Workers Comp Zone


The WCIRB Governing Committee met this morning, with the public meeting featuring a presentation by WCIRB Chief Actuary David Bellusci.

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 mid-year 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 COVID emergency.

On the rate filing issue, Bellusci noted that in comparison to the 1/1/20 average approved “pure premium rate” of $1.52 per $100 of payroll, current projections indicate a mid-year average “pure premium rate” of $1.53. Actual filed rates are quite a bit higher, with the 1/2/20 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 they are 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 WCIRB Actuarial Committee was not recommending a mid-year filing.

Interestingly, the projected LAE ratio (Loss Adjustment Expenses) 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 effects of the COVID emergency on the economy and the comp system.

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

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

Here is a link to the WCIRB page explaining those possible changes, all of which are to be discussed at a public WCIRB meeting on April 14.

Looking at the broader impacts of COVID on the system , another presenter listed potential impacts on the workers’ comp system and ratemaking.

Potential direct impacts were noted to be:

•Comp claims filed arising from COVID diagnosis

•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:

•Impact of economic slowdown on frequency of claims filed and the volume of post-termination cumulative trauma claims

•Impact of economic slowdown on claim duration

•Impact of economic slowdown on industrial mix

•Impact of reduced/substituted medical treatments on future costs and duration

•Impact of increase rise of telemedicine

•Possible legislation that would create an industrial presumption for first responders, medical personnel and employees in essential industries that contract COVID

That’s the report from today’s public (online) WCIRB Governing Committee.

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

So stay tuned.

Julius Young