California Department of Insurance Orders Workers’ Comp Carriers to Return Premiums Due to Stay-At-Home Orders
On June 17th, 2020, California Insurance Commissioner Ricardo Lara issued an Order adopting emergency workers’ compensation regulations in response to the COVID-19 pandemic. These new regulations will mandate insurance companies to recompute premium charges for policyholders to reflect reduced risk of loss consistent with Commissioner Lara’s April 13 and May 15, 2020 Bulletins, and will result in savings for many policyholders as businesses continue to struggle financially during the COVID-19 pandemic.
“California’s business owners have been hit hard by COVID-19,” Lara said. “Workers’ compensation premiums should reflect that many employees are performing less risky duties, and my Order will provide some financial relief for employers when they need it most.”
This follows California Governor’s unprecedented May 6th executive order that creates a time-limited access way to workers comp for employees who worked outside their homes during the stay at home order and contract Covid-19. Workers Comp has traditionally not been the response mechanism for community-spread illness and contagion, and so insurers and employers alike expressed concern over this uncontemplated expense being added to an otherwise defined system. The adjustments provided under the June 17th regulations provides some potential relief to those concerns.
Under these emergency regulations, employers are provided relief via three separate measures:
- Employers are permitted to reclassify an employee if the employee’s duties have changed to a clerical classification that has reduced risk compared with the employee’s previous classification. This reclassification will reduce the employer’s premiums for employees who are a lower risk because they are now working from home even though they may not have previously done so. This change would be retroactive to March 19, 2020, the first day of the Governor’s statewide stay-at-home order, and conclude 60 days after the order is lifted.
- These emergency regulations also exclude from premium calculations the payments made to an employee, including sick or family leave, while the employee is not performing duties of any kind for the employer. Typically, these payments would be used as a basis for the employer’s workers’ compensation premium. This change will lower the employer’s rate by reducing the amount of payroll assessed, and the employer will not pay a premium for paid workers who are otherwise being furloughed.
- The new regulation will exclude claims related to a COVID-19 diagnosis from being included in future rate calculations so that employers are not penalized with higher rates due to COVID-19 claims.
Mark Herbert, Vice President, California for Small Business Majority, said the rules will allow small business owners to correctly reclassify their workforce if their duties have changed, helping businesses keep more money in their pockets as they respond to a decline in revenue and adapt their business models. These rules will also ensure small businesses are better positioned for the long-term by protecting them from future increases in workers’ compensation premiums due to COVID-19, Herbert said.
“These changes provide clarity to employers while helping to share any financial costs of work-related COVID-19 cases among all employers-not just those who found themselves at the center of the epidemic,” said Mitch Steiger, Legislative Advocate for the California Labor Federation, who is also a member of the Workers’ Compensation Insurance Rating Bureau (WCIRB) Governing Board. “In doing so, both workers and employers most affected by this crisis can more quickly begin the process of recovery.”
Insurers will also be required to report injuries involving a diagnosis of COVID-19 which will allow WCIRB to keep track of COVID-19 injuries, and will aid in the WCIRB’s future analyses of the workplace and market impacts. The new regulations will go into effect on July 1, 2020.
For guidance on how to maximize the benefits of this new regulation under your own workers comp policy, contact us today at firstname.lastname@example.org or call us directly at 800-530-4448.
About the Author
Larry St. John is a 20+ year veteran of insurance and risk management for the construction and electronic security industries.
He can be reached at LStJohn@eclipseinsurance.com