California Governor Gavin Newsom’s May 6 executive order expanded Workers’ Compensation benefits to employees who test positive for COVID-19 within 14 days of performing a labor or service at work. Critics of Newsom’s order, including concerned business owners and the California Chamber of Commerce, argue that it could drive up costs for businesses already struggling to stay afloat during the worst economic crisis since the Great Recession of 2008.
Newsom’s order does presume that an infected employee contracted coronavirus at work; nevertheless, it also requires employees to obtain a diagnosis from a licensed physician and allows employers with existing evidence to dispute employee claims within 30 days. The order will remain in place through July 5 and is retroactive to the start of the state’s stay-at-home order that began March 19. The governor said in a press release that the expansion aims to remove a burden for front-line workers and help them access benefits so they can focus on their recovery.
Workers’ Compensation Insurance policies do not typically include coverage for viral illnesses, due to uncertainty surrounding where an employee contracted the illness, said Justin Dorman, National Product Manager, Workers Compensation, Burns & Wilcox, Charleston, South Carolina.
The COVID-19 outbreak, he says, has presented a “gray area” surrounding Workers’ Compensation Insurance that has prompted governors to take action.
“What we are seeing in California is the removal of many barriers to workers filing claims for COVID-19 and getting treatment and financial support as quickly as possible,” he explained. “Many states have done that for front-line workers.”
Expected increase in claims could affect premiums, overload state systems
While California is one of at least 13 states that have made it possible for those who contract the virus to receive Workers’ Compensation benefits, Newsom’s order is more far-reaching than other states’ orders, which apply solely to first responders and health care workers.
The Illinois Workers’ Compensation Commission’s emergency rule granting benefits to essential employees positive for COVID-19 without requiring proof that they contracted the virus at work was withdrawn after business groups filed a lawsuit and a judge blocked the rule from going into effect.
“Most governors are issuing orders to ensure front-line workers can get the help they need. California’s governor has expanded the criteria to qualify for Workers Compensation benefits to a point that has insurers concerned about possible rate increases,” Dorman said. “These orders are well-intentioned; however, because insurers did not build these claims into their premium rates, there could be increases.”
“The insurance industry is doing everything it can to lighten the burden of premiums while helping businesses maintain their Workers’ Compensation Insurance coverage as we navigate this crisis together.” – Justin Dorman, Burns & Wilcox
The average cost of Workers’ Compensation Insurance claims in the U.S. was around $40,000 from 2016 to 2017. The cost of a COVID-19 claim could range from $500 for a single doctor’s office visit to more than $100,000 for hospitalization, Dorman noted. It is still a “data waiting game” at this point, he said, as carriers prepare for an increase in Workers’ Compensation Insurance claims.
Beyond increased insurance premium rates, critics say a surge in employees applying for Workers’ Compensation benefits could also deter businesses from bringing employees back, and overload state workers’ compensation systems.
In the wake of state unemployment systems being quickly overwhelmed by the unprecedented surge in claims that have accompanied the widespread business shutdowns, experts warn that states’ workers’ compensation systems could soon be similarly inundated. As more employees return to work an increase is expected in claims related to COVID-19, including mental health issues such as anxiety and depression and health issues related to employees working in home office conditions that are unlikely to be ergonomic in design.
The potential for fraudulent claims is another concern, as payouts for Workers’ Compensation claims are often higher than they are for health care insurance claims, and the burden would be on employers to disprove an employee’s eligibility for benefits.
“Right now, it is a balancing act,” Dorman explained. “However, these orders are time-limited; they do have end dates.”
Businesses seek guidance on changing laws, insurance
Other states that have expanded Workers’ Compensation benefits to cover COVID-19 for select employees include Kentucky, Minnesota, Missouri and Washington. As state guidelines evolve, many business leaders are asking questions about their Workers’ Compensation Insurance coverage.
“While keeping up with the latest developments can be challenging,” Dorman said, “it is essential.” He recommends using all resources at one’s disposal to obtain current and accurate information, including consulting insurance brokers and agents. “Insurance brokers and agents are there to help.”
While some predict the expansion of Workers’ Compensation benefits could amount to tens of billions of dollars in additional costs for insurers, Dorman pointed out that Workers’ Compensation Insurance claims overall are down, due to high unemployment.
What will have a significant impact on businesses’ Workers’ Compensation Insurance costs going forward, Dorman said, is that bureaus that run each state’s workers’ compensation system are coding COVID-19 claims in a manner that will allow insurance carriers to determine which claims are related to the virus. If a business had many claims but they were all related to COVID-19, for example, an insurance carrier could exclude those in order to price a new Workers’ Compensation Insurance policy more favorably.
“The current situation is unique, and thus not representative of a company’s general operations,” Dorman said. “The insurance industry is doing everything it can to lighten the burden of premiums while helping businesses maintain their Workers’ Compensation Insurance coverage as we navigate this crisis together.”
The Workers’ Compensation Insurance system “works very well and has for a long time,” Dorman asserted, adding, “I think it is the most important insurance coverage for any business.”
Unlike in the U.S., Workers’ Compensation benefits claims in Canada are for loss of earnings rather than for health care expenses. Ontario’s Workplace Safety and Insurance Board’s criteria for determining eligibility for benefits related to COVID-19 include evidence that the applicant’s risk of contracting the virus at work was greater than the average risk in the general public and that the applicant’s work “significantly contributed to their illness.”
Adhering to guidelines, implementing safety practices essential
The potential impact of Workers’ Compensation Insurance expansions will become more apparent when businesses reopen, Dorman said. “In California, many employers may delay reopening for business until they fully understand the potential cost of doing so,” he said. “In other states employers may feel more confident about reopening sooner once they have workplace safety modifications in place.”
“I recommend that while employers should do everything they can to stay on top of safety, they should also be proactive in preparing for the future.” –Dorman
Government, legal and industry advisory bodies have made recommendations for maintaining safe workplaces and reducing the potential spread of COVID-19, for businesses that have been open during the last few months as well as those with plans to reopen.
Business leaders have been urged to follow best practices from the U.S. Centers for Disease Control (CDC), U.S. Department of Labor Occupational Safety and Health Administration (OSHA) regulations, and state or local guidelines. Businesses would also benefit from revisiting their own workplace safety policies, updating employee handbooks and familiarizing themselves with recommended workplace precautions to protect employee health, including new seating arrangements, closing common areas like kitchens, facilitating social distancing, providing sanitizing stations and implementing augmented cleaning protocols.
“Employee safety is the primary concern for an employer,” Dorman said. “I recommend that while employers should do everything they can to stay on top of safety, they should also be proactive in preparing for the future.”
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This information was provided by Burns & Wilcox, North America’s leading insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent about Workers’ Compensation Insurance or other products that might be right for you.