The workers’ compensation landscape is entering a new era as more states move to recognize “mental-only” claims: psychological injuries that occur without accompanying physical harm.
Industry leaders told Insurance Business America this evolution reflects a growing commitment to mental well-being but caution that it could reshape claim patterns, costs, and coverage interpretations across the United States.
“You’re seeing mental health as an element in a lot more claims than you ever have before,” said Mark Walls (pictured below), corporate senior vice president and chief marketing officer at Safety National.
“And you’re seeing more and more states allow for mental health claims in the absence of a physical injury. That’s a newer thing that’s going around the country, and it’s bringing something into the system that wasn’t there before.”
Walls identified post-traumatic stress disorder (PTSD) as the leading force behind this shift.
Initially, PTSD benefits were limited to first responders (firefighters, police officers, and EMTs), often following high-profile traumatic events such as mass shootings.
Over the past decade, however, some states have begun extending coverage to broader categories of workers, each with unique eligibility and diagnostic requirements.
These changes mean that workers such as teachers or retail employees who witness violence or other severe trauma may now qualify for benefits in certain jurisdictions.
“When laws are specific, focusing on sudden traumatic events and referencing established diagnostic guidelines, they can control what fits in that box,” Walls explained. “But too often, they’re not written that tightly.”
Without clear legislative parameters, he warned, states risk re-entering an era of broad “stress claims,” where employees could seek benefits for general workplace pressures or legitimate personnel actions such as demotions or terminations.
“Fifteen years ago, there were states where you’d see claims filed for mental stress caused by legitimate personnel action,” Walls said. “States eventually tightened the laws to stop that. The question now is whether that discipline will hold.”
Tim Palmer (pictured in header), managing director of workers’ compensation at Novatae Risk Group, said the spread of purely mental health claims could have long-term financial implications for insurers and employers.
“In the past, California was really the only state where you had to worry about mental health claims,” Palmer noted. “Now we’re starting to see them become compensable in New York. And I think other states are going to open up mental health as a compensable workers’ comp claim.”
California has long recognized psychiatric-only injuries, but under strict conditions: the mental disorder must be diagnosed under accepted medical standards, work must be the predominant cause, and the claim cannot arise from a legitimate personnel action.
Palmer cautioned that lawmakers may underestimate how these expansions could affect overall costs. “It’ll certainly drive claims costs up,” he said.
Historically, mental-only claims have been difficult to measure and prove, leading most states to restrict them. But the COVID-19 pandemic dramatically heightened awareness of mental health, prompting new pressure to treat psychological injuries as legitimate workplace harms.
Walls agreed that the pandemic amplified both the prevalence and visibility of mental health concerns.
“It definitely got worse around the pandemic,” he said. “You’re seeing a greater focus on mental health and overall well-being. On physical injury claims, there’s a mental health component arising a lot more often than before.”
Access to qualified mental health providers remains a major bottleneck. The ongoing behavioral-health labor shortage could delay treatment, extend disability durations, and push claim costs higher, which both insurers and employers must closely monitor.
Despite these pressures, Palmer expects the workers’ compensation market to stay generally stable through 2026. “We’ll continue to see it soften,” he predicted. “Rates will keep decreasing, but we’ll move from double-digit rate decreases to smaller, single-digit ones.”
After years of aggressive rate cuts, some states may even see modest increases as they absorb new coverage obligations.
Both Walls and Palmer agree that mental health represents the next frontier in workers’ compensation, but its full impact remains uncertain. Much will depend on how legislatures and courts balance compassion with control.
“Every bureau in the country is watching this,” Walls said. “We know there will be more claims and more costs. The question is, how much more? And that’s something we won’t fully understand until a few years down the road.”
