January 2022 Rand Report on Workers' Compensation and COVID is Highly Recommended!

          The Rand Corporation last month published an educational white paper on COVID and workers' compensation that is educational in the extreme for the workers' compensation professional. The lead author is an economist, and his remarks about insurance, in particular, are enlightening.

 

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Michael Dworkin & Bethany Saunders-Medina, COVID-19 and Workers’ Compensation: Considerations for Policymakers (White Paper, Rand Corporation, January 2022), https://www.rand.org/content/dam/rand/pubs/perspectives/PEA1300/PEA1346-1/RAND_PEA1346-1.pdf. 

          

         In this white paper, economists at the Rand Corporation broadly examine workers’ compensation and its role in the COVID pandemic.  

 

The authors accurately depict the workers’ compensation program in general, and then, pertinently, note that many state statutes (though not that of my state, Pennsylvania) exclude “diseases of everyday life.”  Yet, they correctly point out that, despite difficulties of proof of causation (which is likely why such maladies are excluded):

1. Some state laws have been amended, via the adoption of causation presumptions (they vary widely), to make it easier for certain workers to make COVID claims; and

2. Even without the aid of presumptions, many claims by workers have in fact been voluntarily paid.  (Others, certainly in Pennsylvania, have, in the face of insurer denials, been litigated by workers and their dependents.)

          The authors are persuaded by studies that indicate that African-Americans, Hispanics, and modestly-paid workers are more prominently at risk of occupational exposure to, and illness from, COVID.  This is so given their employment in certain essential jobs.  Such essential workers are “less likely to be able to work from home than white essential workers …[.] [Also,] essential workers who cannot work from home have lower incomes than those who can work from home.”   
 

          The authors strongly suggest that compensating COVID infections, as matter of law and practice, is advisable.  Prompt no-fault payment may keep workers beneficently at home during their infections, thus protecting not only themselves but the rest of the workforce.  On the risk management side, wide acknowledgment of COVID as compensable should, at least in theory, prompt employers to undertake safety efforts to avoid claims. The authors, indeed, suggest that employers which engage in systematic, proactive efforts to avoid contagion in the workplace (like providing personal protective equipment and installing improved ventilation systems) should receive premium discounts.
 

          Of note, still, is the authors’ point that, in the face of a pandemic claims, imposing premium increases for those with a disadvantageous experience (lots of claims) does not make sense:
 

Part of the usual justification for [such] insurance pricing is that safe employers should not be forced to cross-subsidize the costs incurred by more-careless employers in the same industry.  This makes sense for injury risks that are largely under the employer’s control.  In the pandemic, however, community spread undercuts this fairness argument: Employers that do everything right still face some possibility that their workers will become sick and file claims.
 

As a result, the authors point out, rating bureaus like NCCI and the PCRB currently “have adopted regulations excluding COVID-19 from experience rating.”  (As for the Pennsylvania Rating Bureau policy, see https://www.hendersonbrothers.com/wp-content/uploads/2020/05/Pennsylvania-Workers-Compensation-Rule-Changes-due-to-COVID.pdf.) 

          Of course, a jurisdiction which legally recognizes occupationally-acquired COVID-19 as compensable will likely impose increased premium costs on employers.  And employers, they say, must be ready for the potential that a worker who has successfully claimed work-related COVID may, in fact, have incurred the infection somewhere else.   

 

The authors, as if to ease the harshness of this observation, follow-up this unremarkable proposition by observing: “Economic research has shown that workers – not employers – ultimately pay for mandated benefits like workers’ compensation via reduced wages ….”  (Citing Jonathan Gruber & Alan B. Krueger, The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers’ Compensation Insurance, 5 Tax Policy and the Economy, pp.111-143 (1991)).  Yet, they in turn further explain: “[T]hese findings reflect long-run labor market equilibrium; it is plausible that employers will have to pay higher total compensation costs in the short run until wages adjust.”