Flash Report: COVID-19 Premium Surcharge Changes

The Workers’ Compensation Insurance Rating Bureau’s Actuarial Committee just approved amending its filing for 2021. The per-class COVID-19 surcharge that it is recommending to be added to pure premium rates is changing. The Bureau’s Governing Committee is expected to make the adjustment official when it meets in the morning.

The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.

The planned changes do not materially affect the industry-wide COVID-19 charge but would have a considerable impact on various classes. Overall, the proposed surcharge takes what would be a recommendation for another rate decrease to a proposed 2.6% average increase in rates for 2021.

However, the planned changes call for increasing the number of tiers from four to six to allow for more differentiation in the surcharge based on each sector’s exposure to COVID-19 claims.

The Bureau originally said that claims from the pandemic would not apply to X-Mods.  But a surcharge is effectively a charge to every employers’ X-Mod no matter how large or small the charge – or the employer. Surcharges affect all employers – even employers who have had no claims and have no X-Mod. Even small computer programming firms where all employees work at home – and therefore are not subject to the presumption – get surcharged.

The filing currently includes surcharges of 2 cents, 6 cents, 12 cents, and 24 cents. Under the revised proposal, the Bureau would instead use charges of 1 cent, 3 cents, 6 cents, 12 cents, 18 cents, and 24 cents (see chart below). Overall, the charges amount to roughly a 4% add-on across all industry sectors.

Health care sectors will still bear the brunt of the charges with the 24-cent surcharge, but physicians, dentists, and daycare centers would face surcharges at half that rate. The original proposal amounted to a 33% surcharge on the workers’ comp rates for physicians and dentists, but they would see a 16% increase under the planned revision.

The update is based on an additional month of data for COVID-19 claims.  The data show that health care’s overall share of claims decreases as more sectors of the economy get back to work. Officials noted that the accommodation and food services industry, in particular, showed an uptick in claims over the past month.

The committee also reviewed the industry’s second-quarter data but voted unanimously against making any changes to the rate filing based on that data.

The review noted significant anomalies due to the pandemic, including a sharp drop in claim frequency and activity but an uptick in case reserves that may be linked to medical treatment delays and return to work.

“There’s so much uncertainty it’s not useful,” noted Dave Bellusci, WCIRB’s chief actuary.

IndustryGroupCOVID-19 Surcharge
55 - Management of Companies and Enterprises10.01
51 - Information10.01
54 - Professional, Scientific, and Technical Services10.01
8742 - Outside Sales20.03
52 - Finance and Insurance20.03
8810 - Clerical20.03
21- Mining, Quarrying, and Oil and Gas Extraction20.03
71 - Arts, Entertainment, and Recreation20.03
53 - Real Estate and Rental and Leasing20.03
56 - Administrative Support and Waste Mgmt and Remediation Services30.06
42 - Wholesale Trade30.06
23 - Construction30.06
61 - Educational Services30.06
31 - Manufacturing30.06
22 - Utilities 30.06
81 - Other Services (except Public Administration)30.06
92- Public Administration40.12
44 - Retail Trade40.12
48- Transportation and Warehousing40.12
Physicians, Dentists, and Daycare40.12
72 - Accommodation and Food Services50.18
11 - Agriculture, Forestry, Fishing and Hunting50.18
62 - Healthcare and Social Assistance (excluding Physicians, Dentists, and Daycare)60.24