The National Council on Compensation Insurance (NCCI) has proposed a 13.4 percent reduction in workers’ compensation insurance rates for employers in Florida. The proposal will be reviewed on October 17 by the Florida Office of Insurance Regulation (OIR). If approved, this reduction—which would come into effect on January 1, 2019—would be the third such reduction in rates since 2016.
“Constant improvement in loss experience is the primary driver underlying the filing,” explained the NCCI in a statement. The 13.4 percent reduction reflects a downward trend nationwide. According to the report, “the long-term decline in claim frequency has continued to more than offset moderate increases in claim severity.”
Most employers in Florida are required to cover their employees with workers’ compensation insurance. The benefits work as a type of wage replacement for injured workers. Workers’ compensation insurance premiums represent a large overhead for businesses, so any reduction would be welcomed. In order to reduce costs, businesses have been found misrepresenting the number of their employees or their employees’ job classifications or even attempting to avoid paying workers’ compensation insurance at all.
The NCCI’s filing is based on the 2015 and 2016 policy years. However, there are concerns that these reductions will be short-lived. In 2016, the Florida Supreme Court issued two decisions relating to workers’ compensation which may have profound effects on insurance rates in years to come.
For the Castellanos v. Next Door Company decision, the court found that Florida’s attorney fee caps were unconstitutional. The fee caps had been in place to deter litigation. In Westphal v. City of Petersburg, the court dismissed the state’s 104-week limit on temporary total disability benefits, again arguing the limit was unconstitutional. The limit has now been extended to 260 weeks.
In their statement, the NCCI explained why they proposed reducing the insurance rates despite these changes. The Supreme Court rulings, the NCCI explained, “resulted in changed to the Florida workers’ compensation landscape. … However, the favorable loss experience in Policy Years 2015 and 2016 has more than offset the combined cost increases that have emerged from those Court decisions.”
Despite this, the NCCI warned that the full effects of the decisions have yet to be seen. “NCCI believes the Castellanos and Westphal decisions are now exerting upward pressure on system costs, and they will continue to influence Florida workers’ compensation insurance rates,” the NCCI said.
In the immediate aftermath of the decisions, the NCCI asked for a 19.6 percent increase in the state’s workers’ compensation insurance rates. The OIR, however, rejected this as too high but later agreed to a 14.5 percent increase which came into effect in December 2016. Since then, rates have been reduced twice: by 9.5 percent in November 2017 and by 1.8 percent in May 2018.
Since the Supreme Court decisions, most insurers say they have noticed increases in claim costs. All insurance companies have experienced an increase in the claimant’s attorney fees. Cases taken to litigation are now taking longer to complete, and the costs of these cases are rising.
In June, Florida’s Chief Financial Officer Jimmy Patronis announced that “sound financial management” of the state’s compensation funds would result in a further $20 million being saved. “Reducing the cost of doing business… means additional savings could be passed onto Florida businesses, easing financial burdens,” he said. “Anytime we can reduce the cost of doing business, we should.”
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