Through the Uprights

By: Mark Webb

It likely came as little surprise to anyone that Insurance Commissioner Ricardo Lara declined, again, to adopt the pure premium (“benchmark”) increase recommended by the Workers’ Compensation Insurance Rating Bureau (WCIRB). Instead, he held to the existing overall average rate of $1.45 per $100 of payroll. Or, to state it exactly as the Commissioner’s announcement states, his decision, “maintains the benchmark rate at $1.45 per $100 of payroll for workers’ compensation insurance unchanged from last year and within the reasonable actuarial range proposed by other experts, effective September 1, 2022.”


That “reasonable actuarial range” recently has been somewhere between the recommendation from the WCIRB and the recommendation from the firm used by the public members of the WCIRB’s Governing Committee to independently analyze pure premium rate filings. In between often falls the actuarial opinion from the Department’s own actuaries. From a practical standpoint, there is little, if any, concern to be expressed if the Commissioner makes a decision that falls between the two. In other words, there is no real alarm unless the Commissioner does not put his decision between the uprights if you will forgive the extended football metaphor. (Spoiler alert – it will get worse before then end of this commentary.)


There are troubling questions to be raised by the Commissioner rejecting the idea that going forward COVID-19 experience should be included in the calculation of a business’s experience rating and as losses for pure premium calculations. If COVID is going to be a community exposure – which frankly it has been since February when the Governor rolled out his SMARTERx Plan – then just like any other communicable disease its compensability should be determined by identification of a peculiar risk – such as health care workers or other classifications of employment which have demonstrated a high rate of infections – and the resulting claims experience should be reflected in experience rating and pure premium.


The effect of COVID on the workers’ compensation system goes well beyond whether and how to count claims experience for purposes of insurance rate making. Job losses in lower-paying jobs during the pandemic had as one unintended consequence an increase – a considerable increase – in the statewide average weekly wage because higher wage earners kept more of their jobs during that period. Under California’s calculations, the maximum wages for purposes of temporary disability (TD) is tied to increases (not decreases) in the statewide average weekly wage.


Then there are the ubiquitous post-termination cumulative trauma claims.  Does it come as a surprise that there is an increase in frequency of CT claims in occupations having the most job losses during the pandemic?


And long COVID’s impact on the system has yet to be fully understood. As noted at the website “Understanding and Addressing the Workplace Challenges Related to Long COVID” sponsored by the U.S. Department of Labor’s Office of Disability Employment Policy, some people who had COVID-19 go on to experience new or lingering symptoms—a condition called long COVID. In these cases, symptoms can last weeks or months and can include shortness of breath, fatigue, brain fog, heart palpitations, headaches, anxiety, depression, and other symptoms.


Are we really saying that for experience rating and pure premium purposes these symptoms, if an occupational injury or illness, should be treated differently from an insurance regulatory standpoint in 2023 based on whether it is from long COVID?


Commissioners have, since 1993, been quick to advise the public that, as is stated in the last Department Press Release, “The pure premium rate is only advisory, as the State Legislature has not given the Commissioner rate setting authority over workers’ compensation rates.”


So, as long as the Commissioner kicks these decisions through the actuarial uprights and insurers can price according to risk, the game goes on.


Note: The opinions expressed herein may or may not be those of Workers’ Comp Executive. Mark Webb is a former Arizona insurance regulator, insurance company chief compliance officer, and is an expert in corporate governance, risk and compliance. He is the owner of Prop 23 Advisors.