Many States Offer Temporary Work Comp Classification Reductions During Pandemic

During the pandemic, insurance laws in many states are allowing employers to reclassify employees who normally work in higher rated workers comp classes as clerical or other lower classifications. Workers compensation premiums are based mainly on the classifications that apply to a business’s workers. For example, office workers are classed with low rates; roofers with high rates. During the pandemic, however, many workers, including those in higher risk classifications with high rates, are not engaged in those activities.

What should a business do? If you drop those workers from your workers compensation rolls completely, you won’t be providing any coverage. Remember in almost all states you still have an obligation to provide workers compensation benefits regardless of whether you as an employer carry workers compensation insurance. The degree of risk those employees face now may not be as great, but they can still incur injuries that require workers compensation.

The National Council on Compensation Insurance (NCCI), which acts on behalf of the workers compensation industry in 39 of the states, has made the following update to its Basic Manual rules to address the situation:

“The temporary interruption or suspension of normal business activities caused by COVID-19 may qualify as a change in operations. For example, if an employer continues to pay its employees while they are working out of their homes (telecommuting) rather than an office, carriers may consider a change from the employer’s governing classification to Code 8810 — Clerical Office Employees NOC or Code 8871 — Clerical Telecommuter Employees, or other appropriate classifications based on the duties of the employees while normal business operations are interrupted or suspended. Once normal business operations resume, appropriate classifications should be applied.”

It is up to the insurance commissioners in each state, however, to adopt these rules.

As a result, insurance commissioners in states such as California, Indiana and North Carolina, have promulgated regulations that permit employers to temporarily change worker classifications in recognition of the lesser degree of risk of many of their employees.

Some states, such as California, have gone further and indicated that losses from COVID-19 are not to be included in calculating experience modifications and other rating factors. A news release from the California Department of Insurance says:

“This new regulation will also 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. 

Insurers will also be required to report injuries involving a diagnosis of COVID-19 which will allow the Commissioner’s statistical agent — the WCIRB [Workers Compensation Inspection Rating Bureau] — 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.”

To further relieve employers of paying premiums on employees furloughed during the pandemic, some state insurance commissioners, such as California’s, have made additional changes. According to California Insurance Commissioner Ricardo Lara:

“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 premium for paid workers who are otherwise being furloughed.”

For more information or help about your workers’ compensation classifications and reporting requirements during the pandemic, please contact the Insurance professionals of EPIC’s CRA ProRental™ Insurance Program: 800.234.6363.