Examining the Early Impacts of COVID-19 on Workers’ Compensation Claims

New WCRI 27-State Study Provides Evidence of Impact Pandemic Is Having on Number and Types of WC Claims

COVID-19 had an enormous impact on the U.S. economy in 2020, both in terms of the loss of jobs and the shifting of many jobs to at-home positions, as well as the direct medical impact of the coronavirus on worker health. As a result, there arise many questions about the impact of this new employment landscape on workers’ compensation claims. These questions are examined in a new Workers Compensation Research Institute study, “The Early Impact of COVID-19 on Workers’ Compensation Claim Composition,” by Olesya Fomenko and John Ruser. By looking at available data from 27 states for the first half of 2020 for private employers and local public safety employees, this study examines both the rise of COVID-19-based workers’ compensation claims and the impact on workers’ compensation of the economic slowdown brought on by COVID-19.

Rate of COVID-19 Workers’ Compensation Claims

This WCRI study found that for the first quarter of 2020 when COVID-19 was first emerging, in 21 of the 27 states studied, including California, Florida, and Texas, the percentage of COVID-19 workers’ compensation claims amounted to 1% or less of all workers’ compensation claims. In five more states that percentage was 2 to 3%, with New Jersey being the outlier with a 10% COVID-19 claims rate. For the second quarter of 2020, when the pandemic was more pronounced, these percentages were much higher with a median rate of 6%, from a low of 1% for South Carolina to a high of 42% for Massachusetts. New Jersey had the second-highest rate at 34%, with other key states including California at 8%, Florida at 6%, and Texas at 2%. Significantly, COVID-19 claims came in at even higher rates when looking only at workers’ compensation claims with more than seven days of lost time. For example, among that subset of claims for the second quarter of 2020, COVID-19 claims in New Jersey were 58% of all claims, in California 21%, in Florida 20%, and in Texas 7%.

The authors looked at various factors that could impact the disparity in COVID-19 claim rates among these states and found, as expected, that the uneven spread of the virus to different geographic areas clearly impacted these claims rates, with states getting hit hardest by the virus in the earliest months of the pandemic (as measured by COVID-19 death rates) tending to have the highest COVID-19 workers’ compensation claims rates.

But they also noted other factors that could have impacted the results, such as the different steps taken by the states to facilitate coverage of COVID-19 by workers’ compensation. For example, they note that 8 states, including California, had rebuttable presumptions or executive orders in place to facilitate coverage of COVID-19 claims, and these states tended to have higher COVID-19 claims rates than states without presumptions. While New Jersey, which consistently had one of the highest COVID-19 claims rates, did not have a presumption law for COVID-19 in effect for the first half of 2020 (a retroactive presumption was added in September), that state did have a rebuttable presumption in place for public safety workers who contracted a serious communicable disease during an epidemic. The authors caution that the tendency towards higher claims rates among states with presumptions may be due to that fact that states hit hardest by the pandemic in the earliest months were more likely to enact a presumption.

The study also looked at the extent to which COVID-19 claims rates varied among different industries and found that COVID-19 claims had a greater impact on certain industries than others, while non-COVID-19 claims were more evenly distributed among the various industries. For example, they found the highest COVID-19 claims rates among high-risk services such as the health care industry, assisted living facilities, and hotels/restaurants/clubs, with lower-risk service industries such as schools, personal beauty services, and insurance/real estate, being the group of industries with the next highest COVID-19 claims rate.

Decline of Workers’ Compensation Claims Generally

This study found decreases among all 27 states in the number of non-COVID-19 workers’ compensation claims when comparing data from the first quarter of 2019 with data from the first quarter of 2020, with the decreases ranging from 2% to 20%. Among some key states, New Jersey showed a 16% decline, California and Texas were both at 10%, and Florida was at 8%. This is consistent with the longer-term trend toward decreasing workers’ compensation claims. The second quarter of 2020 showed an even greater reduction in non-COVID-19 claims, with every state showing at least a 20% drop from the second quarter of 2019. In that measure, New Jersey had the second-highest drop at 48%, Florida was down 42%, California 34%, and Texas 33%.

The authors point to several COVID-related factors certainly play a role in the variation among different states of non-COVID-19 claims decreases from 2019 to 2020. For example, their data showed a positive relationship between the drop in employment rates and the drop in non-COVID-19 compensation claims, although they calculated that this employment drop only explained about a third of the reduction in workers’ compensation claims. Their calculations also showed a “clear relationship between the severity of the pandemic in the state and reduction in the percentage of WC claims,” with pandemic severity in each state being measured by COVID-19 death numbers per capita. For this analysis, they noted that an increase in pandemic severity tended to result in reductions in economic activity along with an increase in physical distancing, including encouraging work from home and even stay-at-home orders.

The number of workers’ compensation claims decreased between 2019 and 2020 even when adding in all COVID-19 claims. While the percent reductions were about the same as described above when comparing the first quarter data for each year, the second quarter reductions were not as great when COVID-19 claims are included. For example, the second quarter reduction in total claims for Florida was 38%, Texas was down 31%, and California was down 28%. New Jersey was down only 21% year-over-year when COVID-19 claims are included, showing a much greater disparity with their non-COVID-19 claims decline of 48%, which is consistent with the data showing that state to have among the highest number of COVID-19 claims.

Despite these overall declines, for claims with more than seven days lost time, including COVID and non-COVID claims, there is a much greater range of results, with some states showing declines and some increases from 2019 to 2020. In comparing all time-lost claims in the first quarter of 2019 with those of the first quarter of 2020, 21 states showed declines in 2020. For example, while Texas was down 8% and California was down 2%, Florida was up 5% and New Jersey was up 19%, with the latter percentage being the highest among all states in the study. When comparing the second quarters of each year, only 12 states still showed a decrease in time-lost claims in 2020, with Texas showing a decline of 16%, Florida 5%, and California 1%. New Jersey, conversely, showed an increase of 52%, the third highest among those states showing an increase in second quarter 2020.

In explaining the increase in time-lost claims in the second quarter of 2020, the authors note that an increase in COVID-19 claims means more cases requiring hospitalizations or other medical attention, and even asymptomatic COVID cases often result in self-quarantine, which itself results in time away from work when work from home is not possible. They also note, however, that workers during the pandemic may only be reporting mores severe injuries that are likely to result in time lost from work, either out of a desire to avoid health care facilities where they might fear a greater risk of COVID exposure, or out of fear of reporting an injury when job security might be reduced due to the economic uncertainty of the pandemic.

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