The workers compensation system has faced extraordinary challenges in the past 12 months. They just aren’t the same issues we thought we would be addressing when the pandemic hit the U.S. in March 2020.

Executive Summary

NCCI CEO Bill Donnell reflects on COVID-19 impacts to workers compensation in 2020, as NCCI looks ahead with new employment and claims scenario tools to capture data and information for carriers. Here, he reviews the dismal employment figures and more positive news about claims, noting, for example, that total incurred losses fell nearly 7.5 percent in 2020—with decreases in non-COVID-19 losses more than offsetting increases directly attributable to the pandemic. However, “we still have a long way to go to fully understand the claims story from this pandemic,” he writes, noting the need to monitor the impact of co-morbidities and long-term COVID-19-related health concerns.

Recession Risk

The acute crisis for the workers compensation system is the recession, which has devastated employment, especially in hospitality, retail and travel services, as well as education and healthcare.

In fact, the U.S. Census Household Pulse Survey for Dec. 9-21 estimates that 50 percent of the U.S. adult population experienced loss of household employment income (either themselves or a household member) since March 13, 2020. An estimated 31 percent expected a loss of household income between mid-December and mid-January. This drop in payroll, whether from reduced hours, wage cuts or layoffs, means less workers compensation premium.

NCCI estimates that the drop in payroll contributes to an approximate 8 percent decrease in overall national workers comp premium for 2020 vs. 2019. That’s a significant issue for insurers and brokers. While it’s not an insurmountable challenge, it is a critical business risk.

The pandemic is another opportunity to renew our commitment to that noble calling: helping injured workers recover.
It is also clear that the recession has struck workers, industries and states unevenly. We have seen wide variations in impact depending on where people live, the work they perform and how local officials have responded to the pandemic.

To help stakeholders navigate the months ahead, NCCI has created an online Employment Scenario Tool. This forecasting model allows users to explore employment recovery scenarios based on state or by industry sector.

Workers Compensation Claims

As the coronavirus spread, the primary worry became the potential for large claims to swamp the system, diminishing carrier financial reserves. Indeed, COVID-19 has taken an extraordinary physical and emotional toll on many workers, especially in healthcare and other work requiring close personal proximity.

In addition to the employment scenario tool, NCCI also recently revised the COVID-19 Hypothetical Scenarios Tool for claims in an effort to respond to demand for more data and information about how the pandemic is affecting workers, employers and the workers compensation system. NCCI is also hosting a webinar, COVID-19 and Workers Compensation: Data and Insights, in late January.
Even though the pandemic has contributed to more than 365,000 deaths in the U.S., the workers compensation system has not been overwhelmed by claims to date. NAIC data through third-quarter 2020 shows that total incurred losses have dropped approximately 7.5 percent compared with the same time period in 2019. While we recognize this is early data and more people will suffer work-related COVID-19 illnesses, carriers have generally suggested that during 2020 decreases in non-COVID-19 losses have more than offset increases directly attributable to the pandemic. For example, significantly reduced mileage has resulted in fewer work-related motor vehicle accidents, and more remote work has limited the incidence of typical workplace slips and falls.

Workers who have contracted COVID-19 have generated some claim activity. To date, these losses are predominantly lost time from work. Medical can range from testing costs to intensive care hospital costs. From a recent NCCI analysis of medical payments in the first half of 2020, the top 5 percent of the COVID-19 medical claims are driving approximately 70 percent of the medical COVID-19-related payments. This early data validates that serious claims exist, but they are few relative to the total. Among other issues, we are closely monitoring the impact of co-morbidities and are considering the possibility of long-term COVID-19-related health concerns. So, we still have a long way to go to fully understand the claims story from this pandemic.

With losses reducing at nearly the same rate as premium, we can say with confidence that COVID-19 claims will not undermine the foundations of the workers compensation system.

Essential Architecture of Commerce

The U.S. and its workers compensation system continue to face challenging issues. It’s worth noting that just a year ago, a pandemic was not ranked as a top business risk for 2020. But now it is THE issue of our time.

This is a reminder that all of us in the workers compensation system have a duty to injured workers, our communities and each other. We must face this crisis and prepare for challenges that may lurk around the corner.

Workers compensation is essential to the architecture of commerce in this nation. More than 100 years ago, the industry developed rapidly to create a safety net for workers. Our system balances the needs of employees and employers and has helped create much safer workplaces. The pandemic is another opportunity to renew our commitment to that noble calling: helping injured workers recover.