Young: The WCIRB Copes With COVID-19

Thursday, April 9, 2020 | 0

The Workers' Compensation Insurance Rating Bureau Governing Committee met Wednesday morning, with the public meeting featuring a presentation by Chief Actuary David Bellusci.

Julius Young

Following the meeting, the Governing Committee went into closed executive session.

But there were two main takeaways from Bellusci’s presentation. First, the WCIRB Actuarial Committee has unanimously recommended that there be no midyear rate filing. Second, there is great concern about the effect of COVID-19, and the WCIRB Classification and Rating Committee will be meeting soon to consider temporary changes in light of the emergency.

On the rate filing issue, Bellusci noted that in comparison to the Jan. 1 average approved pure premium rate of $1.52 per $100 of payroll, current projections indicate a midyear average pure premium rate of $1.53. Actual filed rates are quite a bit higher, with the Jan. 1 industry average filed pure premium rate being $1.72.

He noted that there was some evidence that higher claims settlement trends were moderating and that current data seems to show a 2.7% reduction in “on-level medical severity” (for 2018-2019) versus a 4.7% increase for 2017-2018 (an increase the WCIRB is still trying to figure out).

With projected wage-growth increases being trimmed by the prominent UCLA forecasts, models show that there could be as much as a 4.3% decline in claim frequency (the number of claims filed) as unemployment soars.

After looking at projected indemnity and medical loss ratios, the Actuarial Committee was not recommending a midyear filing. Interestingly, the projected loss adjustment expenses ratio was projected at 36%.1 of losses.

But these numbers (with the exception of the UCLA forecast on claim frequency) largely don’t reflect the elephant in the room, which is the effect of the COVID-19 emergency on the economy and the comp system.

Bellusci noted that the WCIRB is considering changes to the classification system, which would affect what premiums some employers have to pay. Those possible changes are threefold:

• Exclude from reported payroll payments to employees who continue to be paid while not working.
• Allow assignment of a clerical classification to employees who meet the definition while working from home during the stay-in-place order.
• Exclude COVID-19 claims from experience rating.

Looking at the broader impacts of COVID-19, another presenter listed potential effects on workers’ comp and ratemaking. They were noted to be:

• Comp claims filed arising from COVID-19 diagnoses.
• Significant slowdown in claim activity.
• Reductions in payrolls and premiums.
• Increase in work-at-home claims (some of which may be related to poor ergonomics).

Potential indirect impacts were noted to be:

• Economic slowdown on the frequency of claims and the volume of post-termination cumulative trauma claims.
• Economic slowdown on claim duration.
• Economic slowdown on industrial mix.
• Reduced/substituted medical treatments on future costs and duration.
• Increased use of telemedicine.
• Possible legislation that would create an industrial presumption for first responders, medical personnel and employees in essential industries.

Obviously, with so many things in flux, the length and severity of the medical crisis, and the length and severity of the economic slowdown, will have major implications for California workers’ comp.

Julius Young is a claimants' attorney for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his blog, www.workerscompzone.com.