More than three years into the pandemic, much has changed relative to the general US population and the workers compensation environment. The National Council on Compensation Insurance (NCCI) proposed two workers compensation insurance countrywide item filings, E-1410 and B-1447, on February 1, 2023. These filings propose an expiration date of June 30, 2023, for the special treatment of COVID-19 (coronavirus) reporting rules and claims.
For a better understanding of the proposed changes for Item E-1410, please review the following Frequently Asked Questions (FAQs).
1. What is the change?
Item E-1410 proposes revisions to NCCI manual rules related to the reporting of COVID-19 (coronavirus) claims and their inclusion in experience rating calculations and merit rating plans (where applicable).
Item E-1410 proposes revisions to the rules to:
- Establish an end Accident Date of June 30, 2023, to Extraordinary Loss Event (ELE) Catastrophe Number 12 for the reporting of claims attributable to COVID-19 (coronavirus)
- Include claims attributable to COVID-19 (coronavirus) with Accident Dates on and after July 1, 2023, in experience rating calculations, except in Illinois, and merit rating plans (where applicable)
- Report COVID-19 (coronavirus) claims to ELE Catastrophe Number 12 only if these claims have Accident Dates between December 1, 2019, and June 30, 2023
- Exclude COVID-19 (coronavirus) claims from experience rating calculations and merit rating plans (where applicable) only when these claims have Accident Dates between December 1, 2019, and June 30, 2023, and are reported with ELE Catastrophe Number 12
Note: In Illinois, claims attributable to COVID-19 (coronavirus) will continue to be excluded from experience rating calculations after June 30, 2023. However, ELE Catastrophe Number 12 will not be reported after June 30, 2023.
2. Why is it being done now?
In response to the COVID-19 pandemic, NCCI manual rules were revised to exclude COVID-19 (coronavirus) claims from experience rating calculations and merit rating plans (where applicable) when these claims have Accident Dates beginning with December 1, 2019.
NCCI is filing to update manual rules in recognition of the following:
- The workforce will likely be living with COVID-19 for the foreseeable future
- Claim data now suggests that COVID-19-related experience will reflect more typical claims activity
- COVID-19 losses are expected to continue into the future, they are no longer a novel peril in workers compensation
- The special treatment of COVID-19 claims was intended to be temporary
NCCI is recommending that COVID-19 claims with Accident Dates on and after July 1, 2023, be included in the experience rating calculations, except in Illinois, and merit rating plans (where applicable).
3. Why is NCCI no longer considering the COVID-19 pandemic a catastrophic event?
Early in the pandemic, there was much uncertainty about COVID-19 itself, as well as how it would impact workers compensation (WC) claims.
From an actuarial perspective, during that time of significant uncertainty, it was appropriate to treat COVID-19 as a catastrophe until typical claim activity could once again be expected. Now that typical claim activity is expected, it is important to reintroduce the incentives that motivate employers to promote safety in their workplaces. This can be accomplished by including COVID-19 claim experience in experience rating going forward.
4. What evidence is NCCI relying on to make this change?
NCCI performed analyses comparing WC COVID-19 claims to total COVID-19 cases in the general population. In 2020, there was a fairly strong relationship between WC COVID-19 claims and the surges in US COVID-19 cases. However, as we moved into 2021 and 2022, the level of WC COVID-19 claims did not match the intensity of the surges in total COVID-19 cases brought on by new variants.
WC claim data now suggests that COVID-19-related experience will reflect more typical claims activity.
5. What if there is another surge?
The workforce will likely be living with COVID-19 for the foreseeable future.
At the start of the pandemic, there was a lack of guidance on workplace safety measures (social distancing, temperature readings, face masks, and sanitizing), effective treatments, COVID-19 testing, and COVID-19 vaccines. There was also a shortage of personal protection equipment (PPE), and there were widespread lockdowns and business closures. NCCI is treating COVID-19 claims from this period as catastrophic.
The increase of vaccines, prior infections, PPE, and other safety measures allows employers to manage the illness, and recent surges have not resulted in a large volume of workers compensation COVID-19 claim activity. COVID-19 claims no longer require special treatment and should be treated like other workers compensation claims in the experienced rating calculation.
6. Does the January 30, 2023, official Presidential statement planning to extend and end the 2020 COVID-19 national and public health emergency declarations on May 11, 2023, impact Item E-1410?
No. The official Presidential statement announcing the anticipated lifting of the 2020 COVID-19 emergency declarations complements the support provided in Item E-1410. This item states it is reasonable to expect that COVID-19 claims will continue, and further recognizes that prevention measures such as vaccines, widespread availability of PPE, accessibility of testing, and effective treatments for infected persons are now in place. The emergency declarations’ planned end date of May 11, 2023, supports NCCI’s filing effective date for including claims attributable to COVID-19 (coronavirus) with Accident Dates on and after July 1, 2023, into experience rating calculations.
7. Did NCCI engage in any modeling since the start of the pandemic to validate the predictability of claims?
The handling of catastrophic exposure requires special handling in experience rating given the infrequent and random nature of those extraordinary events. NCCI excludes catastrophe-related data from our methodology and the determination of classification experience because those events are not considered to be predictive of future experience. NCCI considers an event to be catastrophic when reported incurred losses exceed $50 million on a countrywide basis.
As stated in the Actuarial Standards of Practice No. 39 Treatment of Catastrophe Losses in Property/Casualty Insurance Ratemaking, “the presence or absence of catastrophes in any historical data used to form future cost estimates can create biases that diminish the appropriateness of using that data as the basis for future cost estimates.” Since pandemics have not previously been contemplated as a catastrophic event and COVID-19 resulted in losses in excess of $50 million, NCCI recently consulted with an expert catastrophe loss modeling firm to model the impact of pandemics on workers compensation system costs.
No other perils were recently modeled but should still be contemplated as possible catastrophic events with exposure to workers compensation system costs.
8. Who will likely be impacted by the change in experience rating modifications?
Experience rating modifications for employers in states with presumptions will likely be impacted more than experience rating modifications for employers in states that do not have presumptions.
9. Does NCCI have a list of states with presumptions?
10. Where is this item being filed?
Item E-1410 is being filed in all NCCI states (includes AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, KS, KY, LA, MD, ME, MO, MS, MT, NE, NH, NM, NV, OK, OR, RI, SC, SD, TN, TX, UT, VA, VT, and WV) and will be recommended to the following independent bureau states for their consideration: IN, MA, and NC.
Refer to Illinois Exhibit 4 of Item E-1410 for a new Illinois
Experience Rating Plan Manual exception to Rule 1-C-3. 820 ILCS 331/1(g)(5) states: “Under no circumstances shall any COVID-19 case increase or affect any employer’s workers’ compensation insurance experience rating or modification, but COVID-19 costs may be included in determining overall State loss costs.” Therefore, claims attributable to COVID-19 (coronavirus), beginning on Accident Date December 1, 2019, with no end date, will continue to be excluded from experience rating calculations in Illinois.
11. Which NCCI manuals are impacted by Item E-1410?
Experience Rating Plan Manual Rule 1-C-3 is impacted.
Revisions to the state-specific merit rating plans (where applicable) impact the following manuals:
Residual Market Manual
Experience Rating Plan Manual
Statistical Plan rules are impacted:
- Loss reporting rule for ELE Catastrophe Number 12—COVID-19 (Coronavirus) Pandemic
- Loss reporting rule for coronavirus claims attributable to COVID-19 with Nature of Injury Code 83–COVID-19 and Cause of Injury Code 83–Pandemic, when these codes apply
12. When will the proposed changes in Item E-1410 become effective?
Item E-1410 is proposed to become effective for:
- new and renewal policies with effective dates on and after July 1, 2023, and
- any in-force policy in effect on and after July 1, 2023.
13. Does Item E-1410 apply to residual market policies in NCCI states?
Yes, the proposed changes in Item E-1410 apply to voluntary market policies in NCCI states and residual market policies in NCCI states where NCCI is the Plan Administrator.
14. What would happen if a claim was reported with Catastrophe Number 12 with an Accident Date on or after July 1, 2023?
For data reported in NCCI states, Indiana, and North Carolina, a claim edit would apply indicating that the accident date is invalid.
15. Should I report Nature of Injury Code 83 and/or Cause of Injury Code 83 after Catastrophe Number 12 expires?
Yes, these codes will continue to be available. For COVID-19 (coronavirus) claims, Nature of Injury Code 83—COVID-19, and if applicable, Cause of Injury Code 83—Pandemic when the description of Pandemic applies, must continue to be reported after ELE Catastrophe Number 12 expires.
16. Will NCCI continue to collect COVID-19 data?
17. For NCCI states and Indiana, what will the reporting requirements be for Unit Statistical Data?
With the proposed changes in Item E-1410, claims attributable to COVID-19 (coronavirus) with Accident Dates on or after 7/1/2023:
- Must not be reported with ELE Catastrophe Number 12
- Must be reported with Nature of Injury Code 83—COVID-19
- Are reported with Cause of Injury Code 83—Pandemic, only when the definition of pandemic applies to these claims
In general, the section in the Act on Emergency Paid Sick Leave (EPSLA) provides that an eligible employer will provide an employee with paid sick time if the employee is unable to work or telework for reasons stated in the Act such as:
- ELE Catastrophe Number 12—COVID-19 (Coronavirus) Pandemic
- Nature of Injury Code 83—COVID-19
- Cause of Injury Code 83—Pandemic
18. What will the reporting requirements be for Financial Call data?
ELE Catastrophe Number 12 will end with an Accident Date of 6/30/2023 and will reflect an updated Accident Date period of 12/1/2019 through 6/30/2023.
For Call #31—Large Loss and Catastrophe and Call #33—Virginia Coal Mine Large Loss and Catastrophe, the reporting of specific ELE Catastrophe Number 12 claims will include Accident Dates through the 6/30/2023 end date. Claims with Accident Dates in 2023 will first be reported in the 2024 reporting season for Calls valued as of December 31, 2023.
19. What is the overall impact of Item E-1410?
Based on the July 1, 2023, Accident Date, ratings effective beginning July 1, 2024, and subsequent have the potential to be affected by COVID-19 claims being reported without Catastrophe Number 12 and included in the experience rating modification calculation.
Note that the earliest policy effective date under which COVID-19 claims could be reported without Catastrophe Number 12 is June 16, 2022.
Experience Rating Plan Manual Rule 1-B-5 requires that a policy of one year and 16 days be treated as a one-year policy.
Experience Rating Plan Manual Rule 2-E-1-a states that experience used in a rating is not less than 21 months before the rating effective date and not more than 57 months before the rating effective date. Based on these rules, the proposed changes have the potential to impact affected employers with experience rating modifications with rating effective dates of March 16, 2024, and later. To the extent that affected employers incur any COVID-19 claims on or after the Accident Date of July 1, 2023, the experience rating modifications will include such claims for those employers. However, the ratings with potential COVID-19 claims exposure before July 1, 2024, are estimated to be less than 0.1% of all experience rating modifications.
20. In NCCI states (excluding Illinois) and Indiana, what is the earliest Unit Report that could impact an experience rating modification with an included COVID-19 claim?
Beginning with the Accident Date of 7/1/2023, policies with effective dates 6/16/2022 are the earliest that could have a COVID-19 claim reported with an Accident Date of 7/1/2023, and without ELE Catastrophe Number 12.
Basic Manual Introduction—Application of manual rules states that a policy issued for a period not longer than one year and 16 days is treated as a one-year policy. Policies with effective dates of 6/16/2022 could be issued within one year and 16 days and have a 7/1/2023 Accident Date claim.
For Unit Statistical Data reporting, policies with effective dates of 6/16/2022 are valued in December 2023 (18 months after the policy effective date), and due by February 2024 (20 months after the effective date). Therefore, the initial Unit Statistical Data reporting beginning with valuation in December 2023 will reflect this change.
Experience rating modifications with an effective date of 3/16/2024 is the earliest date that could include a COVID-19 claim based on a policy with:
- An effective date of 6/16/2022 and expiration date of 7/1/2023 (within one year and 16 days)
- A COVID-19 claim reported with an Accident Date of 7/1/2023, with Nature of Injury Code 83—COVID-19, and without ELE Catastrophe Number 12
21. How will this impact carriers and other stakeholders?
Carriers and other stakeholders need to review the specific changes proposed in this item to determine impact to their systems and processes.
22. Does Item E-1410 impact merit rating plans (where applicable)?
Yes, COVID-19 claims incurred on and after the Accident Date of July 1, 2023, will be included in merit rating plans (where applicable).