Rise in mega workers compensation claims causes concern

The most expensive workers compensation claims continue to increase in price year over year, with medical treatments and technical advances leading to more “mega claims” of at least $3 million each year, experts say. 

While the big claims comprise a statistically small percentage of all workers compensation claims, some experts fear that claims made by workers who become seriously ill from COVID-19 could reach the mega threshold due to lingering health effects from the virus. 

“It’s possible there could be some mega claims related to COVID,” said Mark Walls, Chicago-based vice president of communications and strategic analysis for Safety National Casualty Corp. “To get to that point (the worker) would have had to have very high levels of medical treatment — usually a significant amount of attendant care.”

“These could be some costly claims,” said Harry DeCourcy, Walnut Creek, California-based shareholder with Littler Mendelson P.C., days after California Gov. Gavin Newsom signed a new COVID-19 presumption law last month clearing some red tape for workers comp claims.

“We hear patients can be in (intensive care) for three weeks,” Mr. DeCourcy said, adding that claims “could easily be in the millions of dollars.” 

Most mega claims result from accidents, not occupational diseases, and “because of innovations in technology and medical advancement, people are able to survive injuries” that they didn’t in the past, said Dr. Michael Choo, Walnut Creek, California-based chief medical officer and senior vice president at Paradigm Management Services LLC. “I do believe that medical costs associated with injury care will continue to climb.” 

Overall, mega claims account for upwards of $2 billion in workers comp costs each year, according to research compiled by the National Council on Compensation Insurance, the California’s Workers Compensation Insurance Ratings Bureau and other states that pooled their data to report on mega claims trends across the country. 

In August, the ratings agencies released a study that included data from 43 states and the District of Columbia. The study revealed that more than 4,500 claims from these states and the district incurred losses in excess of $3 million (at 2018 cost levels) from 2001 through 2017. Of those claims, 57% cost between $3 million and $5 million, 33% between $5 million and $10 million, and 10% in excess of $10 million, with mega claim counts for 2017 at a 12-year high, according to the report released on Aug. 25. 

While fewer than 50% of mega claims reach the $3 million threshold by 18 months from policy inception, the claims are reaching that number more quickly than in the past, the study found. 

“This is likely driven by a combination of several items, including a general increase in the number of mega claims arising from the construction sector — potentially due to the higher relative hazardousness of the construction industry compared with other industry sectors,” Ryan Voll, an associate actuary with NCCI and one of the report’s authors, said in an email.

“We’re noticing a higher frequency of claims hitting those thresholds,” Dr. Choo said. “Especially after 2013-2014, we’re definitely seeing more cases with high price tags related to medical costs.”

With COVID-19, the unknown has created a fear in the industry that some of the claims could develop into mega claims due to the “small subset” of individuals who suffer serious damage from the virus, said Gary Anderberg, New Hope, Pennsylvania-based senior vice president of claims analytics at Gallagher Bassett Services Inc. 

Another driver of concern is the rebuttable presumption laws in an expanding number of states that put the onus on employers to prove that workers with COVID-19 contracted the virus elsewhere. 

Particularly in the self-insured sector, presumption laws covering a range of cancers for firefighters or heart conditions for law enforcement officers have led to claims cresting the mega threshold. 

“We’ve seen cancer claims turn into mega claims,” Mr. Walls said. 

While Safety National has seen COVID-19 claims over $1 million, Mr. Walls said  the insurer has not seen any pass the $3 million mark.

Fortunately for the workers comp industry, Mr. Anderberg said, COVID-19 claims are “pretty much behaving like other claims” in that risk factors such as age and comorbidities are a complicating factor and that most cases do not involve hospitalization. 

That does not mean, however, that insurers and employers may not see frontline workers who filed a comp claim for COVID-19 later claiming that other ailments, such as chronic obstructive pulmonary disease, were caused by the coronavirus, he said.

“There are possible applicable precedents with other industrial diseases, but we’re just going to have to wait and see what happens,” Mr. Anderberg said. “A lot of this is going to have to be refined by the courts.”

Louise Esola contributed to this report.