Tag Archives: covid-19

Long-Term Disability in the Time of COVID-19

Through creative destruction, weak businesses shrink and stronger ones expand. The ripple effect of all that disruption often washes ashore at group long-term disability (LTD) insurers, where disability claim costs tend to increase during recessions — new claim submissions rise while claim recoveries fall.

Sadly, studying the effect of past downturns on group LTD isn’t entirely straightforward. Every economic decline comes with a unique context — a tangle of related causes and effects, all of which can affect LTD claims in different ways. And because the economic shock of 2020 was created by a global pandemic and not a financial crash or inflation scare, COVID-19’s implications are especially difficult to unwind.

Disability carriers still need to try.

Understanding the Three R’s…

The three R’s are a good place to start. I’m not referring to reading, writing and ‘rithmetic but to the three rates that drive LTD experience: incidence rates (new claims), termination rates (closed claims) and interest rates. When it comes to these R’s, carriers should avoid the temptation to look too intently at the past for clues to the future.

To understand why, consider the lessons of the Great Recession of 2008. This decline was caused by a financial contagion — a liquidity crisis brought on by subprime lending. This led to a contraction in most sectors while the typically recession-resistant “HUGE” sectors (healthcare, utilities, government and education), in fact, grew. New claim submissions initially dipped as employees deferred claims in a bid to cling to employment or lost jobs too abruptly to file claims.

Eventually, however, new LTD claims rose and remained elevated for years before returning to pre-recession levels. Claim termination rates, too, deteriorated during the recession but rebounded quickly during the recovery. Lastly, an increase in asset defaults and lower portfolio yields strained the income statement of LTD insurers.

… and a K

But this is not 2008. Fast forward to today, and it’s clear that, as former U.S. Federal Reserve Governor Kevin Warsh put it, “If you’ve seen one financial crisis, you’ve seen one financial crisis.” Every recession is unique, and the pandemic-driven decline is particularly unprecedented. In fact, the form this recession may be taking has joined a growing alphabet soup of economic terms. Readers may be familiar with the optimistic V-shaped recovery pattern as well as the pessimistic L-shaped, with U- , W- , and Z-shapes falling somewhere in between. Economists are now introducing the notion that the post-pandemic recovery could look more K-shaped. Think of the vertical line of the K as the starting point from which different parts of the economy diverge: Some sectors grow while others decline. The market has been bullish on companies that support the “quarantine lifestyle” but was less kind to smaller companies as well as those situated in the travel and hospitality industries.

Given a K-shaped recovery scenario, group LTD carriers may ask themselves how much of the business mix is in the upper versus the lower arm of the K. If most of a block is focused on high technology and well-capitalized firms, it makes little sense to adopt overly conservative underwriting or pricing adjustments. But it may be prudent to keep a more watchful eye on business blocks with significant exposure to “lower arm” economic sectors.

See also: 9 Months on: COVID and Workers’ Comp

Recession-resistant sectors are not necessarily pandemic-resistant.

This new K shape is already challenging long-held expectations about which industries represent good disability risks. The previous notion that certain industries are resilient in recessions is now being turned on its head. That’s because recession-resistant sectors are not necessarily pandemic-resistant. For example, unemployment rates during the 2020 COVID-19 pandemic followed a pattern never seen before, sharply spiking during spring lockdowns — and causing job losses in every single sector of the economy.

Morbidity Bersus Mortality

It is easy to see the effects of this pandemic on group life insurance: COVID-19 has a direct and immediate impact on mortality rates. However, the effects on group LTD are much more opaque, as the morbidity impact is largely indirect and delayed. Mortality risk and morbidity risk may have polar-opposite reactions to COVID-19, both in terms of timing and direct linkage, but that is not to say that the financial impact will be wildly different. There are many “pandemic headwinds” facing group LTD carriers, and it’s just a matter of time before these trends crystallize.

For example, the pandemic has strained hospital systems worldwide, leading to deferred preventative care and interrupted treatments that could result not only in a wave of deferred claims, but also sicker insured individuals. Prolonged lockdowns, reports of rising burnout levels among essential workers, particularly in healthcare, and the long-term loss of employment will likely contribute to additional mental and nervous claims. In addition, some survivors of COVID-19 — even those who had mild versions of the disease — continue to report a debilitating constellation of symptoms long after their initial recovery. Called post-COVID-19 syndrome or “long COVID-19,” this condition has generated growing concern among public health providers and disability insurers and is being researched. In RGA-led industry surveys, many disability carrier participants report significant concern over the pandemic’s potential to reduce recovery and return-to-work rates among the long-term disabled.

And while much about the first pandemic recession is new, one fact remains the same in every downturn: The longer economic problems persist, the greater the risk that long-term disability claims experience will worsen.

Keeping Perspective

While these headwinds are troubling, it is important to keep risks in perspective. For example, not all deferred healthcare signals an increased risk of short- or long-term disability claims. Also, mental health is fluid, and sources such as the mental health index Total Brain show that if the conditions contributing to symptoms of depression and anxiety are relieved — such as through the end of a pandemic or recession — the additional likelihood of psychiatric disability claims is mitigated. This is good news in light of the current thinking from economists that the recession may technically already be over and the recovery begun. If so, the recession would be the shortest in U.S. history.

Similarly, elimination periods (EP) should mitigate much of the direct effect of the pandemic on disability claims as a 90-180 EP usually lasts longer than a coronavirus case. Even a diagnosis of long-COVID-19 may not necessarily result in long-term disability. The “long” in long-COVID-19 is in comparison with a typical flu duration of three to four weeks, not the “long” that we infer with long-term disability claims. While most long-COVID-19 cases at present have durations measured in months, it is also too early to truly understand the long-term health consequences of this disease. Said differently, a tidal wave of COVID-19 LTD claims does not appear to be on the horizon, but continuing research points to a few ripples headed our way.

Pressures brought by the pandemic also have led to some unexpected positive developments. Recovery from some disabilities may be made easier by work-from-home measures, just as lockdowns led to faster consumer acceptance of wellness and digital health technologies. Telehealth, for example, has proven to be a very viable and cost-effective alternative to in-person doctor visits. Public health mandates like social distancing and mask-wearing also appear to be suppressing the spread of other infectious diseases such as the seasonal flu. The blisteringly fast pace of COVID-19 vaccine development has opened our eyes to what is possible in virology and paved the way for faster advances in vaccine science.

See also: What Digital Can Do for Disability Claims

The discovery and rollout of vaccines offer hope that an end to the pandemic portion of the crisis is near, but the effects of this recession on disability claims may linger.

COVID-19 Is NOT an Occupational Disease

When workers’ compensation was conceived over 100 years ago, it was designed to cover traumatic injuries in an industrial setting. As workers’ compensation evolved, that coverage expanded in many ways. It was recognized that there were certain diseases or conditions, like asbestosis and black lung disease, to which workers in certain occupations were exposed, and to which the general public was not similarly exposed. The cause of these occupational diseases was not a sudden traumatic exposure but instead resulted from exposure over time, and it often took several years before the disease manifested itself. The traditional workers’ compensation system was not set up for such conditions, so most states eventually passed occupational disease statutes as part of their workers’ compensation laws. 

Infectious diseases were never considered occupational diseases. Still, most states will cover infectious diseases under workers’ compensation if the worker can show all of the following:

  • They contracted the disease.
  • They were exposed to the disease in the workplace.
  • Their risk of catching the disease at work is greater than the general public. 

All of this leads us to the events of the last year with the COVID-19 pandemic. Although thousands of workers’ compensation claims were paid under the existing standard, several states passed presumption laws, assuming that workers in certain occupations contracted COVID-19 in the workplace. These presumptions changed the burden of proof for covered employees so that workers no longer had to prove they had a greater risk of catching the disease than the general public.

A troubling legislative trend is emerging in 2021, which takes this one step further. Several states are considering legislation or regulatory action that will classify COVID-19 as an occupational disease under their statutes. This consideration is alarming for many reasons.

First and foremost, COVID-19 is NOT an occupational disease. Millions of people worldwide contracted the disease, most of whom did not catch it in the workplace. An occupational disease, by definition, is particular to the risks of the occupation. That is not the case with COVID-19. Will this open the door for future infectious diseases to be covered under workers’ compensation? The flu of 1918 never went away; it lives on in a mutated form, necessitating annual vaccinations. The COVID-19 virus will likely undergo similar mutations, which could also necessitate annual vaccinations. Will all respiratory viruses be considered an occupational disease in the future?

Additionally, by making COVID-19 a named occupational disease, are policymakers not creating a de facto presumption that all COVID-19 is work-related? Policymakers seem to be using workers’ compensation to cover some of the pandemic costs, but workers’ compensation is not health insurance. There is no way for employers to run loss control against a global pandemic. There is no way for underwriters to assess the risks of a worldwide pandemic accurately.

See also: 20 Issues to Watch in 2021

If we continue to blur the lines between workers’ compensation and group health, where does this lead? Cancer and heart disease are already considered occupational diseases for specific occupations in certain states, as are hernias and bloodborne diseases. If workers’ compensation becomes responsible for common conditions that affect millions of people every year, it is no longer meeting its designed purpose. It is no longer a grand bargain for employers when they are being forced to pay claims under workers’ compensation that should be the healthcare system’s responsibility.

Are Solutions in Tune With Today’s Needs?

EY’s Global Insurance Consumer Survey reveals how insurers can support the needs of those affected by the COVID-19 pandemic.

In brief

  • Insurers must evolve to meet changing consumer behaviors and priorities caused by the pandemic.
  • The greatest opportunity for insurers lies with those most financially affected.
  • Pervasive and contentious social issues call for insurers to engage, collaborate and lead the development of new solutions.

In late 2020, EY Insurance conducted a global survey of 2,700 consumers and 1,200 small business owners to understand how the pandemic has affected their lives. Our survey of consumers focused on their needs for personal lines and life and retirement insurance products.

To better understand the concerns and product preferences of respondents, we grouped these individuals into three segments: most financially affected, moderately affected and least affected. Across all segments, there are clear opportunities based on consumers’ shifting priorities:

  1. Consumers are seeking to restore their financial well-being and security, with more than half of respondents saying they plan to save more as a result of COVID-19.
  2. Those who experienced the greatest financial distress from the pandemic intend to minimize future financial risk and uncertainty.
  3. The most affected consumers are socially active and place a high value on social responsibility in their insurance purchasing decisions.

Our survey confirms what we’ve heard from senior insurance executives across the industry: This is a moment of opportunity for the industry to increase its relevancy and live its purpose by playing a critical role in the recovery of consumers and the wider economy.

To play such a role, insurers will need to develop innovative products that align to consumers’ evolving needs and provide tangible value.

How the pandemic has affected insurance consumers

Our methodology allowed us to identify the extent to which the pandemic has affected the financial state of respondents in each country. As exemplified in the chart below that displays data from our life insurance findings, there is a sizable difference in impact between those most financially affected and those least affected. For instance, 54% of the most affected experienced a loss of a regular work schedule to a great degree, and 56% lost income to a great degree. Among the least affected respondents, those figures were 0%.

While the most affected consumers are typically younger (70% are under the age of 45) and less affluent than overall respondents, they are not exclusively from these sociodemographic groups. For example, in the U.S., 56% of the most affected respondents held at least one college degree, and 40% earned over $100,000 a year.

The survey also explored respondents’ concerns for the future and their appetite for insurance products. The most and least affected reported similar concerns and insurance needs, suggesting a widespread feeling of vulnerability and anxiety in a world already defined by geopolitical tensions, growing inequality and threats from climate change.

How the pandemic is shifting preferences on protection

Finding financial well-being through cost-effective alternatives

Looking at life insurance and retirement, the top concerns can be directly linked to the health and financial impacts of the pandemic: Fear of losing a loved one is by the far the greatest concern, followed by financial well-being. In seeking financial security, consumers are most interested in products that cover loss of income, credit card bills and other existing financial commitments.

Given the heightened financial anxiety and focus on financial well-being, consumers are seeking cost-effective insurance alternatives, such as policies with lower premiums. Consumers also express willingness to provide personal data or wear a fitness tracker in exchange for a discount or customized monthly rates.

See also: How COVID Alters Consumer Demands

More time at home creates new risks

From the perspective of personal lines, behavioral change brought about by the pandemic is reflected clearly in the results. For instance, cyber fraud as a result of increased time online was the respondents’ top concern, followed by paying for insurance for a car that’s being driven less. Consumers are also more interested in usage-based insurance and home-protection products.

Given that remote working is expected to continue for many employees, insurers should develop products suited to the “new normal,” such as home-protection and usage-based policies.

What to know about those most affected

Those who have experienced the greatest financial impact are inclined to plan for future financial uncertainty: They are more likely than respondents overall to develop an emergency plan, speak with a financial adviser, increase contributions to pension and retirement accounts and purchase new forms of insurance.

Despite this group’s heightened focus on financial planning, since the onset of the pandemic, the majority (60%) of this demographic said that they have not been contacted by their insurance provider. A majority (63%) also said they do not completely understand the extent of their life insurance coverage.

Distinct needs of those most financially impacted graphic

Insurers that contact this demographic, communicate the value of insurance and offer protection solutions at a time of need can help this segment recover while forming the foundation for long-term customer relationships.

Why social responsibility and justice matter

The most affected consumers are both highly concerned about social justice causes and place a greater value on an insurance firm’s social responsibility efforts in their purchasing decisions.

More than half of the most affected respondents reported that a firm’s commitment to social responsibility (racial injustice, environmentalism, income equality, police brutality and employee relations) is very important in their decision to purchase insurance. In addition, the most affected were twice as likely (61%) to donate money, time or supplies to a racial justice organization since March 2020 than respondents overall (31%).

Corporate activity around social purpose is becoming increasingly important to brand reputation and customer retention — and insurers need to think differently about what they are doing in this space.

Insurers have an opportunity to engage a socially active, energized audience by amplifying their corporate social responsibility efforts, including policies and investments to promote equality, diversity and inclusion. Within executive ranks, environmental, social and corporate governance (ESG) and sustainability-related initiatives and a focus on long-term value are important to demonstrating the vital purpose of the industry.

Strategic and operational implications for insurers

To meet consumers’ evolving concerns and needs, insurers must reimagine their offerings and overall value proposition for both existing and prospective customers. Satisfying this market demand starts with a product innovation strategy built around unique solutions that create differentiation in the market.

However, many executives express concern over the ability to achieve such a strategy. In our December 2020 poll of nearly 100 global C-suite insurance executives conducted during a virtual event, product development was predicted to face the greatest challenge in adapting to change.

Product innovation graphic

Developing leading solutions requires an integrated approach that applies innovation discipline to highly regulated products. It also requires the ability to leverage external ecosystems and collaborate with others outside of the industry. Finally, insurers need an adequate technology architecture and supporting platforms.

But everything relies on first identifying the customer and an unmet need.

See also: 3 Tips for Increasing Customer Engagement

While COVID-19 vaccinations may help address our physical health concerns, the financial distress the pandemic has caused many consumers will be felt for years to come. As consumers’ concerns and needs change, insurers have a responsibility to live their purpose of providing protection to all.

Developing products around new customer behaviors and priorities, and reaching new demographics in need, will help the industry maintain its relevance and play the role it needs to in the recovery.

Best Practices for Returning to Work

COVID-19 has been a rollercoaster. Across the country, the virus has accelerated and then subsided several times over the past year, causing major ups and downs in many industries. Some companies have remained open to conduct essential business, while others have closed, then opened with modifications and then closed again. With a vaccine now being rolled out, the outlook is beginning to improve. However, employers still face the burden of how to keep employees healthy and get them back to work safely during this transitional period. 

As states begin to allow businesses to reopen, there’s a tendency to rush to get back to business as usual. While it’s important to resume normal operations as quickly as possible, we need to be thoughtful as we move toward this goal. It’s a delicate balancing act between the need to maintain essential economic activities and maintaining workplace safety.

Here are some best practices for navigating the return to work process:

1. Be Informed

It is critical to determine whether any state and local mandates will affect the reopening of your business or facilities. Policies, legislation and guidelines have changed rapidly during the pandemic. Make sure that you are following CDC and OSHA guidance and understand what’s required in your jurisdiction, because it can vary greatly from state to state and county to county.

2. Make Fair Choices

As business reopens, you may have to decide who will return to the workplace first. Use neutral selection criteria to determine which employees will return to work. Criteria such as seniority, performance or job classification and what roles the company needs filled should be considered. Depending on the size of the group of employees that are returning to work, you may want to consider conducting a disparate impact analysis to ensure that there aren’t any factors affecting one group more than another. 

Be careful not to assume someone cannot return based on childcare needs or caregiving responsibilities or because they fall under the government label of vulnerable population. Higher risk for developing serious illness as a result of this virus is primarily based on age, disability or pregnancy. As a result, making any decisions because someone might fall into those groups can lead to discrimination claims. 

3. Reinforce Guidelines and Protocols

Many employees have worked in more casual remote environments for the past months, so  consider a refresher on respect in the workplace, harassment and professionalism policies. It is also important to provide education or training on any new safety guidelines, social distancing requirements and other protocols. A simple one-page document to instruct and educate employees on COVID-19 symptoms, social distancing, face mask use and other protocols that promote a safe workspace will help get employees up to speed quickly.

See also: Access to Care, Return to Work in a Pandemic

4. Implement Employee Screening

Businesses that have eased restrictions without putting safeguards in place have seen spikes in cases. This is because people have a false sense of safety when restrictions are eased. A quick screening of employees, based on CDC guidelines and recommendations, can be administered by a nurse or employee. Clinical confirmation includes temperature checks and a review of any symptoms to ensure the employee is healthy to return to work.

5. Leverage Telehealth

Telehealth and other virtual services can be a great option for a multitude of reasons. Telehealth offers more efficient and convenient care, resulting in increased employee engagement and satisfaction. This does not need to be limited to workers’ compensation, as most health plans and health systems now offer this option for care. Take advantage of the convenience and the ability to mitigate potential exposure to COVID or any other contagious virus that might be in your provider’s office.   

6. Provide Testing Options

It is critical that employees have access to accurate testing whose results are easily and quickly reported. One way to ease the process is by providing access to self-administered COVID-19 test kits for periodic testing or for when an employee has been exposed to the virus. (CorVel, a national provider of risk management solutions, provides clients with a test kit from 1health, which requires a simple saliva collection to detect the virus with nearly 100% accuracy. A lab-certified report is delivered within 36 hours, allowing employers to make informed decisions about whether employees can safely return to work. The test kit can also be used as part of the initial virtual triage process—an employee who is having symptoms or who may have been exposed to the virus can receive a test kit to self-administer from the safety of their home.)

7. Support Employees

The effects of COVID-19 often go beyond the illness itself. Some issues that may prevent an employee from fully returning to work include delayed care or treatment for injured workers, prolonged COVID-related symptoms and COVID-19-related stress. Consider implementing services to support employees as they navigate the unexpected consequences of the pandemic. This could include critical event debriefing to help employees deal with the loss of a team member, routine wellness checks for injured workers and virtual mental health services. For injured workers awaiting surgery, provide tools to help them prepare for surgery, maintain optimum physical condition and rehabilitate post-op. Patients who are required to wait for surgery often become deconditioned, which will lengthen recovery time and increase cost. (CorVel offers a mobile app that measures, monitors and guides injured workers before and after surgery to speed recovery and reduce costs.) It is important that employees feel supported no matter what they are experiencing as a result of COVID-19.

See also: 4 Business-Boosting Tips for Social Media

Despite the vaccine outlook, COVID-19 isn’t going to disappear tomorrow or next week or in the next month. Businesses will reopen, and employees will return to work, but procedures, protocols and support services need to be in place to ensure a smooth return-to-work.

Whether your business has been open throughout the pandemic or you are in the process of reopening, it is important to implement best practices that provide employee education on COVID-19, communicate clear expectations regarding health policies and expectations and assess employee health on a continuing basis. In this new normal, the goal is to return to business and get employees back to work as quickly as possible and as safely as possible.

Claims Development for COVID (Part 2)

The latest Out Front Ideas with Kimberly and Mark webinar brought together a panel of industry experts to explore trends being seen in COVID-19 claims, as well as long-term medical complications and what risk managers should monitor in the future.

Our guests were:

  • Teresa Bartlett, MD – senior medical officer, Sedgwick
  • Max Koonce – chief claims officer, Sedgwick
  • Tim Stanger – vice president, partner relations, Safety National
  • Alex Swedlow – president, California Workers’ Compensation Institute

Long-Term Effects of COVID-19

There may not be a crystal ball to determine the impact COVID-19 has on a patient years from now, but current trends in symptoms can provide a better picture. These trends in long-term side effects range from fatigue and brain fog to more severe symptoms like blood clots and pneumonia. 

One study performed by the National Institutes of Health (NIH) followed over 4,000 people who tested positive for COVID-19 in the U.S. 50% of those people were unable to work full-time six months after recovering. With only 8% hospitalized, most cases were mild but resulted in long-term side effects, regardless. In another study, over 80% of the COVID-19 patients developed at least one long-term side effect. 

COVID-19 Variants

There have been over seven unique variants of COVID-19 found in the U.S. alone in recent days. While variants are common in viruses, much like with the flu, there is a difference in these mutations. However, understanding the difference between shift and drift is important. 

The U.K., South Africa and Brazil variants are drifts, meaning that the virus’s protein structure has warped, but that testing still recognizes this variant, and that the vaccine works against these strains. However, these variants are still more contagious, and there is uncertainty regarding how long the vaccine will work on these.

The medical community is watching closely for a shift in the virus. When a shift occurs, testing will not recognize the virus, and the vaccine will likely not work. 

Vaccine Developments

The Moderna and Pfizer vaccines are both taken in two doses, with Pfizer’s doses administered 21 days apart and Moderna’s administered 28 days apart. Pfizer’s option allows for anyone age 16 and above to receive the vaccine, while Moderna’s is a higher dosage and allows for anyone age 18 and above to receive it. Only those with an allergy to polyethylene glycol or those who have experienced severe reaction to vaccines are advised against receiving either vaccine.

Johnson & Johnson’s viral vector vaccine, which was just approved for use, varies considerably from the mRNA vaccines currently being administered by Pfizer and Moderna. Like the flu vaccine, Johnson & Johnson’s vaccine uses the cells in a body to target the virus’s spike protein, triggering an immune response. The Johnson & Johnson option is only one dose but is currently only citing 66% efficacy. However, because Moderna and Pfizer’s trials ended before the variants were spreading, all three may have similar efficacy.

See also: Pressure to Innovate Shifts Priorities

Vaccine Myths

There are plenty of myths surrounding the COVID-19 vaccines. One of the common myths states that they could alter your DNA, but they cannot. The vaccine instead penetrates the virus’ genetic code and provides a map to break up the virus and kill it. 

Another common myth concerns sterility in those of child-bearing age. The vaccine contains syncytin-1, a spike protein that is also found in the body and that is used to grow and attach a placenta during pregnancy. However, these two spike proteins are completely different. The syncytin-1 used in the vaccine is only used to penetrate the virus and does not live on inside the body. Therefore, it cannot affect pregnancy. 

There is also a general fear surrounding the potential side effects of the vaccine. While side effects are possible, most are mild and short-lived, occurring for one to three days after the vaccine is administered. These side effects are inconsequential compared with the potential impacts of the virus itself.

To listen to the archive of our complete COVID Claims Development: Workers’ Compensation & Beyond webinar and view a full list of FAQs from this session, please visit https://www.outfrontideas.com/.Follow @outfrontideas on Twitter and Out Front Ideas with Kimberly and Mark on LinkedIn for more information about coming events and webinars.