California employers should continue to benefit from lower workers’ compensation rates through 2020, but a significant increase in COVID-19 and Post Termination claims could reverse the downward rate trend of the past five years, according to Marsh & McLennan’s analysis of The Workers' Compensation Insurance Rating Bureau of California’s (WCIRB) 2020 State Of The System report.
The rate-setting body for workers’ comp rates in California, WCIRB said 2020 premiums are forecast at an eight-year low, more than 30% below their 2016 peak. However, the sharp decrease in employment projected for 2020 and continued decline in insurer rates will contribute to a large decrease in overall premiums for 2020, thus setting the stage for future rate increases as soon as 2021.
Although the number and severity of COVID-19 claims have been lower than initially expected, the WCIRB said the high-range estimate for 2020 workers’ comp claims was a 44% increase – 23% from post-termination cumulative trauma and 21% resulting from Governor Gavin Newsom’s Executive Order on May 6 regarding workers’ comp. The WCIRB’s mid-range estimate forecasts a 25% increase in claims.
The Governor’s Executive Order created a rebuttable presumption that any employee diagnosed with COVID-19 from March 17 to July 5, who had worked at the workplace at the direction of their employer, was presumed to have contracted the disease on the job. With the expiration of the Executive Order on July 5, the rebuttal presumption language will cease to be effective on July 19, 2020. Post-July 5 COVID claims are again be settled under previous workers’ comp rules.
To see the WCIRB’s full report, click here.
- Watch for additional legislative action from Sacramento. Although the presumption expired on July 5, 2020, California Legislature is currently addressing three bills that could potentially extend the order. SB1159 aims to backdate the bill to cover claims filed after July 5 for an employee. We will continue to monitor legislative updates. In the interim, new COVID-19 claims will again be settled under previous workers’ compensation rules.
- Precise record-keeping is more critical than ever. Many workers have been re-assigned to clerical and other job classifications that are effectively lower risk. Employers need to document that change to show proof of reclassification and benefit from lower rates.
- Check on your mid-term workers’ comp refund. On April 13, 2020, California Insurance Commissioner Ricardo Lara issued an order prompting an initial refund for the months of March and April to all adversely impacted California policyholders. Insurers may comply with the premium refund order by providing a premium credit, reduction, return of premium, or other appropriate adjustment. Many insurers have not yet issued those refunds, but all adversely impacted employers are still entitled to them under the order. The refund from insurers is due no later than 120 days from the April 13 order.
- Work with your broker to review your Experience Modification. COVID-19 claims under the Governor’s Executive Order need to be excluded from the Experience Modification calculation. We’ve seen instances when COVID-related claims were included in the Experience Modification, which is the basis for higher rates for employers.
MMA is Here to Help
The Marsh & McLennan Agency team has extensive resources and experience to assist you. Please feel free to reach out if you have questions. More information and ongoing updates are available at Marsh & McLennan Agency’s COVID-19 Resource Center.