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The effect of COVID-19 on workers compensation could range from $1 billion to $80 billion, according to a National Council on Compensation Insurance study that modeled the potential impacts of the virus.
The study, released Monday by the Boca Raton, Florida-based ratings agency, combined NCCI’s actual data on injury and medical costs with some key assumptions to generate multiple scenarios and model the potential impacts that COVID-19 could have on workers compensation in the 38 states where the agency serves as the licensed rating and statistical organization, said Jeff Eddinger, senior division executive at NCCI.
There is “a wide range of possible impacts” from the coronavirus because of the lack of knowledge on exact infection rates or compensability rates, ranging from $1 billion to $80 billion, he said.
“We don’t know what that (worst-case scenario) would do,” he said. “It’s two and a half times what is normally paid out in a year.”
In the study, NCCI estimated that 49 million to 62 million workers could potentially qualify as essential workers who could be eligible for workers compensation relating to COVID acquisition.
Using infection rate assumptions of 5% to 50% and a fatality rate of 0.5%, NCCI estimated that with an assumption of compensability of 60% to 100% for first responders and health care workers, COVID could cost $1 billion to $16.2 billion. Using those same infection and fatality assumptions but modifying the compensability rate from 20% to 60% but including all essential workers raises that worst-case cost impact scenario to $81.5 billion.
In one scenario, NCCI assumed that all cases involving medical services would result in a compensable workers compensation claim, assumed no expected losses for disability and used 10% as the assumed infection rate. Looking at state-specific data as well as age, population density and other characteristics, the potential workers comp loss impact by state assuming a compensability rate of 100% ranged from 39% in Hawaii to 245% in Texas.
It is important to note that the insurance industry would not alone be responsible for the pay out under the various scenarios, Mr. Eddinger said.
“Remember that employers, some of them are self-insured, some of them have large deductibles,” he said. “Some of (the cost) will be borne directly by the employers.”
The Workers Compensation Insurance Rating Bureau of California on April 20 released its own estimates of potential COVID impacts, finding that aid including a COVID-19 presumption for essential workers in the state could carry an annual price tag of as much as $33.6 billion.
More insurance and workers compensation news on the coronavirus crisis here.
Arkansas Republican Gov. Asa Hutchinson signed an executive order Monday expanding workers compensation for occasional exposure to COVID-19 to first responders and health care workers.