlier claims that are costly. However, this is just based on initial analysis and more reported COVID-19 claims are still being processed.
The estimated cost of covering workers’ compensation claims for the nearly 10 million American first responders could be up to $16 billion. In April, California's workers' compensation actuaries estimated a one-year price tag of $11 billion in paid benefits and expenses, amounting to two-thirds of the projected cost of the California workers' compensation system for 2020.
The end of this pandemic is nowhere in sightーworkers’ compensation insurance costs will likely rise. Businesses, insurers, workers, and policymakers should be prepared.
BUT are there ways employers can do to lower the cost of claims?
Employers can help reduce the cost of claims by:
- Implementing safety protocols in the workplace for safer working conditions, therefore mitigating the virus transmission
- Discouraging workers with symptoms from working
- Reminding remote workers about the ergonomic best practices
- Showing they care about their employees
As the world continues to adjust during this pandemic, rules and regulations related to it are also changing. Policymakers are constantly looking for ways to mitigate the economic fallout for everyone’s benefit. COVID-19 claims may be further regulated by a “no safety measures, no claims” policy. This will be an advantage on insurers' end as this will lessen fraud claims, thereby lessening claims cost. This policy will also compel employers to properly implement safety strategies in the workplace.