COVID-19 Update April 16, 2020

Quick story before I get into the info to share today. When all this coronavirus pandemic shut down started, I woke up one morning to put on my eyeglasses and the arm broke off. The eye doctor said they could not fix them until May 1st at the earliest and suggested I go online.

I do my research and find a good place called Glasses USA to order my new eyeglasses. It looked like they would be fast and relatively inexpensive. I received my glasses today – a full 3 weeks later. I found out why it took so long — they were shipped from Thailand!

So much for glasses from USA! (I did spray them before I touched them, just FYI.)

I’m sure you’ve already heard that the SBA has closed the PPP loan application process and is out of money for that program. New funding is supposed to be approved through the Congress when they get back in session. We had heard that there may be an executive order coming down that would allow companies to continue submitting applications pending approval of additional funds for this program; however, that has not happened yet.

Today was a day about workers’ compensation. We have some potentially good news and bad news and lots of questions about the future of workers’ compensation.

Potential good news:
The California legislature has passed a law mandating that all premiums for Business Insurances be refunded for the months of March and April 2020. Of course, the Insurance Companies are fighting this, especially for workers’ compensation. We shall see if other states follow California’s lead on this refund process.

In Wisconsin, they have passed legislation that allows companies to submit payroll for all employees paid but not working. This will be tracked through a separate work comp code, 0012. This code is specific for tracking employees paid but not working, and the rate for work comp for this code is zero.

This is significant because Wisconsin is notorious for leading the country in Workers’ Compensation laws and rules. Many states have followed suit already. We are suggesting whether or not your state has passed this, that you track the employees paid for doing nothing so you can show your carrier at the audit. Hopefully, all states will make this change and you will not have to pay for the coverage during the term you paid employees for doing nothing.

Now for the bad news:
Last week, Illinois passed a law that if any first responder gets COVID-19 disease, it will be automatically assumed that it happened while on the job, and it is to be handled as a paid claim for workers’ compensation.

Then this week, they expanded the law to all essential workers. This has already expanded into the following states: California, Florida, Michigan, Minnesota, South Carolina, South Dakota and of course Illinois. This is not good for the workers’ compensation industry; however, all health insurance companies are jumping for Joy!!!

Ramifications:
The insurance industry lives or dies on actuarial data. It will be 6-9 months before any data will be available for the industry to review all the facts on death, disability, and incapacity or isolation costs. Every state differs on how they pay claims. If a person dies on the job, one state in the northeast may pay out $350,000, whereas another state may pay $125,000. The same thing goes for permanent disability due to loss of lung capacity, or other any other long-term disability.

This is all before we even get to mental health issues due to COVID-19.

All these costs are being moved to the workers’ compensation carriers. At the same time, they are telling the carriers to return premiums or not charge premiums at all. Obviously, in the long term, this is not sustainable.

So here is what will likely happen: Carriers will go insolvent or declare bankruptcy. There is no way they can pay all these claims without collecting any premium. Most states have put a moratorium on any rate increases or policy cancellations until July or later. When the carriers must start paying all these claims, they are going to need to have their own bailout from the government.

Get ready now for your renewal. It’s going up!!! Be prepared now! The workers’ compensation market is about to turn very hard and very fast.

What is a hard market?

A hard market is when there is more demand than there are carriers, so rates go up. Certain industries are going to have a hard time getting coverage. One major carrier, Summit, sent out a moratorium today to all its brokers. No more new policies for healthcare workers until further notice. Industries with lots of exposure like this are going to have a hard time finding coverage starting soon.

Not good news for businesses, so please be prepared for what is coming for your insurance coverage.

Today’s Attachments:

1. Business Disruption: Layoffs & Partial Terminations of Retirement Plans – this is information from our 401k consultant that covers rules regarding “partial termination” of an employer’s retirement plan.
2. NCCI Current COVID-19 Accommodations – this is a list of different laws that have been changed for work comp by state, of course, this is only through this morning.
3. State Disability Laws – Several States have their own laws on disability, and this is part of payroll taxes, this goes into how COVID-19 is affecting them.
4. State EOS – NAPEO (our industry association) put together this great spreadsheet for keeping up with all the various changes in laws by state. This is current as of 04-14-20.
5. P & N Debt Forgiveness Webinar slide deck – This is good information about the PPP debt forgiveness and what we know as of today.

Sorry for the length of the post but there is so much that changes daily, our hope is to keep you informed as much as possible. If anyone has any questions about any of this information, please don’t hesitate to reach out to me or any of the Delta team. We are here to help!