California Orders Workers’ Comp Carriers to Return Premiums Due to Stay-At-Home Orders

California Insurance Commissioner Ricardo Lara has issued an order adopting emergency workers’ compensation regulations in response to the COVID-19 pandemic.

The new regulations go into effect on July 1.

The regulations require insurance companies to recompute premium charges for policyholders to reflect reduced risk of loss consistent with Lara’s April 13 and May 15 bulletins, and will result in savings for many policyholders as businesses continue to struggle financially during the COVID-19 pandemic, according to the California Department of Insurance.

Lara’s latest bulletin in May extended his previous order requiring insurance companies to return partial insurance premiums to consumers and businesses amid the ongoing COVID-19 pandemic.

“California’s business owners have been hit hard by COVID-19,” Lara said in a statement. “Workers’ compensation premiums should reflect that many employees are performing less risky duties, and my order will provide some financial relief for employers when they need it most.”

The Workers’ Compensation Insurance Rating Bureau of California last month published estimated costs of allowing state workers to receive benefits for COVID-19 claims without proving virus exposure at work, dropping a prior mid-range estimate by $10 billion.

Under the emergency regulations, employers are permitted to reclassify an employee if the employee’s duties have changed to a clerical classification that has reduced risk than the employee’s previous classification.

This reclassification will reduce the employer’s premiums for employees who are a lower risk because they are now working from home even though they may not have previously done so. The change would be retroactive to March 19, the first day of the governor’s statewide stay-at-home order, and conclude 60 days after the order is lifted.

The emergency regulations also exclude from premium calculations the payments made to an employee, including sick or family leave, while the employee is not performing duties of any kind for the employer. Typically, these payments would be used as a basis for the employer’s workers’ comp premium. This change will lower the employer’s rate by reducing the amount of payroll assessed, and the employer will not pay premium for paid workers who are otherwise being furloughed.

This new regulation will also exclude claims related to a COVID-19 diagnosis from being included in future rate calculations so that employers are not penalized with higher rates due to COVID-19 claims.

Insurers will also be required to report injuries involving a diagnosis of COVID-19 which will allow the Commissioner’s statistical agent—the WCIRB—to keep track of COVID-19 injuries, and will aid in the WCIRB’s future analyses of the workplace and market impacts.

The amount of refund has not been calculated, Michael Soller, a deputy insurance commissioner for northern California, told Reuters. Insurers collected $11.4 billion in premiums in California last year.