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.