Coronavirus-related paid employer leave could exceed $23 billion

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As employers absorb the broader impact the COVID-19 pandemic is having on their businesses and employees, new data shows that sick leave and short-term disability payments could exceed $23 billion for employers.

Employed patients will make up 1.5 million of the cases, according to health and productivity research non-profit Integrated Benefits Institute. Almost 800,000 of those cases will be from employees of small firms, meaning less than 500 employees.

Nearly 650,000 coronavirus short term disability claims will increase the average annual STD claims volume from 2011- 2018 by 21%. Additionally, the data shows that lost work time cost for employee coronavirus cases is projected to total $6.1 billion. This amount equates to a 6.4% increase in sick day and STD payments from 2018.

These figures represent estimates under a low-range scenario of 4 million U.S. coronavirus cases, as the case estimates rise, so does the STD claims volume. Under a high-range scenario of 15 million U.S. coronavirus cases employed patients will make up 5.6 million cases and 2.4 million coronavirus STD cases will increase the average annual STD claims volume by 79%.

“Employers and their disability insurance partners will bear substantial lost work time costs with STD claims estimated to take between 20% and 75% of the premiums collected in 2018, due to the growing number of employees diagnosed with COVID-19,” IBI President Thomas Parry says. “As the numbers change daily, these findings are a conservative estimate of coronavirus-related lost work time costs and excludes costs pertaining to paid family leave which was beyond the scope of this analysis.”

Up to 5.6 million employees could be impacted, with almost 3 million workers at firms with fewer than 500 employees entitled to paid leave per the Families First Coronavirus Response Act that went into effect on April 1.

The coronavirus crisis has caused disruptions in the economy, resulted in school closures and required many employees to take leaves of absences from work. Shelter-in-place orders have closed businesses deemed nonessential, resulting in lost consumer demand, layoffs, and financial losses across a variety of industries.

There were more than 188,000 diagnosed coronavirus cases in the U.S. as of March 31,according to Johns Hopkins University Center for Systems Science and Engineering. Research shows the confirmed cases of individuals with the illness have been increasing by an average of 30% per day since the steepest uptick began on March 17.

“One important thing to keep in mind is that however the pandemic plays out — whether that is 1.5 million infected employees, 5 million or something else — about half of employees at large companies won’t have the income protection afforded by disability insurance,” says Brian Gifford, director of research and analytics for IBI.

Even with sick days to fall back on, employees could lose about $2,000 in earnings if they contract the illness, Gifford says. Which will not only impact the U.S. workforce, but it will have a significant effect on consumer spending when the pandemic has ended and businesses look to restart.

However, there are ways employers can minimize the impact ensuring that their businesses and employees are well supported. The impact of the coronavirus is going to be different across all industries. As such, employers need to think of their own cost and benefits structure in order to figure out their overall costs and their overall impact on the business and the employees. Employers will need to think about how their health benefits are going to be able to help mitigate some of the financial impact to themselves and to their employees.

“Employers should do their own risk assessment, every business out there is really feeling it right now,” Gifford says. “What I hope they are going to think about is how their benefits are designed to support people during this crisis and to get them ready to return to work.”

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