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Consumer Advisory: Temporary Rule Changes for Workers’ Compensation Insurance

​BALTIMORE – On March 5, 2020, Governor Lawrence J. Hogan, Jr. declared a State of Emergency for the entire State as a result of the COVID-19 virus. As a result of this event, Maryland’s business community, including small, medium and large employers, are facing unprecedented operational and financial challenges. This week, the Maryland Insurance Administration (“Insurance Administration”) reviewed and approved a filing from our authorized workers’ compensation (“W/C”) rating organization, the National Council on Compensation Insurance (“NCCI”). Please take note of the following important information:

In recognition that W/C policies are priced based on the employer’s estimated and audited actual payroll amounts, the Insurance Administration issued Bulletin #20-20 on April 13, 2020 encouraging insurers to adjust premiums mid-term as needed to reflect reductions in payroll and provide attendant premium relief. The Insurance Administration also interacted with NCCI regarding the need to revise W/C rating rules in order to exclude payroll from premium calculations for employees that are being paid by an employer but are not working at all due to the COVID-19 crisis. As a result, NCCI filed and the Insurance Administration has approved changes to the Statistical Plan for Workers’ Compensation and Employers Liability Insurance (“Statistical Plan”) and the Basic Manual for Workers’ Compensation and Employers Liability Insurance (“Basic Manual”).

These temporary rule changes allow for the exclusion of payroll for workers who are not performing any employment functions but are still being paid by the employer. The rules specify that the employer must be able to document this payroll segment in order to exclude such payroll amounts. All employers that are paying salaries to furloughed employees during the current State of Emergency should keep accurate and verifiable records of such payments. Employers with qualifying payroll should notify their W/C insurance producer (agent) or insurer and be prepared to document these payments in order to reduce the amount of payroll subjected to premium calculation.

These rule changes are presently in effect from March 1, 2020 through December 31, 2020.  However, the termination date of these changes may be moved forward or backward in time as future developments warrant. Please contact the Associate Commissioner for Property & Casualty, Robert Baron (Robert.Baron@Maryland.gov / 410.468.2353) with any questions concerning this Consumer Advisory. 

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