Measuring a pandemic

Michael Pieciak, commissioner of the Department of Financial Regulation, discusses advice to business owners and evaluating the risk of COVID-19. With Vermont far ahead of adjoining states, what comes next?

BRATTLEBORO — At his May 1 press conference, Vermont Gov. Phil Scott announced additional loosening of the COVID-19 stay-home orders.

But even if businesses are allowed to reopen, will people feel safe enough (or have enough money) to patronize them?

Michael Pieciak, commissioner of the Department of Financial Regulation (DFR), said the trick will be providing businesses enough support so they can hang on until the economy fully reopens.

Pieciak, a former Brattleboro resident who has headed the agency since 2016, spoke specifically of Vermont's restaurant and hospitality industries, in response to questions around insurance sparked by a previous interview with two local restaurant owners [“Restaurateurs go from new dreams to total uncertainty,” News, April 29].

The DFR has answered a lot of questions from this industry since the governor ordered restaurants to suspend table service in mid-March.

The industry has been “uniquely hit” by this pandemic, said Pieciak, who hopes that in the next round of federal stimulus legislation the government will develop funding targeted to supporting restaurants and the hospitality industry.

Not all of the current funding supports - such as the Paycheck Protection Program and loans through the Small Business Association - will work for restaurants, he added.

This pandemic has created not only a health crisis but an economic one, Pieciak observed.

As a result, the question now is how Vermont will return to “a normal state” from both distinct crises.

Reopening the state will require “keeping an eye on the data,” he said, ensuring that hospitals don't become overwhelmed even after the governor lifts the state of emergency order.

Insurance and the virus preclusion

Pieciak has received a number of questions around insurance.

According to Jason Lively, the owner of Duo, his insurance company denied a recent business interruption claim because the downtown restaurant's closure was related to a virus.

Pieciak said Lively's experience is shared by restaurant owners nationally.

Most basic policies require physical damage by a “known item” such as a fire or flood, he said, adding that insurance companies in general don't factor into their premiums the cost of closing a restaurant because of something like COVID-19; consequently, business closure due to events like earthquakes, floods, war, nuclear radiation, or viruses are by default excluded from coverage.

Including such catastrophes in coverage would probably be cost prohibitive for both the insurance company and the restaurant, Pieciak said.

“It's really a lose/lose situation,” he said.

Pieciak added that since the cost of something like a pandemic was never factored into an insurance policy - and, consequently, excluded under the terms of the policy - the department can't force an insurance company to reimburse businesses.

There's nothing to pay out, he added.

The department's advice to restaurateurs has been to work with their respective insurance companies as much as possible. As a regulator, the department has worked with companies to create as much flexibility as possible, negotiating extended deadlines and grace periods for Vermont businesses.

Separately, the state has delayed the date by which businesses must submit the rooms and meals taxes until June.

“That's not enough,” he conceded. “That's just stuff that will be helpful.”

“Again, it falls back onto [the federal] government and to what kind of stimulus can be fit to this industry,” Pieciak said.

Fortunately, Pieciak said that from a regulatory standpoint, the banks, credit unions, insurance companies, and the other institutions that the DFR oversees were strong prior to COVID-19.

Thanks to its banks, Vermont ranked third per capita in the amount of funding businesses received for the federal coronavirus economic relief programs, he said. According to Pieciak, 6,800 businesses received more than $1 billion from the Paycheck Protection Program (PPP) and from Small Business Administration loans during the first round of funding.

Such programs receive federal funding and federal loan guarantees but are administered by local banks.

The DFR also regulates commercial health insurance companies. The department has worked with the Legislature to enact some emergency rules requiring companies to cover the cost of COVID-19 testing and treatment.

The DFR and lawmakers also enacted emergency rules to ensure health insurance companies will cover a telemedicine appointment just as they would an in-person appointment.

It just makes sense to keep people out of hospitals at this time, he said.

Finally, the DFR also worked with automobile insurance providers to provide refunds totalling $15 million to Vermont policyholders since fewer people are driving, he said.

The refunds might only amount to $50 or $75 per insured driver, Pieciak said - but right now, “everything helps.”

How to reopen a state economy?

In early March, Scott invited Pieciak to a cabinet meeting about responding to COVID-19.

Pieciak remembers Scott said to him, “Mike, you might be wondering why you're here.”

The governor then asked Pieciak's department to help gather pandemic-related data and build forecast models.

According to Pieciak, the state Department of Health had its hands full responding to the immediate crisis. As a result, the DFR took over tracking the “big picture” trends of the virus and developing forecasts.

The DFR drew on its experience collecting data around insurance risks and revenue analytics.

And, since the department is not staffed by epidemiologists, the DFR also partnered with consultants, including a consulting firm that also has worked with the Centers for Disease Control and Prevention to write the federal agency's pandemic mitigation response plan.

The DFR is also working with Columbia University and Northeastern University to help the state develop its COVID-19 models.

As a result, the department is aggregating five analyses of COVID-19 data into models for the state, which it then monitors and refines over time for precision and accuracy.

The goal of the forecasting, according to a May 1 presentation available on the department's website, is to move the state through two phases: first, planning for the surge in COVID-19 cases that threatened to overwhelm the capacity of state medical facilities, and then to support restarting a dormant economy while monitoring key trends.

Vermont is significantly ahead of other New England states.

According to Pieciak, when the virus was at its peak in Vermont, the number of positive cases rose quickly, from 20 to 25 to 50 to 100 within three days. Now the infection rate has slowed enough that it would take 84 days to double.

These statistics suggest that intervention earlier in the cycle of the coronavirus's spread is successfully suppressing the contagion.

According to one data modeling tool, from consulting firm Oliver Wyman, new cases in Vermont peaked at 72 on April 4, and the number of active cases in the state peaked April 29 at 722. The model projects active cases to drop to 271 active cases and seven new cases a day by June 7.

Although the virus has peaked here, a “primer” from Oliver Wyman describes the next chapter as a “long haul of suppression” that is “marked by a pervasive risk of disruption.” Future medical breakthroughs, like a vaccine, or public health tools like “testing protocols and selective quarantine,”could eventually usher in this containment phase.

'Definitely better prepared'

Pieciak said he has experienced two sets of reactions to the COVID-19 crisis in Vermont.

The first, he said, was fear from imagining the worst. Watching the reports out of Italy and how the virus had overwhelmed the hospital systems in that country was “quite terrifying,” and it was “sobering to think” it could happen in Vermont, he said.

But things changed.

“It was inspirational seeing how closely Vermonters adhered to the [social distancing] directions,” he said - a result “that was certainly not a given.”

As a result, “That [adherence] was the only thing that changed our trajectory,” he said.

As Scott loosens the stay-at-home orders, most experts believe Vermont might see a spike in COVID-19 cases, Pieciak said. Experts point to potential upticks in cases during the summer and possibly in the autumn.

“We're definitely better prepared now,” compared to earlier this year, Pieciak said. For example, the state has almost doubled the number of available ventilators. The state has also built out its surge capacity to withstand such surprises with better preparation.

Most importantly, people learned new behaviors around social distancing and hygiene, he added.

No quick end

One might think the state is mindful of such simple tools to fight communicable diseases, in part, because Vermonters already do such a good job of social distancing. But it's unlikely that the population has a strong herd immunity, the state of a community where enough people are immune that a contagion can be contained.

As a result, Pieciak said people should expect no quick end to the self-quarantining order for people coming from other states into Vermont to stay in place for 14 days.

Pieciak said the Scott administration plans to take “slow and measured” steps to reopen the state. These slow steps should allow the state to respond quickly if the data starts going in the wrong direction.

He cautions people considered “high risk” to remain vigilant and practice social distancing as necessary.

In time, Pieciak believes the COVID-19 experience will provide opportunities to “reshuffle the economy” and find better ways of working. In the immediate future, however, the pandemic has done a lot of harm.

Businesses will need help hanging on, he said.

In the meantime, he advises businesses to “conserve their cash” whenever possible. He suggested that before paying bills, businesses should see if they can work with a vendor to reduce costs or develop a payment plan.

He also recommended reaching out to local banks because some PPP funding is still available.

The flip side of the same coin is that it's “equally important that those of us who can, pay our bills,” he said.

Otherwise, vendors will lack the flexibility to help those people who need help right now, Pieciak added.

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