What is workers’ compensation?
According to The Hartford, workers’ compensation insurance is a type of business insurance that provides benefits to employees who suffer work-related injuries or illnesses. More specifically, this insurance helps pay for medical care, wages from lost work time and more.
Under traditional circumstances, identifying whether an employee was injured on the job or occurred in the course of their employment would be much simpler. For instance, you are a roofing company and your employee falls off of the roof and injured his back. Identifying the source, time, and circumstances of the back injury is more apparent. The introduction of Novel Coronavirus (COVID-19) has however made it tremendously difficult not only to identify the source of where an employee may have contracted the virus but the discussion of whether or not this virus is covered under workers’ compensation insurance.
When is workers’ compensation compensable?
The law covers all accidental injuries and occupational diseases arising out of and in the course or scope of employment. This includes diseases or infections resulting from such injuries. The law also covers death resulting from such injuries within a specified period of time.
Many policies contain exclusions, however, for “ordinary diseases of life” (e.g., the common cold or flu) and therefore much be reviewed on a case by case basis. In the event of uncertainty, the employer should file the First Report of Injury or Illness with his / her insurance carrier for determination of responsibility within 7 days of his/ her knowledge of the accident/ injury.
While workers compensation laws provide compensation for “occupational diseases” that arise out of and in the course of employment, many state statutes exclude “ordinary diseases of life” (e.g., the common cold or flu).
NCCI
How different states are handling COVID-19 and Workers’ Compensation
Many states have decided to extend the coverage of workers’ compensation to include first responders and health care workers impacted by COVID-19. The common approach has been to amend state policy so that COVID-19 infections in certain workers are considered work-related and as a result covered. This however puts the burden on the employers and insurers to prove that the infection was not work-related making it easier for those workers to file successful claims.
In total, 14 states have taken action to extend workers’ compensation coverage to include COVID-19 as a work-related illness. Six states have enacted legislation creating a presumption of coverage for various types of workers. Four states have used executive branch authority to implement presumption policies for first responders and health care workers in response to COVID-19. Another four states including California and Kentucky have taken executive action to provide coverage to other essential workers like grocery store employees.
There are however unintended consequences to this approach as many fear that this will cause a direct correlation in the costs of premiums that employers have to pay for workers’ compensation coverage. Workers’ compensation, while usually state-mandated and given a rate that corresponds to the classification of the work performed by the business is also impacted by utilization of the policy.
Workers’ Compensation Costs for Employers
Due to the rising number of positive COVID-19 cases and the rise in death rates, the concern for employers have risen. From trying to properly classify employees given the changes to the type of work performed to addressing the employees that have tested positive. One major concern is whether or not the claims that are filed as a result of an employee tested positive will ultimately impact their workers compensation premiums as it is an employer paid policy.
As you may recall, workers’ compensation is directly correlated to the risk associated with the work an employer performs. Comparing first responders and nurses to Software developers would results in a vastly different outcome in likely exposure to Coronavirus. Therefore, should a claim arise in one of those professions, especially given the states that leave the burden of proof on the employer, the presumption is their claims history and MOD will be impacted. Thereby impacting the overall premium for that employer.
The National Council on Compensation Insurance (NCCI) is actively monitoring the situation and has provided a tremendous amount of resources for businesses as well as information to guide agents. NCCI
Companies being denied or non-renewed due to COVID-19
While there is much uncertainty as it pertains to how claims will be handled, from the litigation to overall costs burden on insurance carriers, many have decided to either non-renew certain client companies or deny them coverage entirely.
From companies in the home health industries to ALFs, they are getting the call and/or email of non-renewal. Many businesses are required to have workers’ compensation coverage depending on their state, number of employees or work they perform. Others might need workers comp to secure bids on certain projects, work with the government, or simply maintain certain professional licenses.
The burden on employers is tremendous . Not only are they struggling to support their employees and for many to keep their doors open, now there are challenges in securing the right insurance to secure their business and wealth.
How to get Workers Compensation for your Business
During this time, many employers are seeking alternate options to secure workers compensation. Traditionally speaking the open market or admitted carriers would be the first choice for employers, not they are seeking non-admitted markets or employee leasing companies.
Employee leasing also known as Professional Employer Organizations (PEO) provides human resources, payroll, workers compensation and health services to small and medium-sized businesses. Under this PEO framework, the client company (the business) and the PEO form what is called a co-employer relationship.
The great news is that businesses gain access to the workers compensation carriers that the PEO or leasing company has access to. Not only are they much more likely to secure the workers comp coverage they need, there is a huge likelihood that will also receive a cost reduction to the economies of scale the PEO provides.
Another benefit is the additional support in the payroll process as well and human resource services. As a result of COVID-19 the CARES Act was enacted making, changing, and altering regulation as it pertains to human resources management, and businesses are struggled to remain updated and in many cases compliant. With the various mandates, some businesses have received fines for things related to the level of care and safety they should provide their employees and clients. A PEO becomes your HR department assisting with all of the various regulatory changes and adaptations.
NAPEO
Navigating the current COVID-19 business climate has been a huge undertaking on so many levels. So much is still very uncertain. Thankfully, there are alternatives for businesses to find resources that will help in the many transitions that may arise.