NAPEO and How to Price Your Workers’ Compensation Exposure

While this year’s “Super Bowl” for NAPEO was a bit different, I was very impressed in what was put together under the shadow of the pandemic.  Great content and albeit virtually, great to catch up with folks.

My dear friend and colleague Tom Stypla did a lunch and learn on how to price client companies for workers’ compensation that is linked here…

How to Price Your Workers’ Compensation Exposure Final

Tom has priced more PEO business than anyone I know.  His understanding of PEO workers’ compensation is extremely impactful.

If we can help you with an underwriting strategy or an individual client, let us know!  321.217.7477 is my cell….

Jay Starkman One of the 500 Most Influential Business Leaders in Florida

Very deserved award for Jay and his team behind him.  Not many can build what they did and it is because of focus, execution and the right people.  I have been blessed to be able to watch…

Congrats!

ENGAGE PEO CEO JAY STARKMAN RECOGNIZED ON FLORIDA TREND’S “FLORIDA 500” LIST OF MOST INFLUENTIAL BUSINESS LEADERS

Florida Trend Florida 500

Fort Lauderdale, Fla. – September 18, 2020 – Engage PEO, a professional employer organization providing HR outsourcing solutions to small and mid-sized businesses across the U.S., announced today that the company’s CEO, Jay Starkman, has been recognized in the second edition of Florida Trend’s Florida 500 list as one of the most influential business leaders in the state.

The Florida 500 is a special section created by Florida Trend magazine that highlights the 500 most influential executives in different economic sectors throughout the state of Florida. Selection of the 500 executives recognized on this year’s list was based on a year-long research initiative and spans more than 60 business categories.

“Since founding Engage in 2011, it has always been my priority to provide innovative solutions that help clients navigate the ever-evolving workplace environment; that mission has never been more relevant than it is today,” said Jay Starkman, CEO of Engage PEO. “To be recognized on the Florida 500 list during such a trying time – alongside some of the most inspiring leaders in the state – is a true honor, and one that I could not have achieved without my dedicated employees, valued partners, and long-time clients.”

The complete list of the recipients of the Florida 500 can be found in the September special issue of Florida Trend magazine. More information can be found here.

About Engage PEO

Engage PEO delivers comprehensive HR solutions to small and mid-sized businesses nationwide, sharpening their competitive advantage. Comprised of the industry’s most respected veteran professional employer organization executives, certified HR professionals and attorneys, Engage PEO provides hands-on, expert HR services and counsel to help clients minimize cost and maximize efficiency for stronger business performance.  The company’s superior service offering includes a full range of health and workers’ compensation insurance products, payroll technology and tax administration, risk management services and advanced technology as part of an extensive suite of HR services. Engage PEO was recently awarded the designation of Certified Professional Employer Organization (CPEO) by the Internal Revenue Service (IRS), ensuring greater benefits for small and mid-sized businesses such as tax advantages and financial protections. Engage PEO is also accredited by the Employer Services Assurance Corporation. Engage PEO was named to Inc. magazine’s list of the 5000 fastest growing companies every year since 2016. For more information on Engage PEO visit www.engagepeo.com. The IRS does not endorse any particular certified professional employer organization. For more information on certified professional employer organizations go towww.IRS.gov.

Elon Takes on the Insurance Marketplace

…sorry have to laugh, “you guys (actuaries) are good at math”. um, yeah –

That part he got right.  Very good indeed.

While I have a tremendous amount of respect for Elon and his accomplishments, this seems to be a bit out of his usual sweet spot.

Perhaps “Midas” will strike again, but my personal opinion is he got a bad renewal and now wants to go Orwellian.  All about a revolution in an industry that is perilously behind the times, but this seems not thought out –

Are we now to be graded individually against our peers?  Do we wear letters or colors based on performance.  A slippery slope —

Tesla Invites Actuaries to Help It Create a ‘Revolutionary’ Insurance Company

By | July 24, 2020

Tesla, which has been testing an insurance product for its drivers in California, is preparing to build an insurer, one CEO Elon Musk says will be “revolutionary.” And he’s inviting actuaries to join his cause.

“I would love to have some high energy actuaries, especially. I have great respect for the actuarial profession. You guys are great at math. Please join Tesla, especially if you want to change things and you’re annoyed by how slow the industry is. This is the place to be According to Zachary Kirkhorn, Tesla’s chief financial officer, the company wants to harness the data from its telematics on its cars and drivers to build the new insurance operation beyond California.

“Where we want to get to with Tesla Insurance is to be able to use the data that’s captured in the car, in the driving profile of the person in the car, to be able to assess correlations and probabilities of crash and be able then to assess a premium on a monthly basis for that customer,” he said.

He said Tesla is nearly finished with testing its California telematics product and hopes to be filing that in several more states by the end of the year with the goal of going nationwide.

Tesla Insurance Will Use Driver Video, GPS Data Subject to States’ Approval

Musk said that accuracy of information is “at the heart of being competitive” with insurance. The choice is between assessing drivers “looking in the rear-view mirror” or assessing them individually, “looking ahead with smart projections” and being able to inform them what actions they can take to reduce their insurance.

“It’s like… if you want to pay more for insurance, you can. But if you want to pay less, then please don’t drive so crazy,” Musk said, adding, “Then people can make a choice.”

He said understanding the insurance expense, such as $15,000 to fix a fender, can actually be helpful to the carmaker, allowing it to adjust the design of its cars to how repairs are done and lessen the cost.

Musk has long maintained that car insurance rates should fall as driver-assist and self-driving technology become standard.

Top photo: Elon Musk, Tesla Chairman, Product Architect and CEO. (AP Photo/Paul Sancya)

The NCCI, Presumption and COVID19

The National Council of Compensation Insurance (“NCCI”) continues to further refine its cost estimates of COVID19 for the 38 states that it oversees for the purposes of rate and rule making for workers’ compensation.  The most notable states not included in this study are California, New York and New Jersey which collectively make up about 40% of the workers’ compensation premiums countrywide.

The term “presumption of compensability” speaks to whether a COVID19 case is deemed compensable solely by the nature of the afflicted’s joe duties, scope and where work is performed.  This is different in every state with new bills and laws being drafted and legislated every day.

The preemption legislation generally falls into three buckets:

  • Bills that establish compensability presumptions for first responders (fire, police, ambulance) and/or certain healthcare workers (nursing homes, hospitals, home health etc)
  • Bills that establish compensability presumptions for essential or frontline workers.  This expands presumption into most all client-facing roles still necessary (grocery, pharmacist, mass transit, TSA, meat-packing, banking etc.)
  • Bills that establish compensability presumptions for all employees in the state

Needless to say, understanding the expected costs to the workers’ compensation system of any given state and the appropriate risk load to charge as a result starts with who will and will not “automatically” be covered and thus drive cost.  As you will note below, there is a lot of activity in regard to this issue across the country.

You can access NCCI’s state-by-state compensability tracker here.

Additionally, the NCCI has built a free on-line COVID19 “Hypothetical Scenarios Tool” that really gets into the granular on expectation of costs by type of worker and symptom group as well as the expected risk load as a result thereof.  Here is where the NCCI’s middle of the road projection is as of their last study in April with the assumptions of all NCCI states and the total workforce presumed to have contracted COVID19 in an occupational setting.  The scenario assumptions with slide bars below can be adjusted manually, but these are the “middle ion the road” defaults.


Note in this scenario of the total workplace presumed to being exposed to COVID19 in all NCCI states, the expected additional risk load is +85%.

Where I found this model to be even more interesting is on a state by state basis.  Using same “total workforce” but now selecting just Florida.

A 69% v 85% risk load and a fatality claim average being $121,118 v $341,111.  Fatalities the most important risk and cost driver with “critical claims” coming in #2.  Now if we do the same for Texas…

The risk load almost triples the national average at 236% fueled by the cost of a fatality more than double the national average, or $723,912.

This is a very powerful tool that shows all of the variables in play in the forecasting of expected costs in NCCI states due to COVID19.  As this continues to be refined we will update you.

Have a great weekend and stay safe.

California Workers’ Compensation Impact Projections – COVID19

As our clients continue to grow their businesses during the COVID19 pandemic, it has never become more important to select the right client company exposures to take risk on and those to lay off on guaranteed cost policies.  Having an underwriting strategy for risk selection and understanding of proper pricing as a result of COVID19 is an issue that needs to be focused on in this dynamic environment.

As with any projection, as time goes by, the future is understood with greater certainty.  As I continue to monitor the “risk load” attributable to COVID19 on a State by State basis, it made me think of one of my literary heroes and a famous quote of his:

“A habit of basing convictions upon evidence, and of giving to them only that degree or certainty which the evidence warrants, would, if it became general, cure most of the ills from which the world suffers.”  – Bertrand Russell
Why?  Because we are still dealing with “evidence” on COVID19 that is uncertain.   How much we can warrant forecasted outcomes as a result is therefore uncertain.  Besides the fact we are dealing with a 1 in a 100 year pandemic with no script to work off from the past, the models forecasting number of events and costs are built off of social distancing and staying at home; these variables being complicated by the reopening of States on the rise and social demonstrations triggered by the Floyd case/police brutality.
That said, based on the evidence in California at present, the middle of the road estimate is the addition of $1.2B of system costs to the current system costs of $18.3B, or 7%.
The low end is 3.3% and high end 11%.  These costs emanate from the mid-range loss estimate of 31,100 COVID19 claims.  Please note that this projection is based off the Governor’s order of presumption only lasting through July 1, 2020.  Of these expected claims, it is anticipated the costs will be as follows:
Claim Type               %               Expected Costs per Claim
Mild                           82                          $2,100
Severe                      10                           $74,800
Critical                        3                           $191,100
Death                         5                            $280,500
While I found this projection on the surface to be light, Mr. Stypla and I than contemplated the facts that California was one of the first to close and has been very strict in “stay at home” protocols.  As a result, their fatalities per 100,000 people are far less than other populous states:
Cases/ Fatalities/ 100,000
California – 347/12/100,000
New York – 1,951/157/100,000
Texas – 270/6/100,000
Florida – 307/13/100,000
New Jersey – 1,855/139/100,000
Illinois – 1,020/48/100,000
Michigan – 651/60/100,000
Wisconsin – 366/11/100,000
Ohio – 335/21/100,000
Mass. – 1,507/108/100,000
As you can see, there is a wide range of events by State with California being on the lower end of the spectrum.  So the take away is based on evidence today, California appears to be outperforming against initial forecasts and the country as a whole.  Hopefully the numbers will stand, but to belabor it, these are very fluid forecasts based on evidence available as of today.

Workers’ Compensation Super Bowl

The National Council of Compensation Insurnce (“NCCI”) hosts their Annual Issues Symposium this afternoon on a shortened and virtual basis.  There is no other conference that influences what happens with workers’ compensation reserving and pricing then this one.

All major carriers and their respective mathematical prophets will be on the line to measure profitability and the components thereof for the last year and historic.  Even more importantly this year, the prediction of go-forward profitability and pricing guidance/trend.

Click to access II_AIS2020-Agenda.pdf

Mr. Donnell starts off at 1:00, State of the Line at 1:15 and Bob Hartwig does a COVID presentation 2-3.  Very much condensed than usual and for the first time that I know of… its free!

We will be summarizing our interpretations of these presentations later in the day but please check out if you have the time.  Hartwig, especially, is a tremendous speaker –

The links below to join…

Plan to join us for NCCI’s Annual Issues Symposium—AIS Virtual<https://www.ncci.com/Articles/Pages/AIS_LiveStream_UserCapture.aspx?aisinvitelinkclick=yes>, May 12, 2020, 1:00 p.m. ET.

AIS Virtual is the premier workers compensation event offering actionable intelligence around the industry’s most relevant issues.

These helpful tips will get you ready:

 

  • For optimal viewing, use Chrome or Firefox and log in early to test your system’s livestreaming capability.

 

  • Log in will be available 15 minutes prior to our start time, and you’ll be able to enjoy our AIS Virtual preshow content as we count down to our 1:00 p.m. ET kickoff.

 

Following the main program, view our interactive Meet the Experts session, and access additional insights via our AIS Virtual Highlights Report on ncci.com.

For more information, and the full AIS Virtual agenda<https://www.ncci.com/Articles/Documents/II_AIS2020-Agenda.pdf>, visit ncci.com<https://www.ncci.com/Articles/Pages/II_AIS2020-Registration.aspx>.

California COVID Call to Cost Billions for Workers’ Compensation System

As expected, the largest workers’ compensation market in the country has rendered the opinion that it is presumed that anyone that is employed outside of their house has contracted the virus at work.  Prior to this order or COVID for that matter the total cost of loss in the California system was predicted to be $18.1 B.  The median risk load as a result if you include “First Responders” is $11.2 B, or 61%.  If you exclude “First Responders”, the additional cost expected is $5.2 B, or a risk load or 28%.

It will be interesting how insurance carriers and those on large deductibles react to this.

FOR IMMEDIATE RELEASE: Contact: Governor’s Press Office
Wednesday, May 6, 2020 (916) 445-4571

Governor Newsom Announces Workers’ Compensation Benefits for Workers who Contract COVID-19 During Stay at Home Order

Benefit will be available for diagnosed workers working outside their homes

 

Presumption will be workers contracted the virus at work; employers will have chance to rebut

 

Governor also signed executive order waiving penalties on property taxes for residents and small businesses experiencing economic hardship based on COVID-19; order also extends deadline for filing property tax statements

 

SACRAMENTO – As California prepares to enter Stage 2 of the gradual reopening of the state this Friday, Governor Gavin Newsom today announced that workers who contract COVID-19 while on the job may be eligible to receive workers’ compensation. The Governor signed an executive order that creates a time-limited rebuttable presumption for accessing workers’ compensation benefits applicable to Californians who must work outside of their homes during the stay at home order.

 

“We are removing a burden for workers on the front lines, who risk their own health and safety to deliver critical services to our fellow Californians, so that they can access benefits, and be able to focus on their recovery,” said Governor Newsom. “Workers’ compensation is a critical piece to reopening the state and it will help workers get the care they need to get healthy, and in turn, protect public health.”

 

Those eligible will have the rebuttable presumption if they tested positive for COVID-19 or were diagnosed with COVID-19 and confirmed by a positive test within 14 days of performing a labor or service at a place of work after the stay at home order was issued on March 19, 2020. The presumption will stay in place for 60 days after issuance of the executive order.

 

The Governor also signed an executive order that waives penalties for property taxes paid after April 10 for taxpayers who demonstrate they have experienced financial hardship due to the COVID-19 pandemic through May 6, 2021. This will apply to residential properties and small businesses. Additionally, the executive order will extend the deadline for certain businesses to file Business Personal Property Statements from tomorrow to May 31, 2020, to avoid penalties.

 

“The COVID-19 pandemic has impacted the lives and livelihoods of many, and as we look toward opening our local communities and economies, we want to make sure that those that have been most impacted have the ability to get back on their feet,” said Governor Newsom.

 

Since declaring a state of emergency due to COVID-19 on March 4, 2020, Governor Newsom has taken several actions to benefit workers on the front lines, includingpaid sick leave benefits for food sector workers that are subject to a quarantine or isolation order; critical child support services for essential workers and vulnerable populations; additional weekly unemployment benefits; and needed assistance in the form of loans for small businesses and job opportunities in critical industries for workers that have been displaced by the pandemic.

 

The NCCI Speaks to the Impact of COVID19 on Workers’ Compensation

Following suit with the research brief from WCIRB. Click here to access.

…done last week by the Workers’ Compensation Insurance Rating Bureau of California (“WCIRB”) on the impact of COVID19 on the California Workers’ Compensation system, the National Council of Compensation Insurance (“NCCI”) came out yesterday with the same for the 38 States that it tracks for rule and rate-making purposes. Note the numbers below do not include half the country’s volume of workers’ compensation premiums when it is considered States like California (25% on its own), New York and Ohio are not included in the below data.

Key findings of the NCCI on frequency rates:

  • % of ee’s that will contract COVID 19 on the job – <10% – 81%
    • it should be noted that the issue of “Presumption of Coverage” related to different types of occupations is the driver of the huge range in frequency – all States are presuming “First Responders” (1,176,110 workers), others to include Healthcare Workers and First Responders (9,666,420 workers) and still others such as Illinois that presumes any worker that is client facing has occupational exposure to the disease (86,351,950 total workers in the 38 States considered)
  • Infection rate is 5-50% regardless of class of worker above
  • Range of Impact of CoVid losses on overall expected losses by category of worker:
    • First Responders – PreCoVid expected losses of $1.1B with potential impact of $.1B – $1.9B… 10%-170% range
    • First Responders and Healthcare Workers – Pre CoVid losses of $3B  with potential impact of $1B – $16.2B…. 33% – 550% range
    • All Workers – PreCovid losses of $32.1B with potential impact of $2.78B – $81.5B… 8 – 254% range
    • Hospitalization rate after infection range is 1 – 31%
    • Critical care rate of 5 – 27%
    • Duration of care for mild symptoms of 2 weeks and 3 – 6 for moderate or critical cases
    • Cost per claim type:
      • Mild $1,000
      • Moderate-Severe $25,500
      • Severe $59,000
    • Impact by infection and compensability rates
      • 1% occupationally impacted, cost of loss goes up 8%
      • 5% = 42%
      • 10% = 85% – which at present is NCCI’s selection
    • Fatality rate for those infected with the virus is .5% across all classes of employees – Average impact $146,980 in death benefits (does not include medical)

My summation of what the NCCI and WCIRB are projecting is as followed:

  • The huge range in expected costs is going to be understood on a State by State basis with the issue of presumption of contraction based on occupational duties being the biggest driver
  • As each State has unique payouts for disability and death, the prediction of cost and risk load for pricing needs to be State by State
  • The healthcare segment is providing the most unpredictability – add a risk load, park the business elsewhere or stay out of the segment for now – too unpredictable
  • PEO’s can be a very important partner to insurance carriers by allowing them to understand performance data fastest due to their management of payroll
  • The smartest people I know do not know what to predict but this is a start – we probably will not have enough real data to narrow this range of expectations for months

Stay safe and we will get through this – but with our eyes open.