The Workers’ Compensation Insurance Rating Bureau has a problem. Its ‘conventional thinker’ style is on full display during a time the industry – more importantly, the employers of California — need creativity or at least innovation. The Bureau needs a new way to look at an old process. This commentary offers that solution.
Don’t get me wrong, the Guys & Dolls over at the Bureau are highly intelligent. But they are also traditional and linear thinkers – actuarial types – numbers, formulas, process, process, process. And they can’t seem to keep themselves from doing things the way they always have.
But first, a little background.
California’s Bureau is starting work to create a telecommuter classification, 8871. It is certainly no new idea. At least 35 other jurisdictions already have the class and have had it for many years. And all those other states have a rate that is significantly lower than 8810 – Clerical Office Employees. Overall the average is 56% lower, as is shown in the chart.
Bureau officials intend to make the new to California 8871 class effective in 2021. But it intends to apply the rate for 8810. Workers’ Comp Executive thinks the new class too late, and the rate is far too high.
The California Bureau doesn’t want to learn from the experience of other states. No, it’s going to do things the old way. Establish the class, charge based upon another class, and spend years analyzing the results only to come out with an individual rate for the class years later. Creating a new class usually takes it three to five years. Here’s how the Bureau explains it:
“The expectation is that as data for 8871 comes in eventually in the years ahead, these classifications would have their own individual rates, but initially, they would be matched to that of 8810.” That’s WCIRB’s Brian Gray, a fine insurance guy, who oversees the administration of the Bureau’s classification system.
Acknowledging that other states have a lower rate for the telecommuter class, Gray maintains that “in California, we would not be able to identify any specific data for telecommuter employees at this time…we would need to monitor it on a going-forward basis.”
Just how many years of monitoring will it take to issue a rate? The Bureau isn’t embarrassed and freely admits that it would be the mid-2020’s before 8871, and 8810 are rated separately.
WCIRB chief actuary Dave Bellusci joins Gray in the linear thinking. “This is proposed to be for 2021, so it would be several years out there before we’d actually get unit stat data,” says. “We might explore trying to do something earlier, but absent that, with the first USRs that would go into the rate-making with the 2021 experience, we are really talking about four years out.”
The Solution Is Not That Difficult
It seems simple, and the evidence supports a different process this time.
The Bureau should file the class 8871, retroactive to January 2020. Unit stat reporting could be optional for carriers for 2020, but mandatory as of January 2021. Note that under California law, any carrier is free to invent any class (or use 8871) and use it with its own rates as long as unit stats are reported under a Bureau code.
But stopping there doesn’t serve the state or the economy well. The Bureau should file a rate that is 50% of the clerical 8810 rate. It would require creativity and change in process. As evidenced by NCCIs data for clerical, telecommuting, and dare I say computer programing, which is about 20% of the clerical rate, the actuarial evidence is already quite clear: Telecommuters have fewer claims. Let’s face it; the only way the other states get to their rate is by results and experience.
I propose the good folks at the California Bureau take a small leap of faith in the other state’s data, file the rate at 50% of clerical, and make adjustments as necessary as the results indicate. Anyone can plainly see by the other states results that rate changes in the future won’t be significant. So why wait four long years to create a rate that is badly needed right now in a suffering economy. It is not only fair but the right thing to do.
It is an equitable solution for both California’s carriers and employers. It would be a Bureau first, and it would indicate the Bureau is capable of innovative thinking on behalf of the real users of the system, California employers.
In all of Workers’ Comp Executive’s stories about the Bureau, we use the following, “The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.”
Never has this been on fuller display, and rarely has it been more critical that the Bureau focuses on California’s employers.
Recent Comparison Of Rates For 8810 and 8871
|DISTRICT OF COLUMBIA||$0.06||$0.05||$0.01||83%|