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COVID-19 and Its Impact on the Workers’ Compensation Industry

COVID-19 and Its Impact on the Workers’ Compensation Industry

COVID-19, the new strain of coronavirus and a deadly one at that, is causing increasing concern to organizations and governments across the world. For organizations, the major challenge is to figure out how the outbreak could affect their employees, brand, customers, functioning, and revenue. Workers’ compensation attorneys and medical review companies that assist these attorneys are all working to make sure that their client organizations understand the impact the possibility of a large number of claims can have on them. Apart from the possibility of numerous claims, what are the challenges that will affect the workers’ compensation industry?

A recent post in insurancethoughtleadership.com/ highlighted some of these challenges.

  • It would require a case by case evaluation to determine whether an infectious disease is “work-related”.
  • The cost per workers’ compensation claim could increase due to the longer duration of these claims. The increased duration could result from the following factors:
    • The healthcare sector is fighting the new virus and very likely there will be delays in treatment. Elective surgeries may be postponed until later after this emergency situation passes.
    • There has been significant workforce reduction in most industries, and employers will find it difficult to find modified work options.
    • In wage-loss states, indemnity benefits cannot often be terminated without a return to work. However, return to work in any capacity could prove to be a challenge for many industry sectors.
    • It may be virtually impossible to find outside job placement through vocational rehabilitation with so many employers idle and a considerable percentage of workers looking for work.
    • The courts are mostly closed in many U.S. states, and this has made the workers’ compensation adjudication process grind to a halt.
  • What about the financial implications for the industry?
    • There has been a drastic drop in payroll for many employers and this could mean lower workers’ compensation premiums they pay. It is expected that overall industry premiums will see a sharp decline for 2020 compared to earlier years. When premiums are low, state regulatory agencies will also experience lower revenue inflow because these agencies are often funded by premium taxes and assessments.
    • Workers’ compensation insurers especially and the insurance industry generally depend on investment income as a factor in their overall pricing model. These investments are likely to be down with the federal interest rate at zero and the huge drop in the stock market. Therefore, insurers may be forced to charge higher rates to compensate for the huge decline in investment income.
    • COVID-19 has brought about considerable business disruption in the workers’ compensation sector also. Many offices are closed because of the hazardous situation. It is important that the insurance sector is also included in the group of essential businesses if organizations in this sector are to remain competitive.
  • Costs of claims: Now, most organizations are functioning with a skeletal staff, and the number of claims over the near term is likely to be lower because the opportunities for workplace injuries are also less. Certain sectors such as healthcare, some retailers, and occupations such as first responders are likely to see an increase in claims and costs. Many people are working from home and only time can tell what claims arise in these situations and how these will be settled. Medical management providers offering utilization review and case management may experience less revenue inflow because of the decrease in the total number of claims. Third party administrators also may see a dip in their revenue because they too have a per claim or fee-for-service business model. It is however, estimated that by the latter part of this year, there could be an increase in the number of claims with everything settling back to normal.
  • Increased claims following change in business model: Restaurants, for instance, are shifting to a delivery-only model. Workers who are not typical commercial drivers are taking up this new role as drivers. This could lead to an increase in work-related auto accidents in the restaurant industry. Many businesses may not have appropriate commercial auto coverage since they did not have drivers until now. Another consideration is, since many companies are shifting to a work-from-home model, auto accidents could also be fewer overall.

As providers of medical review solutions for insurance attorneys, we understand that employers, insurers and employees themselves should best consult a workers’ compensation lawyer to have a clear idea regarding the implications of COVID-19 on workers’ compensation claims and the industry in general. The present situation is a typical occasion when the financial robustness rating of insurance carriers is most important. Most workers’ compensation carriers have good ratings and should be able to overcome the challenges on the way. They are committed to respond positively to policyholders who really need financial assistance. The use of advanced technology like electronic banking is enabling injured workers to receive their benefits even when confined to bed.

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