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New Workers’ Compensation Rate Filing Expands COVID-19 Surcharge Tiers

The California Workers Compensation Insurance Rating Bureau has amended its 2021 rate filing to make its earlier recommended COVID-19 surcharge more equitable.

The Rating Bureau is leaving unchanged its overall recommendation that benchmark rates be increased an average of 2.6% for policies incepting on or after Jan. 1, 2021.

But it modified an earlier recommendation that a COVID-19 surcharge of $.06 per $100 of payroll be applied to all policies in favor of a six-tiered surcharge ranging from one cent per $100 of payroll for the least-risky sectors to a high of 24 cents for the riskiest. All sectors will be placed in one of six tiers depending on their relative share of COVID-19 claims that had been filed through the end of August.

The Insurance Department just wrapped up hearings on the rate filing in early October and will announce whether it approves the rate filing or makes changes.

Had the pandemic not hit, the Rating Bureau would not be asking for a rate increase, but a reduction of 1.5%. The Rating Bureau estimates that estimate that the cost of COVID-19 claims on Jan. 1, 2021 to Aug. 31, 2021 policies is 4.1%, or $0.06 per $100 of payroll to an average of $1.56 per $100 of payroll.

The benchmark rates (or pure premium rates) are published as guideposts for insurers to price their policies and insurers are not required to follow them, although most do to some degree.

While the Bureau earlier said it would not apply COVID-19 claims towards employers’ individual experience modifiers (X-Mods), the surcharge will apply to all employers, even those who have not seen any coronavirus-related illness claims.

Below is a list of the six different surcharge tiers and some of the NAIC industry class codes that would fit into each of them. (Please note that the two digits are the first two numbers of four-digit class codes and all class codes that start with those two digits will see the surcharge applied, unless otherwise noted with a four-digit code).

1 cent

  • Management of Companies and Enterprises (55)
  • Information technology (51)
  • Professional, Scientific, and Technical Services (54)

3 cents

  • Outside Sales (8742)
  • Finance and Insurance (52)
  • Clerical (8810)
  • Mining, Quarrying, and Oil and Gas Extraction (21)
  • Arts, Entertainment, and Recreation (71)
  • Real Estate and Rental and Leasing (53)

6 cents

  • Administrative Support and Waste Management and Remediation Services (56)
  • Wholesale Trade (42)
  • Construction (23)
  • Educational Services (61)
  • Manufacturing (31)
  • Other Services (except Public Administration) (81)

12 cents

  • Public Administration (92)
  • Retail Trade (44)
  • Transportation and Warehousing (48)

18 cents

  • Accommodation and Food Services (72)
  • Agriculture, Forestry, Fishing and Hunting (11)

24 cents

  • Healthcare and Social Assistance (excluding Physicians, Dentists, and Daycare) (62)

The surcharge in many cases amounts to a roughly 30% increase over the indicated rate without a specific surcharge.

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