COVID-19 has brought a spotlight to a long-developing issue in workers compensation (WC), namely the presumption of compensability. As legislators and politicians increasingly turn to the use and expansion of the "presumption of compensability" to extend automatic compensability to selected workers who may have been exposed to disease, insurers and employers, in particular, seek to understand the costs and other impacts on WC systems.
Traditionally, such systems have relied on verification that injuries and illnesses occurred in both the course and scope of employment. Some wonder if the continued expansion of presumption of compensability might undermine the original intent of the "Grand Bargain" (essentially the exchange of tort rights for no-fault benefits) between employers and employees.
The Evolution of Occupational Disease and WC Compensability
Some may argue that this first emerged as a significant issue on September 11, 2001 (although the solution to those injured and killed in association with that fateful day—the 9/11 Victim's Compensation Fund—is a federally designed and funded mechanism). These costs have been more significant than initially predicted.
Concerns over the expanded use of presumption of compensability first got the attention of WC rating sources around 2010. The National Council on Compensation Insurance (NCCI) released its first white paper on the topic in 2013, another comprehensive look in 2018, and has now updated the issue in 2020 as a result of the accelerated turn to this approach in response to COVID-19.
Before COVID-19's appearance (officially in March 2020), NCCI and other rating bureaus have been unable to reliably quantify the cost impact of the presumption of compensability as it has been applied to "first responders." The impact on government is more difficult to quantify as it is largely tax-funded rather than covered by commercial insurance. The NCCI did, however, conclude unequivocally that this approach to WC compensability, typically expanding the definition of covered occupational diseases (ODs), will have substantive cost impact subject to the breadth and depth of application.
The NCCI estimates that the use of presumption of compensability for COVID-19-exposed workers could increase WC costs from a low of $2.78 billion to as much as $81.5 billion for the 38 states it studies. New York and California, both engaged in their own rating activity (outside NCCI data), have issued their own estimates that are even more staggering.
One key unknown is whether the presumption of compensability tool will be limited to this virus or whether the impact will be more general to "ordinary diseases of life," as Hawaii has seemingly allowed. Will there be changes then to parameter limits such as indemnity benefit waiting periods, rendering a potentially minor illness as "lost time" events?
New York's estimate of the impact on loss costs from varying applications of the presumption of compensability for COVID-19 could exceed $31 billion, or 353 percent of current annual WC costs in the state of New York (before COVID-19). For the state of California, the Workers' Compensation Insurance Rating Bureau estimates a range of cost impacts from $2.2 billion up to $33.6 billion with a midrange estimate of $11.2 billion (61 percent of average annual WC costs in that state). Such presumptions now appear to have traction. Key concerns include the following.
Cost of significant increases to workers compensation insurance premiums
Competitiveness of businesses within affected states
Implications for the WC systems and the "Grand Bargain"
The full effect COVID-19 will have on this trend
The historical underlying proposition for WC was the occurrence of an accident or a fortuitous event happening suddenly. In the 100-plus years since its original deployment, new concepts such as psychiatric injury, repetitive trauma, and occupational disease were periodically added to the various state laws, expanding what was "compensable" under the many state-based statutes. The system's evolutionary nature and state-driven diversity are important components of how the systems change. Early challenges to the systems were predominantly by injured workers contesting the sufficiency of benefits defined by each statute.
Presumption of Compensability: Then and Now
With the inception of occupational disease in WC, it was typically tied to specific workplace environments. The best examples are dust-related exposure diseases such as silicosis, asbestos, and black lung disease. Exposure to these and other specific diseases was exclusively related to the workplace and, thus, presuming them to be covered by WC statutes was an easy-to-make argument.
Modern work environments have focused heavily on promoting safety by emphasizing the prevention of known workplace connected diseases, though it is not with any consistency across industries or companies unless by regulatory mandate. As a result, WC systems evolved to include selected compensability of occupational diseases that were not ordinary diseases of life or to which the public was not ordinarily exposed. The "Grand Bargain" was working equitably.
In the late twentieth century, WC systems began to be amended with a statutory imposition of presumption of compensability. In general, the purpose of the presumption of compensability is that something is true under the law until proven otherwise. In a general sense, both in tort and in WC, the person seeking benefits is presumed not to be entitled to them. The injured worker is presumed to not be entitled to benefits until proven. Therefore, that person bears the burden of proving entitlement.
In general, this means proving that an accident and resultant injury/disease occurred in the course and scope of the employment. A presumption of compensability generally changes that premise and holds that benefits are due until and unless another party (the employer) proves that they are not. Generally, the presumption of compensability shifts the "burden of proof" without significantly changing the underlying statutory rules regarding compensability.
In recent decades, presumptions of compensability have become more common in WC largely through the efforts of unions representing the interests of firefighters and police officers. Presumptions of compensability most often fall within two categories, "conclusive" and "rebuttable." A conclusive presumption of compensability protects the decision from a challenge, which means the alleged injury is compensable, despite any proof to the contrary that might be presented. A rebuttable presumption of compensability is the opposite, as it is true until proven otherwise.
Presumptions of compensability in the "first responder" realm have become commonplace as to cardiovascular conditions, cancers, and emotional claims. These have only changed the necessary evidence to prove claims. Thus, any employee could prove the compensability of a heart attack or other cardiovascular event in WC, but a firefighter with a presumption of compensability may have such an event or condition presumed compensable without the need of proof. A non-first responder would have to prove his or her case, while the firefighter would prevail unless the employer successfully rebutted the cause and compensability.
Some states have legislated compensability of mental claims in WC without the necessity of any physical harm or injury. Those states, and this paradigm, are referred to as "mental/mental." In other jurisdictions, mental conditions are compensable only if that follows some physical injury otherwise compensable in WC. These jurisdictions are referred to as "physical/mental."
Various jurisdictions have established these presumptions of compensability for select occupations and conditions. The table is, thus, set across the country for a variety of reactions to the presentation of an unexpected and somewhat unprecedented contagion being presumed compensable.
The Impact of COVID-19 on WC
COVID-19 has produced unusual and substantial job losses. There is already evidence of permanent changes in the way we dine, work, travel, and relax. And through legislative action, there will be lasting changes to WC systems. State legislative and executive actions have been increasingly common, the duration of which is still to be determined. The presumption of compensability of COVID-19 in WC has been increasingly common as states grapple with the challenges of the virus crisis. Some jurisdictions' executive actions have specifically included other employee groups in their orders, as well.
Those states implementing change through legislative action are doing so through statutory amendment and will likely remain unless repealed by future legislative action. The states acting through executive action are similarly changing their WC laws but under the auspices of emergency powers delegated to improve the response to such events. The executive declarations are, therefore, temporary, yet it remains to be seen whether those state legislatures will enact more lasting change that would affect a more permanent impact to WC systems as a result.
Regardless of the type of action taken, those who incur the WC expenses are likely to adjust in the face of this unexpected and possibly significant cost of doing business. Insurance companies are likely to seek rate increases and, for employers who self-insure, more controls to mitigate incremental costs. The effects will be potentially significant and impact the speed of recovery of the economy depending on the volume of individuals who qualify for COVID-19 benefits in those reacting states. At this writing, of course, not all states have acted with COVID-19 presumptions of compensability as tactics are still developing.
Cost impacts will vary significantly from state to state. The short to midterm costs are potentially nominal. A fair number of patients with a COVID-19 diagnosis will self-isolate and recover in a home setting. There will be liability for indemnity benefits and nominal medical treatments or medication that will range from minimal to weeks, even months of duration, along with related treatment costs.
The longer-term, higher impact costs would begin when hospitalization is incurred. Such care is expensive, with daily costs often exceeding $10,000. Treatment in an intensive care unit or including surgeries, respirators, and more would be significantly more expensive yet. Reports estimate that average COVID-19 hospitalizations are 8 days, suggesting a reasonable probability of close to $100,000 exposure per case for those incurring costs in this category. This category may also include the permanent death benefits and funeral expenses for the small percentage of patients who succumb to the disease and its sequel or complications. Those complications could lead to litigation where an employer might maintain that alleged death by COVID-19 was more likely due to preexisting or comorbidities, such as heart disease, diabetes, or asthma.
The impact on WC systems and premiums should be viewed in the context relative to system impact (e.g., 61 to 353 percent of annual cost). Those costs will be borne across employments in those jurisdictions adopting such a presumption of compensability. This shifting of viral disease into WC represents a significant cost and may lead to significant implications for WC systems as a material departure from their original intended design and purpose.
Conclusion
The immediate implication is likely to be litigated among stakeholders attempting to allay the cost-shifting these issues portend. The stage is set for WC in some jurisdictions to absorb substantial costs associated with COVID-19 due to the expanded use of the presumption of compensability. Whether those costs are immediate through a retroactive executive liability expansion or in the future through legislative expansion with commensurate rate changes, WC insurers will eventually be forced to increase premiums to cover this risk where deemed compensable.
As states expand both their WC coverage and premiums, there will be a potential incentive for businesses to minimize presence in those jurisdictions, as practical, and thereby enhance profit. As COVID-19 plays itself out over time, the extent and frequency of using the presumption of compensability will influence how it is used for diseases in the future not yet on the radar. Stakeholders in the WC systems would be wise to carefully consider the full ramifications of the continued expansion of presumption of compensability before capitulating to its unopposed use without a clear, supportable basis for doing so.
The "Grand Bargain" was designed to offer balance in industrial injury rights between employers and employees. Overuse of the presumption of compensability risks tipping that balance away from that original intent and increasingly toward inequity among these stakeholders.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
COVID-19 has brought a spotlight to a long-developing issue in workers compensation (WC), namely the presumption of compensability. As legislators and politicians increasingly turn to the use and expansion of the "presumption of compensability" to extend automatic compensability to selected workers who may have been exposed to disease, insurers and employers, in particular, seek to understand the costs and other impacts on WC systems.
Traditionally, such systems have relied on verification that injuries and illnesses occurred in both the course and scope of employment. Some wonder if the continued expansion of presumption of compensability might undermine the original intent of the "Grand Bargain" (essentially the exchange of tort rights for no-fault benefits) between employers and employees.
The Evolution of Occupational Disease and WC Compensability
Some may argue that this first emerged as a significant issue on September 11, 2001 (although the solution to those injured and killed in association with that fateful day—the 9/11 Victim's Compensation Fund—is a federally designed and funded mechanism). These costs have been more significant than initially predicted.
Concerns over the expanded use of presumption of compensability first got the attention of WC rating sources around 2010. The National Council on Compensation Insurance (NCCI) released its first white paper on the topic in 2013, another comprehensive look in 2018, and has now updated the issue in 2020 as a result of the accelerated turn to this approach in response to COVID-19.
Before COVID-19's appearance (officially in March 2020), NCCI and other rating bureaus have been unable to reliably quantify the cost impact of the presumption of compensability as it has been applied to "first responders." The impact on government is more difficult to quantify as it is largely tax-funded rather than covered by commercial insurance. The NCCI did, however, conclude unequivocally that this approach to WC compensability, typically expanding the definition of covered occupational diseases (ODs), will have substantive cost impact subject to the breadth and depth of application.
The NCCI estimates that the use of presumption of compensability for COVID-19-exposed workers could increase WC costs from a low of $2.78 billion to as much as $81.5 billion for the 38 states it studies. New York and California, both engaged in their own rating activity (outside NCCI data), have issued their own estimates that are even more staggering.
One key unknown is whether the presumption of compensability tool will be limited to this virus or whether the impact will be more general to "ordinary diseases of life," as Hawaii has seemingly allowed. Will there be changes then to parameter limits such as indemnity benefit waiting periods, rendering a potentially minor illness as "lost time" events?
New York's estimate of the impact on loss costs from varying applications of the presumption of compensability for COVID-19 could exceed $31 billion, or 353 percent of current annual WC costs in the state of New York (before COVID-19). For the state of California, the Workers' Compensation Insurance Rating Bureau estimates a range of cost impacts from $2.2 billion up to $33.6 billion with a midrange estimate of $11.2 billion (61 percent of average annual WC costs in that state). Such presumptions now appear to have traction. Key concerns include the following.
The historical underlying proposition for WC was the occurrence of an accident or a fortuitous event happening suddenly. In the 100-plus years since its original deployment, new concepts such as psychiatric injury, repetitive trauma, and occupational disease were periodically added to the various state laws, expanding what was "compensable" under the many state-based statutes. The system's evolutionary nature and state-driven diversity are important components of how the systems change. Early challenges to the systems were predominantly by injured workers contesting the sufficiency of benefits defined by each statute.
Presumption of Compensability: Then and Now
With the inception of occupational disease in WC, it was typically tied to specific workplace environments. The best examples are dust-related exposure diseases such as silicosis, asbestos, and black lung disease. Exposure to these and other specific diseases was exclusively related to the workplace and, thus, presuming them to be covered by WC statutes was an easy-to-make argument.
Modern work environments have focused heavily on promoting safety by emphasizing the prevention of known workplace connected diseases, though it is not with any consistency across industries or companies unless by regulatory mandate. As a result, WC systems evolved to include selected compensability of occupational diseases that were not ordinary diseases of life or to which the public was not ordinarily exposed. The "Grand Bargain" was working equitably.
In the late twentieth century, WC systems began to be amended with a statutory imposition of presumption of compensability. In general, the purpose of the presumption of compensability is that something is true under the law until proven otherwise. In a general sense, both in tort and in WC, the person seeking benefits is presumed not to be entitled to them. The injured worker is presumed to not be entitled to benefits until proven. Therefore, that person bears the burden of proving entitlement.
In general, this means proving that an accident and resultant injury/disease occurred in the course and scope of the employment. A presumption of compensability generally changes that premise and holds that benefits are due until and unless another party (the employer) proves that they are not. Generally, the presumption of compensability shifts the "burden of proof" without significantly changing the underlying statutory rules regarding compensability.
In recent decades, presumptions of compensability have become more common in WC largely through the efforts of unions representing the interests of firefighters and police officers. Presumptions of compensability most often fall within two categories, "conclusive" and "rebuttable." A conclusive presumption of compensability protects the decision from a challenge, which means the alleged injury is compensable, despite any proof to the contrary that might be presented. A rebuttable presumption of compensability is the opposite, as it is true until proven otherwise.
Presumptions of compensability in the "first responder" realm have become commonplace as to cardiovascular conditions, cancers, and emotional claims. These have only changed the necessary evidence to prove claims. Thus, any employee could prove the compensability of a heart attack or other cardiovascular event in WC, but a firefighter with a presumption of compensability may have such an event or condition presumed compensable without the need of proof. A non-first responder would have to prove his or her case, while the firefighter would prevail unless the employer successfully rebutted the cause and compensability.
Some states have legislated compensability of mental claims in WC without the necessity of any physical harm or injury. Those states, and this paradigm, are referred to as "mental/mental." In other jurisdictions, mental conditions are compensable only if that follows some physical injury otherwise compensable in WC. These jurisdictions are referred to as "physical/mental."
Various jurisdictions have established these presumptions of compensability for select occupations and conditions. The table is, thus, set across the country for a variety of reactions to the presentation of an unexpected and somewhat unprecedented contagion being presumed compensable.
The Impact of COVID-19 on WC
COVID-19 has produced unusual and substantial job losses. There is already evidence of permanent changes in the way we dine, work, travel, and relax. And through legislative action, there will be lasting changes to WC systems. State legislative and executive actions have been increasingly common, the duration of which is still to be determined. The presumption of compensability of COVID-19 in WC has been increasingly common as states grapple with the challenges of the virus crisis. Some jurisdictions' executive actions have specifically included other employee groups in their orders, as well.
Those states implementing change through legislative action are doing so through statutory amendment and will likely remain unless repealed by future legislative action. The states acting through executive action are similarly changing their WC laws but under the auspices of emergency powers delegated to improve the response to such events. The executive declarations are, therefore, temporary, yet it remains to be seen whether those state legislatures will enact more lasting change that would affect a more permanent impact to WC systems as a result.
Regardless of the type of action taken, those who incur the WC expenses are likely to adjust in the face of this unexpected and possibly significant cost of doing business. Insurance companies are likely to seek rate increases and, for employers who self-insure, more controls to mitigate incremental costs. The effects will be potentially significant and impact the speed of recovery of the economy depending on the volume of individuals who qualify for COVID-19 benefits in those reacting states. At this writing, of course, not all states have acted with COVID-19 presumptions of compensability as tactics are still developing.
Cost impacts will vary significantly from state to state. The short to midterm costs are potentially nominal. A fair number of patients with a COVID-19 diagnosis will self-isolate and recover in a home setting. There will be liability for indemnity benefits and nominal medical treatments or medication that will range from minimal to weeks, even months of duration, along with related treatment costs.
The longer-term, higher impact costs would begin when hospitalization is incurred. Such care is expensive, with daily costs often exceeding $10,000. Treatment in an intensive care unit or including surgeries, respirators, and more would be significantly more expensive yet. Reports estimate that average COVID-19 hospitalizations are 8 days, suggesting a reasonable probability of close to $100,000 exposure per case for those incurring costs in this category. This category may also include the permanent death benefits and funeral expenses for the small percentage of patients who succumb to the disease and its sequel or complications. Those complications could lead to litigation where an employer might maintain that alleged death by COVID-19 was more likely due to preexisting or comorbidities, such as heart disease, diabetes, or asthma.
The impact on WC systems and premiums should be viewed in the context relative to system impact (e.g., 61 to 353 percent of annual cost). Those costs will be borne across employments in those jurisdictions adopting such a presumption of compensability. This shifting of viral disease into WC represents a significant cost and may lead to significant implications for WC systems as a material departure from their original intended design and purpose.
Conclusion
The immediate implication is likely to be litigated among stakeholders attempting to allay the cost-shifting these issues portend. The stage is set for WC in some jurisdictions to absorb substantial costs associated with COVID-19 due to the expanded use of the presumption of compensability. Whether those costs are immediate through a retroactive executive liability expansion or in the future through legislative expansion with commensurate rate changes, WC insurers will eventually be forced to increase premiums to cover this risk where deemed compensable.
As states expand both their WC coverage and premiums, there will be a potential incentive for businesses to minimize presence in those jurisdictions, as practical, and thereby enhance profit. As COVID-19 plays itself out over time, the extent and frequency of using the presumption of compensability will influence how it is used for diseases in the future not yet on the radar. Stakeholders in the WC systems would be wise to carefully consider the full ramifications of the continued expansion of presumption of compensability before capitulating to its unopposed use without a clear, supportable basis for doing so.
The "Grand Bargain" was designed to offer balance in industrial injury rights between employers and employees. Overuse of the presumption of compensability risks tipping that balance away from that original intent and increasingly toward inequity among these stakeholders.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.