Worker’s Compensation – COVID-19 Prompts Rate Hike Recommendation – OCTOBER 2020


THE COVID-19 pandemic seems to have reversed years of falling workers’ compensation rates in California, as the Workers’ Compensation Insurance Rating Bureau has recommended that average benchmark rates be increased by 2.6% for 2021.
The recommendation was forwarded to the California Department of Insurance, which will schedule a hearing on the recommendation in the fall.
It should be noted that the 2.6% increase recommendation would be an average across all class codes, as the Rating Bureau plans to allocate the expected COVID-19 costs by weight across the state’s overall industrial sector. Note that even low exposure classes will be surcharged.
The Bureau in its recommendation aims to apply the surcharge on a weighted basis according to each class code’s share of growing COVID-19 claims costs. It is considering a tiered surcharge model based on an employer’s risk, as follows (for examples, see below):

High risk – A 12-cent surcharge per $100 of payroll.
Medium risk – A 6-cent surcharge per $100 of payroll.
Low risk – A 4-cent surcharge per $100 of payroll.

 

The X-factor


The Bureau’s actuarial committee noted that the pandemic does present challenges for predicting workers’ compensation costs. “The 2021 policy year will still be impacted by COVID-19, but some trends may stabilize. The challenge will be projecting exposure and claims frequency (for COVID-19 claims),” the committee wrote in a report. Actually, the overall effect of COVID-19 on rates going into 2021 was 4%, according to the Rating Bureau. Had it not included the COVID-19 surcharge, it would be asking for a 1.3% decrease in benchmark rates.

The reason is that claims costs and claims frequency have been falling and long-term claims are costing less than originally anticipated. The Bureau also forecasts that the recession caused by the pandemic will also have a profound effect on overall claims: it projects an overall 6.3% decrease in claims frequency due to slowing economic conditions.

Interestingly, COVID-19 claims are not supposed to count against employers’ experience rating and loss histories, according to new rules that took effect in May. However, the claims are having an overall effect in terms of workers’ comp benefit payments. The Bureau also has to price in the uncertainty over the future of COVID-19. Will it get worse, or will it begin to wane? Will there be a vaccine and new and improved treatment regimens that reduce mortality or decrease symptoms and hospitalizations?

It is concerned that some low-risk industries may be getting a surcharge that is still out of proportion to their actual risk, particularly with people who are working remotely. It plans to further study the issue and will likely amend the filing depending on the results.


New Law Creates COVID-19 Claim Framework – OCTOBER 2020


GOVERNOR GAVIN Newsom has signed legislation that creates a new framework for COVID-19- related workers’ compensation claims. SB 1159 replaces an executive order that Newsom made on March 18 that required all employees working outside the home who contracted COVID-19 be eligible for workers’ compensation benefits if they file a claim. The new law expands that rebuttable presumption” that a coronavirus case is work-related to front-line workers, as well as employees in workplaces that have had an outbreak of cases. The new law is retroactive to July 6, the day after Newsom’s executive order expired, and is set to expire Jan. 1, 2023.  Employers with fewer than five employees are exempt under the statute.

SB 1159’s three parts

Part 1. The law codifies Newsom’s prior executive order that provided a “rebuttable presumption” that COVID-19 was contracted in the scope and course of work by employees working outside of the home who get infected.

Part 2. The law provides a rebuttable presumption that firefighters, law enforcement officers, health care workers and home care workers who contract COVID-19, contracted it in the workplace.

Part 3. The law creates a rebuttable presumption that a worker’s COVID-19 diagnosis is work-related within 14 days of a company outbreak. Under SB 1159, an outbreak is defined as when four employees test positive at a specific place of employment with 100 or fewer employees and, for larger places of employment, when 4% of the employees test positive. It’s also deemed a workplace outbreak if the employer had to shut down due to the coronavirus.

Rebutting a claim

Employers can rebut the presumption that COVID-19 was contracted at work if they have:
• Proof of measures they put in place to reduce potential transmission of COVID-19,
• Evidence of the employee’s nonoccupational risks of contracting COVID-19,
• Statements made by the employee, or
• Any other evidence normally used to dispute a work-related injury.

REPORTING REQUIREMENTS

When an employer learns of an employee testing positive, they must report to the insurer the following information within three business days:
• The date the employee tested positive.
• The address or addresses of the employee’s specific place(s) of employment during the 14-day period preceding the date of their positive test.
• The highest number of workers who reported to work in the 45-day period preceding the last day the employee worked at each specific site.

Filing False Information Can Result in a $10,000 Fine

The Rossi Law Group has the following recommendations for employers in California:
• Keep track of all locations each employee works at, the number of employees on each day at each location, as well as a log of those that test positive (including the date the specimen was collected).
• If you are aware of any staff who have tested positive between July 6 and Sept. 17, you have 30 days after Sept. 17 to report the positive test to the claims administrator.
• You must also report to the insurer positive COVID-19 results for employees that are not filing claims. In that case, you must omit personal identifying information of the employee.
• Provide any factual information to the claims administrator that could help rebut any claim of work-relatedness.

The law also has some teeth: Anyone who submits false or misleading information shall be subjected to a civil fine up to $10,000.

One last thing…

The governor also signed into law AB 685, which requires employers to report an outbreak to local public health officials. Employers must also report known cases to employees who may have been exposed to COVID-19 within one business day.


Workers’ Compensation – New Telecommuter Class Code in the Works – July 2020


DUE TO the COVID-19 pandemic, California’s workers’ compensation rating agency plans to implement a new class code for telecommuting employees on Jan 1, 2021. The Workers’ Compensation Insurance Rating Bureau of California started work on the new classification as companies ordered employees to start working at home after stay-at-home orders were issued to contain the spread of the coronavirus.
The new code for telecommuting workers will be 8871. Under a prior emergency rule, the Rating Bureau had recommended that employees who were thrust into telecommuting because of the COVID-19 outbreak be assigned the 8810 “Clerical Office Employee” code.
This is a major change in the class code structure and will affect employers throughout the state. If you have telecommuting staff, you should prepare for this change now.

The specifics
Until now, telecommuting employees whose duties meet the definition of clerical employees in the California Workers’ Compensation Uniform Statistical Reporting Plan have been assigned class code 8810 “Clerical Office Employees,” or their employers’ standard classification if that classification specifically includes clerical office staff.
Rating Bureau staff has proposed that class code 8871 be the code for clerical employees who work more than 50% of their time at their home or other office space that is not on the employer’s premises.
As mentioned, the class code will be used only if the class code for the employer does not include clerical employees. Currently, there are 41 class codes that include clerical staff. There are also two codes that specifically exclude them. If a company includes all of its staff in the same code, any clerical staff on its payroll are not assigned the 8810 “Clerical Employee” class code and instead assigned the code for the company as a whole.
For the sake of continuity, the Rating Bureau staff has recommended that those 43 class codes be amended to specifically include or exclude clerical telecommuting staff.

What you should do
If you have staff on your payroll who are telecommuting, you should start preparing your accounting or bookkeeping software to add in this code for when your policy comes due in 2021.
Starting work on this now can help your insurer more accurately price your future policies, or when they decide to audit your payroll.
Conversely, you should not attempt to change the class code for your currently telecommuting employees now or at any time before Jan. 1, 2021, as the final rules have not yet been written, approved or promulgated. They also need to be approved by the state insurance commissioner.
The Rating Bureau plans to apply the rate for the class code for clerical employees to the new class code for the first few years, and until it can gather enough data to set a unique rate for the code. That could take a few years as the Rating Bureau typically uses a window of the past three years of claims experience and costs when setting class code rates.


COVID-19 Emergency Rating Changes Take X-MOD – July 2020


THE DEPARTMENT of Insurance has approved emergency workers’ compensation rules dealing with COVID-19 and California employers. The rules were recommended by the Workers’ Compensation Insurance Rating Bureau to bring fairness for employers’ experience rating during the COVID-19 pandemic amid shelter-at-home orders and for dealing with claims of workers who contract COVID-19 on the job. The following new rules took effect on July 1:

1. Classification changes for staff working from home
As a result of the California stay-at-home order, many employers have altered employees’ duties so they can be accomplished from home, and often those duties are clerical-like in nature. Under the rule, an employee can be assigned payroll classification code 8810 if:

  • Their duties meet the definition of a “clerical office employee” while working from home, and
  • Their payroll for the balance of the policy period is not assignable to a standard classification that specifically excludes clerical office employees.

There are a number of other classifications that already include clerical operations in their definitions, and those classifications would not be eligible for a change.

2. Non-working, paid staff
Salaries paid to workers who are at home not working, yet still collecting a paycheck, will be excluded from payroll for workers’ comp premium calculation purposes when the payments are less than or equal to the employee’s regular rate of pay.

3. COVID-19-related claims
Under the emergency rules, all workers’ comp claims directly arising from a diagnosis of COVID-19 will not be included in the calculation of your experience modification. The Rating Bureau said in proposing this change that since the occurrence of COVID-19 workers’ compensation claims are unlikely to be a strong predictor of future claim costs incurred by an employer, their inclusion in X-Mod calculations would not reflect an employer’s safety efforts and would not reflect the intended goal of the experience rating system.

The takeaway
These rules are effective during the time the stay-at-home order by Gov. Gavin Newsom is in effect, and 60 days after the order is lifted. If you have employees who work from home, discuss with your insurance company or us whether you should change the class code to reflect their new duties. If you do reclassify employees or are paying workers who are not working, document those changes too, and keep careful records. Also, worker COVID-19 claims will be eligible for workers’ compensation benefits under a second-order by Newsom, but under these new rules, they will not count against your X-Mod.


Top New Laws and Regs Affecting Businesses – January 2020 RISK REPORT


The new decade is starting off with a tsunami of new laws and regulations that will affect California businesses. Companies operating in California will have to be prepared for significant changes or open themselves up to potential litigation, fines, and other risks.

Here’s what you need to know coming into the new year:

1. AB 5

The controversial AB 5 creates a more stringent test for determining who is an independent contractor or employee in
California.  Known as the “ABC test,” the standard requires companies to prove that people working for them as independent contractors are:

A) Free from the firm’s control when working;
B) Doing work that falls outside the company’s normal business; and
C) Operating an independent business or trade beyond the job for which they were hired.

Legal experts recommend that employers:

• Perform a worker classification audit, and review all contracts with personnel.
• Notify any state agencies about corrections and changes to a
worker’s status.
• Discuss with legal counsel whether they should now also include them as employees for the purposes of payroll taxes, workers’ compensation insurance, federal income tax withholding, and FICA payment and withholding.

2. Wildfire safety regulations

Cal/OSHA issued emergency regulations that require employers of outdoor workers to take protective measures, including providing respiratory equipment, when air quality is significantly affected by wildfires. Under the new regs, when the Air Quality Index (AQI) for particulate matter 2.5 is more than 150, employers with workers who are outdoors are required to comply with the new rules. These include providing workers with protection like respirators, changing work schedules or moving them to a safe location.

3. Arbitration agreements

Starting Jan. 1, the state will bar almost all employee arbitration agreements. AB 51 bars employers from requiring
applicants, employees and independent contractors to sign mandatory arbitration agreements and waive rights to filing
lawsuits if they lodge a complaint for discrimination, harassment, wage and hour issues. Businesses groups sued to overturn the law on the grounds that it is preempted by the Federal Arbitration Act.

4. Overtime rules

New federal overtime regulations are taking effect for non-exempt workers. Under the new rule, employers will be required to pay overtime to certain salaried workers who make less than $684 per week – or $35,568 per year – up from the current threshold of $455, or $23,660 in annual salary.

5. Consumer privacy

Starting Jan. 1, under the California Consumer Protection Act, businesses that keep personal data of residents are required to safeguard that information and inform website users how their personal data may be used. The law applies to firms with $25 million or more in annual revenues or those that sell personal information as part of their business.

6. Return of the individual mandate

A new law brings back the individual mandate requiring Californians at least to secure health insurance coverage or face tax penalties. This comes after the penalties for not abiding by the Affordable Care Act’s individual mandate were abolished by Congress in late 2017. Starting in 2020, California residents are required to have health insurance or pay excess taxes. This will affect any of your staff who have opted out of your group health plan as it may mean they are going without coverage, unless they have opted to be covered by their spouse’s plan. If you have staff who didn’t enroll in your plan for 2020, they may have to wait until your group’s next open enrollment at the end of the year. That could force them to pay tax penalties.

7. New audit, X-Mod thresholds

The threshold for physical workers’ compensation audits for California policies incepting on or after Jan. 1 is $10,500 in annual premium, a drop from $13,000. This means that any employer with an annual workers’ comp premium of $10,500 or more will be subject to a physical audit at least once a year. On top of that, the threshold for experience rating (to have an X-Mod) has also fallen – to $9,700 in annual premium as of Jan. 1, from $10,000.

8. Harassment training partly pushed back

Employers with five or more workers were required to conduct sexual harassment prevention training for their staff by the end of 2019 under a California law passed in 2018. A new law extends the compliance deadline for some employers who had already conducted training prior to 2019. The original law, SB 1343, required all employers with five or more staff to conduct sexual harassment prevention training to their employees before Jan. 1, 2020 – and every two years after that. If you have never trained your staff, you should have done so in 2019.

But if you have, here are the new rules:
• If you trained your staff in 2019, you aren’t required to provide refresher training until two years from the time the employee was trained.
• If you trained your staff in 2018, you can maintain the two-year cycle and comply with the new Jan. 1, 2021 deadline. You did not have to repeat the training in 2019.

9. Hairstyle discrimination

A new law makes it illegal for employers to discriminate against employees and job applicants based on their hairstyle if it is part of their racial makeup. The CROWN Act (Create a Respectful and Open Workplace for Natural Hair), defines race or ethnicity as “inclusive of traits historically associated with race, including, but not limited to hair texture and protective hairstyles like braids, locks, and twists.” This new definition of race means that natural hair traits fall under the context of racial discrimination in housing, employment and school matters.

10. Reporting serious injuries

A new law broadens the scope of what will be classified as a serious illness or injury which regulations require employers to report to Cal/OSHA “immediately.” The new rules being implemented by AB 1805 are designed to bring California’s rules more in line with Federal OSHA’s regulations for reporting. It will mean that some injuries that were not reportable before will be, such as:
• Any inpatient hospitalization for treatment of a workplace injury or illness will need to be reported to Cal/OSHA.
• An inpatient hospitalization must be required for something “other than medical observation or diagnostic testing.”
• Employers will need to report any “amputation” to Cal/OSHA. This replaces the terminology “loss of member.” Even if the tip of a finger is cut off, it’s considered an amputation. As of yet, there is no effective date for this new law, as enabling regulations have to be written – a process that will start this year.


Workers’ Compensation – Bureau Recommends Further Rate Cut


Worker’s Comp Insurance rates will likely continue sliding in 2020 after California’s rating agency submitted its recommendation that the state insurance commissioner reduces the average benchmark rates by 5.4%. If the recommendation is approved, it will be the rate ninth consecutive decrease since 2015 (some years had two decreases), which has resulted in the average benchmark rate for all class codes falling a combined 45% since then. 

The Workers’ Compensation Insurance Rating Bureau, which makes the filing at least once a year, said average claims costs continue falling due to the effects of reforms that took effect in 2014.  The Rating Bureau tracks workers’ comp costs in the state and makes the recommendations for changing the benchmark rates, which insurers use to price their policies. Every class code gets its own rate, which will change depending on the trends in claims costs and numbers for that class code.

WHY RATES ARE FALLING – Rates are still declining because:

  • Old claims costs are less than expected.
  • Claims are being settled more quickly.
  • Drug costs continue falling sharply.
  • Fewer liens on claims are being filed.

Insurers use the benchmark rates as guideposts for pricing their own policies, but in the end, they can price the policies as they wish. On top of the benchmark rate, insurers will add surcharges for various classes or regions, and add on administrative costs to arrive at their own rates. Also, rates will not fall for all employers.

 

 

 

 

 

Rates depend on a number of factors, including an employer’s claims history and region. Policies in Southern California, for instance, are often surcharged because of the amount of cumulative trauma claims filed in the region.  The state insurance commissioner will hold a hearing on the rate filing on October 14, and then make a final decision on the rate change.

What to do

Just because rates have been falling, do not waver in your focus on safety.  Here are some mistakes to avoid:

Complacency – When your premium falls, it’s easy to shift focus away from workplace safety, injury management and cost containment to other business matters. This is a mistake and can cost you in additional workplace injuries.
Focusing on just premiums – Indirect costs – including overtime, temporary labor, increased training, supervisor time, production delays, unhappy customers, increased stress, and property or equipment damage – represent several times the direct cost of an injury.
Expecting rates to stay low forever – Rates are cyclical. The key is to ride the low rates for as long as you can through unwavering attention to workplace safety and claims management.
Chasing low rates – One benefit you have from working with us is continuity, and jumping ship to another broker just to save a few thousand dollars on your premium is not always a smart choice, particularly if the new brokerage is not involved in helping you keep claims costs low.

 

 


Workers’ Comp – New Experience Rating, Physical Audit Levels Set


Starting in 2020,  the threshold for California employers to be  eligible for experience rating (X-Mod) has been reduced by order of the state insurance commissioner. 

Commissioner Ricardo Lara in September approved the recommendations by the Workers’ Compensation Insurance Rating Bureau to lower thresholds for determining eligibility for experience rating and when a carrier needs to perform a physical audit of an employer’s payroll records.

NEW THRESHOLDS

Annual physical audit
As of Jan. 1, 2020: Any employer with $10,500 or more in annual premium.
Current threshold: $13,000 or more in annual premium.
Threshold for experience rating (to have an X-Mod)
As of Jan. 1, 2020: $9,700 in annual premium.
Current threshold: $10,000 or more in annual premium.

 

“Physical audit” is defined as an “audit of payroll, whether conducted at the policyholder’s location or at a  Remote site, that is based upon an auditor’s examination of the policyholder’s books of accounts and original payroll records (in either electronic or hard copy form), as necessary to determine and verify the exposure amounts by classification.”

The eligibility rating threshold is the amount of payroll developed during the experience period in each classification, multiplied by the expected loss rates for each class. If the total for all assigned classes is at or above the threshold, then the employer is eligible for an X-Mod.

Changes to dual-wage class codes

Lara also approved the Rating Bureau’s recommendations for changes to a number of construction dual-wage class codes. While most workers’ comp classes have one rate, in some classes the difference in claims costs between high- and  lowerwage workers is so great that a dual-wage  classification is needed.  In those cases, the workers above the threshold rate are assigned one rate, while those below that threshold are assigned a higher rate. The new thresholds are for 14 construction classifications, and any workers above the threshold will have a lower rate applied.


Worker’s Comp – Construction Dual-Wage Changes Ahead


The Workers’ Compensation Insurance Rating Bureau of California will recommend dual-wage threshold changes to a number of construction classifications for the 2020 workers’ compensation policy year.

The Rating Bureau will make the recommendations to the Department of Insurance during its annual rate filing in June. The recommendations would have to be approved by the state insurance commissioner.

While most workers’ compensation classes have one rate, in some classes the difference in claims costs between high- and lower-wage workers is so great that a dual-wage classification is needed. In those cases, the workers above the threshold rate are assigned one rate, while those below that threshold are assigned a higher rate. This is usually because the higher-wage workers are generally more experienced and tend to suffer fewer workplace injuries compared to those below the threshold.

There are 18 dual-wage classes, but not all of them are in line for changes. Opposite is the list of changes the Rating Bureau plans to recommend in its rate filing.

 


Keep Injured Staff in Loop to Reduce Claims Costs – Workplace Safety


THE KEY to getting injured employees back on the job and reducing litigation is keeping them engaged and educating them, so they have a better understanding of the claims process and what they can expect from it. Employers that advocate for the injured worker, instead of just giving them the standard booklets on what to expect, can help them heal up enough to integrate back into work.

Also, by keeping injured workers in the loop, you reduce the chances that they will seek out legal counsel for their claim, at which point it can spiral out of control for the employer. The trend among forward-thinking employers is to use a few techniques for improving satisfaction among their injured workers, which in turn leads to lower claims costs.

Early treatment

Getting an early and accurate diagnosis and putting the injured worker on a treatment plan greatly helps them recover faster – and it prevents the misuse of medicines. This fast-track – or sports medicine – approach has the added effect of letting the employee know they are valued and that the employer cares about their swift recovery.

Speak openly

Once an employee is off work for a workers’ comp claim, they can easily start feeling disaffected and lost, particularly if they are left out of the loop about their claim. If you at any point plan to discuss the claim, the injured worker should be included. This is important because some injured workers mistakenly believe their job is at risk after filing a claim.

Unfortunately, their treating physician and the claims adjusters will often not have the time to talk to the injured worker. Your H.R. manager can keep them engaged through education and explaining the processes.

Advocacy

Some employers have also taken steps to advocate for their injured employees through the workers’ comp process and representing their interests before the claims adjuster.

Employers who have had the best success sit down with the injured worker as early as possible to lay out the entire process for them, from the first doctor’s visit to what to expect when dealing with the claims adjuster.

The main reason injured workers hire attorneys is that they don’t understand what’s going to happen and they don’t understand the workers’ compensation process. Acting as an advocate for the injured worker, and holding their hand through the process, will go a long way to easing their fears.

Monitor and explain treatment

The proactive employer will stay in touch during treatment and help the worker monitor their process. If the employer is engaged, the injured worker is more likely to stay on track with the treatment regimens prescribed by the doctor.

This may involve coordination with the treating physician so that any physical rehabilitation is done with their job responsibilities in mind. A good therapist can also explain why certain exercises are necessary for the injured worker.

Also, urge the rehab center and the claims adjuster to ensure that the injured worker sees the same therapist every time.

Stay engaged

Some employers communicate with the treating physician, claims adjuster and injured worker about the possibility of the individual coming back to limited or restricted duty.

Just remember, your engagement with the injured worker must be done in a way that best meets the person’s needs.

Also, if there is friction between the worker and a superior, make sure it’s not their superior that’s engaging with them during this process. You don’t want any undue stress on the injured employee during this sensitive and critical period.
Knowing the employer is concerned about their wellbeing, and is looking forward to their return, can aid recovery.


WORKER’S COMP – Most Common Audit Mistakes: What to Look For


No company owner wants to undergo a workers’ compensation audit, but they are a fact of life if you run a business and have employees.

Unfortunately, many audits don’t go smoothly and sometimes your insurer may make mistakes. Missouri-based Workers’ Compensation Consultants, which helps employers through the audit process, recently listed the 10 most common audit mistakes insurers make.

The list highlights a common problem and how you can detect the mistakes. Insurance companies allow you to review the audit with your broker. If you have received an audit bill that is obviously overstated, you should contact us.

Here are the things to look for when reviewing an audit by your insurance company:

Wrong class code – Misapplication of job classifications occurs in many audits. With hundreds of job classes to choose from, mistakes can happen. Talk to us and review your old policies to see if any of your class codes have
changed.

X-Mod is changed – After your insurer finishes the audit, it will use the information to calculate your premium. When that happens, it has to include your X-Mod to get the right rate. But sometimes the insurer may use an incorrect X-Mod.

Subcontractors are counted – Sometimes insurers will include subcontractors as employees, which results in a new audit bill to account for the additional “employees.”

But if they are genuine subcontractors, they should not be counted. Often, uninsured contractors will be included as employees.  Make sure to use insured contractors only.

Disappearing credits – Most policies will have some sort of premium credits or other modifiers. Sometimes during audits, the insurer will remove them when recalculating the premium they think you owe. Watch out for missing credits and other modifiers if you get an audit bill, like:

  • Premium discount
  • Schedule credits
  • Deductible credits
  • State-specific credits

 

Audit worksheets missing – If the auditor fails to provide you with audit worksheets, which are used do compile your payroll and other audit information, you should ask to check their work.

They will provide you with the information you need to carry out such a check.

Your rates changed – The rates you are charged at the beginning of your policy period must remain the same for the entire period. If your base rates have changed, the insurer may have made a mistake.

Separation of payroll – Depending on your industry, you may or may not be able to split your employees’ payroll between job classifications (like cabinet installers and sheetrock hangers). This is a pinch point when errors can occur. If the auditor says you are not allowed to split job classifications even though you have in the past, your audit may be in error.

Unexpected large premium due – If you get a significant bill for your insurance company after your audit, the auditor may have made mistakes, particularly if you know that your employment has remained relatively stable and you’ve had no significant claims, if any. If it seems out of whack, call us.

Payroll data doesn’t match – If there is a discrepancy between your payroll data and what you see on the audit, a mistake may have been made. Try to match the payroll on the audit with that generated from your accountant. If the insurer made a mistake, you could end up paying for phantom payroll numbers.

No physical audit – There are three types of audits:

  • Mail audit
  •  Phone audit, and
  • Physical auditThe mail and phone audits are prone to errors, since neither you nor your staff likely have any experience in premium auditing. If you have a big bill after a mail or phone audit, mistakes could have been made.