Here’s what’s puzzling me about agricultural workers, COVID infections, and workers’ comp.

• Few agricultural workers have filed WC claims for COVID.
• COVID infections are much more prevalent among Latinx than any other ethnic group.
• News reports indicate workers infected with COVID have spread the virus to family and co-workers
• Infection rates in the ag heartland in the Central Valley are much higher than in population-dense urban centers.

Here’s the data.

Latinx people are much more likely to contract COVID19 than any other ethnic group – more than twice as likely as White people.

Agriculture employs a lot of Latinx folks; average monthly employment was 422,000 in 2019 (downloadable files).

About 45% of ag workers nationally are Latinx. [if you have data specific to California please share]

So far this year, only 0.2% of California’s agricultural workers have filed a work comp claim for COVID19.

While news reports allege some employers are failing to implement adequate COVID19 safety protections, there’s another side to this, one that requires serious consideration.

This from a colleague (edited to preserve confidentiality):

I can attest to the Latino population being hit extra hard.  The reasons are fairly simple.

Number 1 reason:   The work ethic demonstrated by our workforce is hurting them and their co-workers.  The Mexican culture has long had excellent work ethic.  Their mantra is always, “I have to work.  I have to work.  I HAVE to work.”  They often do not safeguard their own health as a result.  Many when told they are positive respond with, “Well yeah.  I knew.  I haven’t felt good for a week.”  Which means that they’ve been spreading the virus daily.

Another factor for Ag workers is the common practice of transporting workers by vans or small buses.  Probably the worst thing they can do.

We found out most of them refused to comply with wearing a mask.  They’d have them on in front of the supervisor, but as soon as the vehicle left the yard, most all of them would take the masks off.

The third problem is the comorbidity factor of diabetes.  Their diets frequently lead to diabetes.  Every one of our fatalities had instant blood sugar levels of 700+.  Each of the deaths were investigated, and without exception, we found that there had been a diabetes dx years before but they had failed to comply.  Most of the diabetes dx’s were for men who refused to ignore or rethink the macho feelings of being able to drink beer and eat as many carbs as they want along with refusing to take meds.

Of course this does not apply to the entire Latinx population.  But it is sadly true of more than half and probably true of at least 75%.

What does this mean for you?

1. Don’t be surprised if we see a significant increase in workers’ comp claims from agricultural workers.
2. Cultural norms and biases MUST be considered, factored into, and made part of any and all prevention solutions.
3. There are NO simple answers, and all of us are part of the problem – and can be part of the solution.

REMINDER – sign up for Pandemic, Premiums, and Profit: Is it the Sky That’s Falling…or the Floor? a free webinar on COVID19’s impact on workers’ compensation here. Mark Priven of Bickmore Actuarial and I will be weighing in this Thursday at 1 pm Eastern, 10 am Pacific.

We know a LOT about how COVID and the COVID economy are affecting workers’ comp – and that’s what Mark Priven and I will dive into next week as we discuss “Pandemic, Premiums and Profits: Is It the Sky That’s Falling … or the Floor?” .

The free webinar (register here) is happening August 20 at 10 am Pacific, 1 pm Eastern. (attendance is limited, so sign up now to make sure you get a spot).

Mark is Vice President and Principal of Bickmore Actuarial, a highly regarded Actuary, and a very insightful analyst of all things workers’ comp. I’m honored to be on the virtual dais with Mark.

What triggered our decision to work together was a shared concern that there’s been way too much discussion about the potential, theoretical, possible, hypothetical costs of COVID itself – and (with one major exception) no discussion, analysis, projections, or discussion of the huge drop in workers’ comp claims – and the effects of that drop..

Frankly, prognostications about the damage COVID could do to profits just don’t stand up to scrutiny.  How an industry with a combined ratio of 85 and investment income of 11% will go from a 26% profit margin to a loss when COVID claims are not that common and all evidence indicates they aren’t that expensive is…puzzling.

One can – and some do – argue that we don’t have data on claim counts yet – and therefore it’s premature to discuss the impact.

But you can’t have it both ways – we know little about COVID, so making assumptions or statements about how the disease will affect workers’ comp is equally presumptuous.

Fact is we are fast approaching budget season for employers, insurers, TPAs, and service companies – and it is incumbent on those with data and expertise to share that information.

So, sign up, send us your questions, and Mark and I will do our best.

What does this mean for you?

Sign up here.

Thank you, CWCI. Due to it’s diligence and foresight, we now know:

• through June 30 there were 14,487 COVID claims reported to California’s DWC;
• this amounts to 6.3% of all confirmed COVID cases (data from JHU);
• the vast majority of COVID claims reported have been accepted;
• and perhaps the most important data point…

Total claims (COVID and non-COVID) dropped 28.8% from the first half of 2019 to the first half of 2020. (note this is corrected from my original 36.4%)

Kudos to the fine folk at CWCI; they have produced the first data-based report on all things COVID. It is quite user-friendly, highly credible, and interactive, allowing users to analyze California-specific on COVID and non-COVID claims.  The tool enables comparison by industry, body part, nature and cause of injury, class code and region for claims (both filed claims and accepted claims) with dates of injury from 1/1/2020 to 6/30/2020.

The tool also allows users to compare actual claim counts for the same time period in 2019 to current and projected counts for 2020.

Claim counts, dear readers, is WAAAAAY more important than the rather minor financial impact COVID claims have had on workers’ comp. As I’ve reported previously, work comp COVID claims to date are not expensive; despite the prognostications of others, it is unlikely indeed COVID’s costs will have any material impact on work comp financials.

What WILL have an impact – and a very positive one – is the massive drop in total claim counts we’ve seen so far this year.

grey – 2019; green – 2020

Yeah, I know, this is California-specific, and only for half a year, and not fully developed, and all that stuff. I also know a 36% drop in total claim counts is the biggest thing to hit the workers’ comp industry in…forever. 

What does this mean to you?

Everything.

Moody’s report on the impact of COVID19 on workers’ compensation says stuff I agree with, namely:

Premium dollars will drop.

Rates will drop.

Claim counts will drop.

It also says profits will be pressured and future earnings reduced, asserting presumption and issues related to furloughed workers’ claims “could lead to…rising costs for workers’ compensation insurers.”

Whoa there cowboy…not so fast.

 

Reality is insurers are still collecting billions in premiums while claim counts and claim expenses are way down – and the cost of COVID claims is minimal. Unless premium income drops dramatically and/or COVID claim costs explode, work comp insurers’ profits are going to increase – not drop.

Here’s why.

As reported in my second survey of the Impact of COVID19 on Workers’ Compensation, claim counts plummeted in the first half of 2020 – but premiums did not.

Respondents indicated workers suffering relatively minor injuries are not reporting them. This isn’t surprising, as a) past research shows this happens when employment declines, because b) workers fear reporting a claim may affect their employment.

Next, workers with existing claims can’t/won’t access needed care. Yes, this likely extends disability duration, but it also reduces medical expense. Eventually medical expense may catch up – or not as there’s evidence some foregone treatment is not “made up.”

So, fewer claims and lower costs = higher profits for insurers.

Next – premium income.

Unlike auto insurers, there are no reports of workers’ comp insurers giving back or rebating premiums. Businesses that have closed permanently aren’t paying premiums, but most are still afloat and paying their bills.

Second, there’s no indication insurers have ramped up premium audits – which would result in credits or refunds to employers due to lower payroll. Unless and until those audits are done, employers that slashed their labor costs won’t get a refund.

So, premium income is declining somewhat – but expenses have dropped more and faster. Net – higher profits for insurers today.

Moody’s also opines that low interest rates and lower reserves will “pressure profits.”

First, interest rates have dropped since COVID came to our shores, but not by much, so I don’t see that the impact will be significant.

Second, insurers are still way over-reserved – and since actuaries base future claims on past experience, and we don’t have any past experience with pandemics, I find it hard to believe insurers will decide to slash reserves.

Third – and perhaps most important, medical inflation – or, more accurately, there isn’t medical inflation – which wasn’t addressed in Moody’s analysis. There is no evidence of significant medical cost inflation in workers’ comp. Yes, facility costs are problematic in some states, especially Florida.  This has been countered by a dramatic drop in drug costs, driven in large part by much lower opioid dispensing.

The net – medical inflation is in the low single digits – likely lower than most actuarial forecasts.

So, while there may be a little pressure on future profits, it won’t amount to much.

Finally, COVID and presumption.

The industry’s reaction to presumption law changes is reminiscent of the caterwauling over medical marijuana – lots of noise about not much. Reality is:

1. Few COVID claims incur medical expenses.
2. COVID claims aren’t expensive – on average COVID claims with medical expenses cost less than the typical lost time claim
3. The impact of presumption changes has been minimal.

What does this mean for you?

Workers’ comp insurer profits aren’t likely to drop much – until a price war starts.

When (not if, but when) insurers start the inevitable war over market share, profits are going to drop – a lot.

Lastly, it does the industry no credit to continue keeping premiums high when employers and governments are getting crushed. It is time for insurers to stop the “yeah, but what if…” nonsense and do the right thing. 

COVID19 is morphing, affecting different regions differently, infecting a different age cohort, and perhaps mutating.

What should workers’ comp service providers do?

1.  Pay attention to the facts.
   Not the politicized nonsense from people who should know better, but the facts. Where is COVID19 spreading, what populations are being affected, what mitigation measures are and are not working.
2. Pay attention to experts’ predictions – not politicians.
   Epidemiologists, Anthony Fauci, objective data scientists, and credible sites e.g.  COVID Forecast Hub. This last is particularly helpful as you can see predictions for infection rates and deaths based on aggregating carefully evaluated models.
3. Understand that COVID’s impact will vary greatly by state, and even within individual states. For example, infection rates are exploding in many southeastern and southern states, while they’ve leveled off and are declining in most northeastern states.
   Death rates trail infection rates by 2-4 weeks; the COVID Forecast Hub’s excellent and fully transparent model will help you project what the next few weeks will bring in each state. (click on specific states for their data)
   
   For predictions of infection rates, go here to select individual states. The graph below compares New York and Texas…

   

   That’s great – and what do I do with it?

A few thoughts.

Compare different states to determine where your clients are going to need resources, help, staff – and what kinds. For states on the downslope (NY for an example), plan to reduce staffing while prepping those staff for work in states where infection rates are on the rise (e.g. TX).

Have your compliance staff research and prepare information for clients and your product development people. This a) helps your branding, and b) ensures your staff are working within state regulations.

Using infection predictions, track presumption laws and changes thereto, share that information with your clients, and develop services specific to each state.

Using death rate predictions as a proxy for severity and potential facility overload, devise ways to help find facilities for patients, perhaps even out of state. Contract with transportation entities to move patients when required.

I’m quite sure your front-line staff have a lot more and a lot better ideas than these; ask them for their thoughts on what they would have done differently

Finally, the elephant in the room. In what can only be described as a self-inflicted tragedy, idiots have politicized COVID19 and in so doing done incalculable harm.

COVID doesn’t care about your political ideology or party affiliation. Managing a business requires allegiance to facts based on data and decisions based on logic.

What does this mean for you?

Your competitors hope you listen to idiots.

If you really want to know what COVID is doing to workers’ comp, you have to hear from those on the front lines.

35 workers’ comp insurers, TPAs, state funds, self-administered employers, and service companies gave me their views on the impact of COVID19 and employment on their businesses, claims counts, costs – and how they are adapting to a very different climate.Quick takeaways:

• COVID claim costs are pretty low, with just a handful of claims exceeding a few hundred thousand dollars.
• Shutdowns/Lockdowns = drop in payroll + business closures -> premium decreases, delayed RTW 
• Respondents see total claim counts dropping 20% for 2020
• Tele-everything is growing rapidly, but still has a long way to go
• Many filed claims are not accepted because:
  • patient does not have a positive COVID test
  • patient is asymptomatic
  • Employers tend to give workers exposed to COVID19 two weeks of paid leave; they become WC claims if/when medical care is needed to treat COVID
• Presumption is a concern, but less so than it was a couple months ago

Winners and losers

Service companies with the following attributes are generally doing much better than their counterparts:

• no or low debt service cost and
• on-shored business functions that
• provide services typically used later in the claim’s life e.g. pharmacy.

Here are more details – and your free copy of the summary report is here.

A comprehensive version of the report including respondents’ detailed statements (respondents are not identified) and the accompanying raw data is available for purchase; contact jpadudaAThealthstrategyassocDOTcom. (substitute symbols for capitalized letters)

What does this mean for you?

For workers’ comp, the economic fallout from COVID is far more significant than COVID itself.