COVID-19 has taken the world by storm and changed the way we live our day to day lives. New questions surrounding the pandemic and insurance emerge daily, while changes to the insurance landscape loom.
With more and more employees being forced to work from home, NCCI has provided guidance on how to classify employees while they do so. Employers can change the classification of their employees to a Clerical Telecommuter Employee, 8871, which has a rate range of $0.03 to $0.14 across the NCCI states. If this class code is lower, the employer will have the option and be responsible for maintaining separate payroll records to reflect these changes to lower their current premium. We realize the need for many is right now, so it is worth noting that these premium savings will not be realized until the time of audit, unless the carrier accepts a reduced payroll endorsement.
NCCI also proposed a rule change for employers that are still paying employees even though they are not working. In this proposed rule change, this payroll will not be used in the calculation of premium. Again, this will be the employer’s responsibility to maintain the separate payroll to reflect this. Another key point will be determining the retrospective aspect of this proposed rule. Many employers have sent home employees already. It will be important to watch if the NCCI states pass the rule with a retrospective feature, which would allow employers to capture the entire qualified payroll period, including the time prior to the effective date of passage for this proposed rule. Please note that this is a possible rule change and is awaiting approval by the State Insurance Commissioners. We don’t control the approval or execution of this proposed rule, but historically when NCCI suggests a rule of this type, it is approved by the NCCI states. This proposed rule is also just for NCCI states, although we are seeing state funds also adopt this rule.
While this proposed rule change and the reclassification of employees would save employers in the short-term, the long-term effect this could have on experience modification calculations remains to be seen. The lower submitted payroll and less expensive class code would both adjust the modification calculation and result in lower expected loses. The employees being home, working or not, should lead to less actual losses for the same time frame, but there are still two other years on the worksheet and since the experience mod basically uses a three-year average, this could lead to increases in experience modification factors. To be best prepared for this situation, contact your AssuredPartners team to run an analysis on possible mod impacts.
To stay up to date with the latest COVID-19 WC changes by each state, click here. This link will be updated as changes are accepted and approved at the state level for WC.