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 72’nd Annual Workers’ Compensation Educational Conference – Orlando

Another year and another convergence of the who’s who in the field of workers’ compensation at the Marriott World Center in Orlando this week.  Known as the largest insurance conference in the country, the Workers’ Compensation Institute brings together “centers of influence” in law, medicine, claims adjusting, underwriting, brokerage, risk-bearing, managed care, regulation, legislation, staffing and of course coemployment.

Dating back over a decade, the Workers’ Compensation Institute and specifically Jim McConnaughhay and Steve Rissman have granted the PEO community a one day educational track.  Shortly thereafter, FAPEO and NAPEO threw their influence and sponsorship behind it.  Special thanks to the WCI, FAPEO and NAPEO for making this a success and bringing positive exposure to the PEO industry.

I am proud to participate on a panel Tuesday morning at 9:00 am with Andy Olwert (Next Level), Deb Hetzer (PEMCO), Phil Herron (Continuum HR) and Robert Barrett (Rissman, Barrett, Hurt, Donahue, McLain & Manganese’s, PA) titled “Accountability in the PEO Industry – Posting Wins for PEO’s and Their Claims Teams”.  More information on this data-driven session can be found on the WCI 360 site here:

http://www.wci360.com/conference/professional-employer-organization-breakout

Hope to see you Thursday morning and look forward to catching up with lots of old friends!

California Adopts 16.5% Workers’ Compensation Rate Drop for 7.1

From the Insurance Journal…

http://www.insurancejournal.com/news/west/2017/05/22/451841.htm

California chose to adopt the Workers’ Compensation Insurance Rating Bureau’s (“WCIRB”) recommendation of a -16.5% drop in pure premium rates.  It should be noted that these rates are advisory only and so what to watch next is who adopts the pricing decrease and who does not.  With over 30% of all US workers’ compensation premiums generated out of California, this will provide an intriguing battleground and opportunity for those carriers that buy into WCIRB’s numbers in regard to lower medical loss development, decreasing indemnity claim frequency, and lower than projected loss adjustment expenses.

– Paul R. Hughes

 

2016 Workers’ Compensation Combined Ratio is a 94 per NCCI

It has been a busy month of conventions… NAPEO Legal and Legislative, RIMS and last week the NCCI.  On the ground at the PACE conference in New Orleans, a look back at the NCCI AIS.

The National Council of Compensation Insurance (“NCCI”) Annual Issues Symposium is the preeminent conference for understanding all things workers’ compensation.  Industry experts in the carrier, reinsurance and brokerage communities converge in Orlando every year in May to better understand the meaningful trends in the workers’ compensation line of insurance. The most meaningful number of this year’s event was 94… the lowest combined ratio of any other year since 1990 with the exception of 2006 (93).  It should also be noted that this is a 6 point drop from the 100 of last year and represents one of few years <100.

Based on typical patterns, this is now where capital enters the market… which was illuminated when the NCCI literally sold out of tickets.

With NAPEO’s Legal and Legislative Conference two weeks ago, the NCCI conference last week and PACE in New Orleans this week… it has been a high school reunion of sort – seeing good friends, telling old stories and commiserating on how to make the PEO industry the optimal platform for American business.  Health insurance maybe in the news every day but workers’ compensation is the line of business that PEO’s must have.

The origination of the PEO Compass was to provide an executive summary of all things workers’ compensation and how they impact all things PEO.  The NCCI is a huge driver of this nationwide and sets rates and rules in 37 states.  The document attached is a must read for those like me that are workers’ compensation and data geeks.

https://www.ncci.com/Articles/Documents/II_AIS2017-SOL-Guide.pdf

For those that are not (or would prefer not going through 57 slides), the highlights below:

  • The total P/C industry’s 2016 combined ratio (101%) represents a three-point increase versus that for 2015.
  • Combined ratios increased in all lines of business except workers compensation (slide 4)
  • Premium for the NCCI-serviced Residual Market Pools has remained stable over the last four policy years, at approximately $1.1 billion. (slide 12)
  • Between 2015 and 2016, countrywide private carrier direct written premium grew +2.4% (slide 15)
  • The percentage change in payroll (+4.5%) is approximately equal to the percentage change in the average wage (+2.5%) plus the percentage change in employment (+1.9%).  Employment grew at an above-average rate for the Professional and Business Services; Education and Health Services; Construction; and Leisure and Hospitality sectors.  Employment in the Manufacturing sector was flat, while the All Other sector posted a decrease primarily due to declines in Natural Resources and Mining employment (slide 17)
  • NCCI workers’ compensation filings with effective dates in 2017 averaged –6.7%… California and New York are already seeking approval for rate decreases which are not even part of this data set (slide 18)
  • In 2013, more than 70% of respondents saw an increase in premium at renewal, but by the fourth quarter of 2016, 62% reported seeing a decrease in premium at renewal (slide 23)
  • The workers compensation 2016 calendar year combined ratio for private carriers was 94%. This is the second consecutive year that the industry has posted a six-point underwriting gain. Consecutive combined ratios at this level have not been seen in at least the last 30 years (slide 24)

What this means is that workers’ compensation has become a very sexy line of insurance risk-bearers.  With favorable improvements in operating and investment performance, the median expected rate of return is +20%.  Again, it is therefore no surprise that this years NCCI AIS conference was sold out months prior to the event.

For those that happen to be in New Orleans this week for the annual PACE conference, let’s meet up and strategize in person about the great opportunities ahead for the industry.

– Paul R. Hughes

c: 321.217.7477

e. phughes@libertateins.com

 

 

Understand Average CA Claims Cost in Real-Time (Powered by RiskMD)

California PEO Loss Ratio Study

Because of the speed in which PEOs report payroll and premium for client companies, we are able to show live heat maps back to our PEO community representing areas where both average claims cost and activity are the highest.  On the graphic below, we have highlighted the state of California which represents 18% of workers’ compensation premium for the country; as a result, trends in California tend to be much more meaningful than other states.  The visual below synthesized $3 Billion of payroll information, $155 Million of workers’ compensation premiums, and 5,613 claims.  Countrywide our data aggregates more than $19 Billion of payroll information, $500 Million of workers’ compensation premiums, and 31,000 claims dating back to January 1 2008.  It is not a myth that claims tend to cost more in both metropolitan cities as well as southern California.

RiskMD 4x Faster Than Bureaus

Every time our PEO clients run a payroll, our RiskMD heat maps refresh in real-time, and allow our clients to turn risk into reward.  By understanding data, PEOs can evolve their workers’ compensation platforms into profit centers.  RiskMD synthesizes our data 1.5 years faster than anyone else and an amazing 4 years faster than national and state bureaus.  We can get in and out of areas of profitability and duress in a given class code, zip code, county, or state.

Risk MD Advantages for Making Your Workers Compensation Platform a Profit Center

The advantage to using RiskMD data is that we know where claims are going to be higher than average 3.5 years before bureau information is released.  All of traditional workers’ compensation placements, which represent 92% of the market, do not know payroll and premium until post audit.  Actuarial bureaus then get this information approximately 4-6 months thereafter and use it for rate making purposes approximately one year after that.  As a result, the data used to promulgate workers’ compensation rates countrywide is from the years 2006-2010.  The data you are seeing illuminated on this gauge is as of last Friday (3/21/14).

PEOs should be very bullish in the state of California

PEOs do need to realize that there are wider ranges of results than in every other state (consider average cost per claim and percentage of claims litigated).  There exists a wide range of profitability and non-profitability in California and therefore it needs to be treated as multiple states in its own due to its size, as well as socioeconomic differences within its territory.  In fact: larger carriers use territorial multipliers where more/less rate is charged depending on the county in question.  We feel that we can get more granular than that, by identifying zip codes rather than counties that have the highest averages.

While the data pool will never have as much credibility as “every flip of the coin”, it certainly provides a credible benchmark to show trend in key areas like the state of California.  Click the graphic to zoom in.

RiskMD Data Claims Cost in Real-Time Based on Population Growth

– This view provides an enhanced visualization of the location of claim occurrences by zip code.  The data includes all Risk Transfer Programs claims occurring between 1/1/2008 and 3/21/2014.  This view is updated 3-5 times per week when a new claims files are available to push into our proprietary data store.
– The size of each circle indicates total claim count for the given zip code. The color indicates average cost per claim.
– The data set overlay (colors) indicate population growth by zip code for the years 2009-2014.