WCIRB Recommendations Offer CA Employers Temporary Relief from Workers' Comp Claims Related to COVID-19

May 19, 2020California

Recommendations Offer California Employers Temporary Relief from Workers’ Compensation Claims Related to COVID-19

The Workers’ Compensation Insurance Rating Bureau (WCIRB) made three recommendations to the California Department of Insurance which are likely to benefit most California employers in the near term.

The unanimous recommendations from the WCIRB should immediately lower workers’ compensation premiums if approved, as expected, by the California Department of Insurance. Following a public hearing on May 18, 2020, during which there was no recorded opposition to the recommendations, it is now in California Insurance Commissioner Ricardo Lara’s hands whether to adopt the changes as recommended, reject them in their entirety, or adopt with modifications. 

The recommendations are the latest in a series of actions by the WCIRB, Insurance Commissioner Lara and California Governor Gavin Newsom that will have a deep near term and long term impact on California workers’ compensation costs. For a timeline of events related to workers’ compensation and insurance premium refunds, please see Page 3.

WCIRB’s Recommendations and Employer Impact

  1. Exclude COVID-19 related workers’ comp claims from an employer’s Experience Modification Rating.

    Claims arising directly from a diagnosis of COVID-19 with an accident date on or after December 1, 2019 would be excluded from the experience rating calculations of individual employers.

    Employer impact: Employers and insurers need to track COVID-19 claims to ensure they are excluded from the calculation. This exclusion will reduce the risk factors used to calculate workers’ comp premiums for employers.

  2. Exclude payments to employees who continue to be paid while not working.

    Employees who are continuing to be paid while not engaged in any work would be excluded from reportable payroll. This exclusion would apply while California’s statewide stay-at-home order is in place and for up to 30 days thereafter if the employee continues not to work. The exclusion of this payroll recognizes the fact that employees who are not working due to the stay-at-home order have virtually no work-related exposure.

    Employer impact: Employers need to review their payroll and keep careful records. If necessary, employers should ask their payroll vendor to segregate payroll of those employees who are being paid and work-from-home employees from others. The National Council on Compensation Insurance recommends using the newly created code of 0012 to identify this payroll. The code will help insurers track credits and ensure this payroll is not included in your premium calculation or your future experience rating calculations.

  3. Reclassify eligible stay-at-home workers to Clerical Office Employees.

    The temporary assignment of Classification 8810, Clerical Office Employees, would be allowed for employees whose job meets the definition of a Clerical Office Employee. This provision would apply while California’s statewide stay-at-home order is in place and for up to 60 days thereafter if the employee continues to meet the definition. It does not apply to employees whose payroll is otherwise assignable to a standard classification that specifically includes Clerical Office Employees.

    Employer impact: Employers can reclassify workers who are on their payroll, but have been working from home. However, if the governing classification automatically includes clerical workers, there will be no reclassification to the 8810 code.  For example, the class code 8834 Physician’s Practices/Outpatient Clinics already includes clerical workers. As a result, there would be no reclassification for those workers.  Employers should work closely with their brokers to resolve this in the coming months.

Workers’ Compensation Premiums Expected To Rise In Next Six to 12 Months

The recommendations likely to be approved by Insurance Commissioner Ricardo Lara should lower workers’ compensation premiums for employers over the next few months. Additionally, premiums for other types of commercial insurance are also likely to drop following Commissioner Lara’s requests to insurers in April and May.

With less premium being paid and a likely increase in claims due to Gov. Newsom’s Executive Order, which presumes COVID-19 cases are work related, we expect workers’ compensation rates to rise.  This will be partly offset by fewer non COVID-19 claims during business suspensions or slowdowns.  We anticipate claims will impact certain types of industries disproportionately, and cause more acute unprofitability for insurers in those sectors, which will exaggerate upward rate pressure and may reduce insurer appetite for those businesses. Marsh & McLennan Agency can work with you to look for opportunities to minimize the impact of future premium increases.

2020 Timeline of California Insurance and Workers' Compensation Events

April 13 – Insurance Commissioner Lara ordered insurers to provide a premium credit, reduction, return of premium, or other appropriate premium adjustment for automobile insurance, commercial automobile insurance, workers’ compensation insurance, commercial multiple peril insurance, commercial liability insurance, and medical malpractice insurance.

April 17 – WCIRB governing committee approves the Special Regulatory Filing in response to COVID-19.

May 6 – Gov. Gavin Newsom issues an Executive Order establishing a four-part test to determine if employees are eligible to file a COVID-19-related workers’ compensation claim. The order presumes infected workers contracted coronavirus on the job.

May 15 – Insurance Commissioner Lara issues a bulletin asking insurance companies to extend the request for previous premium refunds for March and April to the end of May. If pandemic extends beyond May, Commissioner Lara said he will issue additional guidance.

May 18 – Department of Insurance conducts a public hearing to hear testimony related to Special Regulatory Filing.

MMA Is Here To Help

Marsh & McLennan Agency is monitoring regulatory and legislative developments in Sacramento. Our team has extensive resources and experience to help during this period of uncertainty. More information and ongoing updates are available at Marsh & McLennan Agency’s COVID-19 Resource Center.