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By Hon. Susan V. Hamilton, Former Assistant Secretary and Deputy Commissioner, California Workers’ Compensation Appeals Board
As we enter the third year of the global pandemic, it is abundantly clear that COVID-19 has impacted nearly every aspect of life, not the least of which is our work lives. For nearly eighteen months, from March 19, 2020 to June 15, 2021, all California residents EXCEPT those workers necessary to maintain continuity of operations of critical infrastructure were ordered to stay at home. The “Stay at Home” order was followed by other measures intended to protect the health and safety of Californians whose work during the initial phase of the pandemic put them at the highest risk for being exposed to and contracting COVID-19. The Governor’s Executive Order N-62-20 creates a rebuttable presumption of industrial causation of any COVID-19 related illness of a worker who worked at their employer’s jobsite at the direction of their employer between March 19, 2020 and July 5, 2020. Senate Bill 1159 (Stats. of 2020, effective September 17, 2020) codified the presumption and created two additional presumptions.
How COVID-19 has affected California’s worker’ compensation system to date is the subject of a recent study conducted by the RAND Corporation. That study, COVID-19 in the California Workers’ Compensation System (study), examines COVID-19 workers’ compensation claims and evaluates the presumptions initially put in place by Executive Order and later codified. While the course of the COVID-19 pandemic remains uncertain, the study’s findings, insights and recommendations will be instrumental in guiding policy makers as they face new challenges presented by the still present and highly contagious virus.
To fully appreciate the study’s findings and recommendations it is important to review the measures taken in the early days of the pandemic to protect the health and safety of all California residents, especially those workers required to continue to work outside their homes to provide important services. Those workers were understandably concerned about contracting the virus while at work, just as employers were concerned about their compensation liability for such a highly contagious virus. Executive Order N-62-20 was the compromise. It provides that all workers who worked at a jobsite outside of their home at the direction of their employer between March 19, 2020 and July 5, 2020 and who are positive for COVID-19 within 14 days of working at the employer’s jobsite are presumed to have contracted any COVID-19 related illness at work for the purposes of awarding workers’ compensation benefits. Generally, these workers work in such industries as health care, public safety and protection, transportation, manufacturing, and food services. To be covered by the presumption, the employee had to test positive for or be diagnosed with COVID-19 by a licensed physician within 14 days of working at the jobsite. Such diagnosis had to be confirmed within 30 days by a positive COVID-19 test. The employer is given 30 days to accept or deny the claim.
Senate Bill 1159 became effective on September 17, 2020. It adds several new sections to the Labor Code. The first is Labor Code section 3212.86, which codifies the COVID-19 rebuttable presumption created by Executive Order N-62-20 and extends its application to employees who get sick or injured due to COVID-19 on or after July 6, 2020. This statute is repealed effective January 1, 2023.
Next is Labor Code section 3212.87. That statute applies to specified active firefighters, peace officers, fire and rescue personnel, paramedics, emergency medical technicians, health care workers who provide direct patient care in health facilities, as well as providers of in-home supportive services and employees who provide direct patient care for a home health agency. This statute, known as the “frontline” presumption, defines injury as illness or death resulting from COVID-19, but only if each of the following apply: (1) the employee tests positive for COVID-19 by a Polymerase Chain Reaction (PCR) test within 14 days after a day that the employee performed services at the employer’s place of employment and at the employer’s direction; and (2) the day referenced in (1) above is on or after July 6, 2020. If these criteria are met, the employee is entitled to a presumption of compensable injury. The employer has 30 days to accept or deny the claim. For health care facility employees other than those who provide direct patient care in an acute hospital, skilled nursing facility, intermediate facility or custodial settings, the presumption can be rebutted by showing that the employee did not have contact with a patient who tested positive for COVID-19 within the last 14 days. Benefits that may be awarded include hospital, surgical, medical treatment, indemnity and death benefits. If an employee has paid sick leave benefits specifically available in response to COVID-19, those benefits must be used and exhausted before the employee is entitled to temporary disability indemnity or salary continuation under Labor Code sections 4800, 4800.5 or 4850. Like Labor Code section 3212.86, this section is repealed effective January 1, 2023.
The third statute is Labor Code section 3212.88. It is commonly referred to as the “outbreak” presumption, and it applies to employees not covered by Labor Code section 3212.86 who test positive for COVID-19 during an outbreak at the employee’s specific place of employment, and whose employer has five or more employees. An outbreak exists if within 14 days one of the following occurs at a specific place of employment: (1) four employees test positive for COVID-19 if the employer has 100 or fewer employees; (2) four percent of the number of employees who reported to the specific place of employment test positive for COVID-19 if the employer has more than 100 employees; or (3) a specific place of employment is ordered to close by a local public health department, the State Department of Public Health, the Division of Occupational Safety and Health, or a school superintendent due to risk of COVID-19. The statute creates a rebuttable presumption of industrial injury or illness for such an employee that must be accepted or denied within 45 days of the claim. The employer is allowed to rebut the presumption by evidence showing measures taken at the workplace to reduce potential transmission of COVID-19. An employee’s positive COVID-19 test along with other pertinent information must be reported to the employer’s claims administrator. Benefits that can be awarded include hospital, surgical, medical, indemnity payments and death payments; however, if the employee has paid sick leave specifically available for COVID-19 related illnesses, it must be exhausted before temporary disability indemnity or various salary continuation benefits can be paid. This statute is also repealed as of January 1, 2023.
The Study Framework
The study has three main goals. First, to evaluate the overall impacts of COVID-19 claims on California’s workers’ compensation system. Second, to evaluate the overall impact of COVID-19 claims on the payment of workers’ compensation benefits, including any differences in the impacts across different occupational groups. Third, to assess the overall and cost impacts of the “frontline worker” and “outbreak” presumptions created by Senate Bill 1159. The study uses quantitative claims data from the Workers’ Compensation Information System (WCIS) by industry and occupation for the period from January 2020 to June 2021. This quantitative analysis is complimented by semi-structured interviews with workers, employers, claims administrators and public health officials who were chosen to reflect the geographic diversity of California. The study’s quantitative analysis establishes a number of basic facts about California’s experience to date with COVID-19 workers’ compensation claims, and the qualitative analysis reveals how COVID-19 claims have impacted workers, employers and claims administrators. The key findings are reviewed below.
COVID-19 Claim Volume between January 2020 and June 2021
The impact of COVID-19 claims on California’s workers’ compensation system cannot be fully appreciated without a clear understanding of the number of claims in comparison to non-COVID claims. In the 18-month period between January 2020 and June 2021, approximately 155,000 claims were reported to WCIS as COVID-19 infections. That number accounts for approximately 16% of all workers’ compensation claims filed during the time period. While the volume of COVID-19 claims might seem manageable, the study observes large fluctuations of COVID-19 claims volume that are outside the historical experience of California’s workers’ compensation system. For example, in June and July of 2020, COVID-19 claims accounted for over 20% of all claims reported. In other months they averaged around 10% of all claims. However, in December 2020 they accounted for 55% of all reported claims. 82,000 COVID-19 claims with a December 2020 injury date were reported, which is significantly greater than the highest number of monthly reported claims in the decade before the pandemic (68,000). Monthly fluctuations in COVID-19 claims appear to follow surges in the virus. As the study notes, such fluctuations present a significant challenge for employers and claims administrators.
Early in the pandemic, between March 19, 2020 and July 5, 2020, non-COVID claims dropped by approximately 25%, although they still remained higher than COVID-19 claims. This drop in volume is consistent with the Stay-at-Home order and job losses during the early months of the pandemic. As California’s economy began to open again, however, the volume of non-COVID-19 claims has risen but still remains lower than pre-pandemic levels.
COVID-19 Claims by Occupation and Industry
The study analyzed COVID-19 claims by occupation and industry. The findings are not altogether surprising. Generally, industries with very low rates of reported COVID-19 claims were white-collar industries, such as Information services, with low historical claim rates, and service industries, such as hospitality, education, recreation, and entertainment that were subject to widespread closures. However, it is important to note that the study did not analyze data on job losses during the pandemic, reduction in hours worked, or the prevalence of work-from-home arrangements, which are factors likely to influence the rate of COVID-19 claims.
Those industries with the highest number of COVID-19 reported claims were health care, protective services, transportation, warehousing, retail and manufacturing. Workers in many of these industries are covered by the “frontline” or “outbreak” presumptions. Health care workers accounted for 32% of all reported COVID-19 claims during the study period. Of these workers, the COVID-19 claims rates were highest for workers in skilled nursing facilities, followed next by workers in hospitals and home health care settings. Additionally, COVID-19 claim rates were higher for those workers in health care supportive roles (e.g., nurse assistant) than health care providers, except for health care providers working in ambulatory care settings.
Ten percent of all reported COVID-19 claims during the study period were filed by peace officers and firefighters. While this may seem like a small percentage, in comparison to healthcare and other industries, their COVID-19 claims rates per 10,000 workers were the highest. For firefighters, the rate of COVID-19 claims was 785 per 10,000 workers and for peace officers it was 683 per 10,000 workers. In contrast, the COVID-19 claim rate at skilled nursing facilities was 394 per 10,000 workers and the COVID-19 claim rate at hospitals was 202 per 10,000 workers.
Several other occupations were notable for higher COVID-19 claim rates. For example, the food manufacturing industry had a COVID-19 claim rate of 134 claims per 10,000 workers, double the rate in all other manufacturing industries (63 claims per 10,000 workers). The study posits that this difference could be attributable to higher levels of exposure to COVID-19 since food production industries were classified as critical infrastructure and were largely exempt from Stay-at-Home orders. Transportation and warehousing industries also experienced high COVID-19 claims rates. Within these industries, courier and messenger occupations had a rate of 509 COVID-19 claims per 10,000 workers.
Denial of COVID-19 Claims
Given that COVID-19 is a new virus and one that is highly transmissible, it is not surprising that an industrial claim of COVID-19 infection might be denied. What is surprising is the rate at which COVID-19 claims were denied. The study reports that COVID-19 claims are denied much more often than non-COVID claims. They are even denied more often than claims for infectious diseases reported in the years prior to this pandemic. The study finds that denial rates for COVID-19 claims did vary, depending on when they were filed, but still remained higher than the denial rates for non-COVID claims. For example, COVID-19 claims reported prior to the temporary presumption (January 1, 2020-March 18, 2020) had a denial rate of 44% compared to 13% for non-COVID claims. Once the temporary presumption established by Executive Order N-62-20 took effect, the denial rate for COVID-19 claims was 26% compared to 14% for non-COVID claims. After Senate Bill 1159 added the “frontline” and “outbreak” presumptions, the denial rate for COVID-19 claims was 34% compared to 10% for other non-COVID claims.
The study also examined denial rates across industry and occupation. COVID-19 claims reported by health care workers were denied twice as often as their non-COVID claims, even after the adoption of the presumption. The same was essentially true for peace officers and firefighters who are also covered by the “frontline” presumption. As for workers in those occupations potentially covered by the “outbreak” presumption (e.g., manufacturing, transportation, agriculture, etc.), the denial rate of COVID-19 claims was nearly three times as high as the rate of denials for their non-COVID claims. Further, after the “outbreak” presumption was codified, the denial rate for COVID-19 claims increased. The study suggests that this finding might be attributable to the fact that the temporary presumption was more lenient than the “outbreak” presumption.
How can we make sense of the extraordinarily high denial rate of COVID-19 claims? The study cautions that it was missing important data that could alter its findings. It is possible that some COVID-19 claims were reported on a precautionary basis simply to document an exposure. It is also possible that some COVID-19 claims were denied because the infection was not verified by a positive PCR test. Or the claim may have been denied because of lack of an employment relationship. The study also reviewed claim denial data provided by the California Workers’ Compensation Institute (CWCI). CWCI conducted its own analysis of COVID-19 claim denials from the data of 29 different claims administrators. Its analysis found that 58% of COVID-19 claims were denied because the infection was not medically verified by a positive PCR test. In some instances, a PCR test had not even been performed. In other instances, the PCR test was negative. Similarly, a large Joint Powers Authority that provides coverage for public entities throughout California provided data to the study on COVID-19 acceptance and denial rates. Nearly all COVID-19 claims with a positive PCR test were accepted whereas nearly all claims with a negative or no PCR test were denied. As an aside, claim denial due to the lack of a positive PCR test does not seem unusual. Throughout the pandemic to date PCR testing has not been readily available to those who need it to confirm an infection.
Paid Indemnity on COVID-19 Claims
The study reports that temporary disability indemnity (TD) is by far the most frequently paid form of indemnity on COVID-19 claims to date. Even so, the average amount of TD paid on COVID-19 claims is less than that paid on non-COVID claims. For workers covered by the “frontline” presumption, the difference in the amount of TD paid on COVID-19 claims versus non-COVID-claims was $1,348 compared to $1,538. For those workers in occupations likely covered by the “outbreak” presumption, the disparity was much greater. The average TD paid on a COVID-19 claim was $410 compared to $1,210 on a non-COVID claim. Additionally, the duration of TD payments on COVID-19 claims is significantly less than it is on non-COVID claims. “Frontline” presumption workers with COVID-19 claims had an average TD duration of 25 days as compared to an average duration of 53 days for non-COVID claims.
Why is less TD paid on COVID-19 claims than on non-COVID claims? One contributing factor, the study says, is that nearly all workers had access to special federal and state paid leave programs that were set up in the initial phases of the pandemic to cover an employee’s lost time from work due to COVID-19 infection and/or the need to quarantine after exposure. It appears that in most instances, these paid leave programs were sufficient to cover a worker’s lost time.
What about the payment of permanent disability indemnity (PD) on COVID-19 claims? So far PD payments and settlements are extremely rare on COVID-19 claims. As the study observes, the same is true for non-COVID claims filed during the same time period. Even so, payments of PD and settlements are less common on COVID-19 claims.
Similarly, paid death benefits on COVID-19 claims have remained rare so far. The study says this is likely because COVID-19 death claims are still in the process of being litigated. It also notes that claims involving the death of a worker are far more common among COVID-19 claims than among non-COVID claims.
Payment of Medical Benefits on COVID-19 Claims
The study reports that one distinguishing feature between COVID-19 claims and non-COVID claims is the high percentage of COVID-19 claims that are submitted without any medical bills. During the period from July 6, 2020 to June 30, 2021, 77% of COVID-19 claims filed by “frontline” workers and 85% filed by other workers had no medical bills submitted. Likely this is because the overwhelming majority of workers were able to access medical care for COVID-19 related issues through their group health insurance because federal rules required that treatment for COVID-19 be covered by all insurers. Thus, no co-pays or deductibles were required. Similarly, for uninsured workers, the Health Resources and Services Administration provided workers with full coverage for COVID-19 related medical treatment. As these special programs phase out, however, more COVID-19 claims will likely be submitted with medical bills.
For those COVID-19 claims that were submitted through workers’ compensation with medical bills, the study finds that medical spending on COVID-19 claims without hospitalization is lower than it is on non-COVID claims without hospitalization. In contrast, when it comes to COVID-19 claims with hospitalization, the study finds that medical spending on COVID-19 claims has been largely driven by a much higher frequency of hospitalization. When the study looked at claims with paid medical bills, COVID-19 claims were seven times more likely to involve hospitalization than non-COVID claims, and over three times more likely than non-COVID claims to involve care in an intensive care unit (ICU). Two important take-aways are suggested by these findings. First, that the overall population of COVID-19 claims contains both very low severity claims and very high severity claims than is typically seen among reported claim populations. Second, that workers’ compensation played an important role in shielding those workers with severe COVID-19 from the financial risk associated with high-cost medical treatment, such as hospitalization in the ICU.
The study observes that there is a big unknown facing workers’ compensation claims administrators and self-insured employers—namely, the number of workers who received medical treatment for COVID-19 that was billed to other payors. Presumably some of those payors may seek to recoup some portion of their payments through workers’ compensation, which would likely have implications for the overall amounts of medical benefits paid through the workers’ compensation system on COVID-19 claims.
Another unknown is with regard to future medical benefit payments on COVID-19 claims. Within the confines of this study there was inadequate data to make a forecast as to the likely costs of reasonable and necessary future care, including care for lingering symptoms that have been associated with some COVID-19 infections.
What Lies Ahead?
The unique and unprecedented nature of the COVID-19 pandemic presents a real challenge to the workers’ compensation system. According to the study, concern about COVID-19’s impact on workers’ compensation has not subsided—it has grown, especially as the virus continues to mutate and surge, and many workers continue to have high risk of exposure at work. There are still so many unknowns. Did the “frontline” and “outbreak” presumptions reduce litigation? We don’t know the full impact yet, but there is some suggestion of benefit by establishing a clear criterion (positive PCR test) for a COVID-19 claim to be accepted.
As COVID-19 claims mature, more research will help shed light on important questions, such as how did COVID-19 claims and claims outcomes vary across California and by industry and occupation? For those workers experiencing lingering effects from a COVID-19 infection, will workers’ compensation cover the costs of medical care, wage loss due to disability, and any required rehabilitation services? What are the best claims handling practices to deal with large fluctuations in claim volume and shortened time frames for accepting or denying claims? The answer to these and other important questions will be invaluable in assisting policymakers in taking the most prudent steps to respond to the immediate and on-going challenges presented by the COVID-19 pandemic.
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