The NCCI recommended a 14.5% rate increase for workers comp in Florida beginning Dec. 1, 2016. The increase is currently under dispute in state courts, but in the meantime, the situation could serve as a warning to other states about adjusting their approach to workers comp.
As of Dec. 1, 2016, the National Council on Compensation Insurance (NCCI) recommended the Florida Office of Insurance Regulation approve a 14.5% average rate increase for workers comp insurance policies in the state.
The courts are currently testing the increase as a possible violation of the state’s Sunshine Law, because the NCCI and Florida Office of Insurance Regulation did not hold public meetings about the hike. The Florida legislature will likely face pressure from both the insurance industry and the business community to make a decision soon, which means Florida should expect some type of legislative change to the workers compensation system in the first half of 2017.
In the meantime, the situation could serve as a warning to other states about adjusting their approach to workers comp.
What Happened?
Three main events are responsible for the NCCI’s recommendation:
Castellanos v. Next Door Company: Marvin Castellanos, an injured employee, sued Next Door Company in this 2016 Florida Supreme Court case. The ruling invalidated a previous one from 2009, which limited an injured worker’s ability to recover a reasonable amount of money for attorney’s fees. Based on the 2009 ruling, workers comp settlements were restricted due to a recommended fee schedule which judges were required to follow when determining how much money to award a plaintiff for attorney’s fees.
Now, judges simply use the fee schedule as a starting point, awarding more or less depending on the specifics of each case. Most carriers expect the ruling to increase the amount that judges award injured employees for attorney’s fees in civil suits.
The ruling prompted the NCCI to recommend a 10.1% premium increase for workers comp coverage in Florida. Based on that recommendation, the Florida Office of Insurance Regulation approved the increase beginning Dec. 1.
Westphal v. City of St. Petersburg: Another 2016 Florida Supreme Court case addressed statutory limitation on temporary total disability benefits, which refers to the time period for which an injured worker can collect partial salary benefits as a result of a workers comp claim. In Florida, the previous time period for collecting disability benefits was 104 weeks. Thanks to this case, it’s now 260 weeks—which extends how long injured workers can continue collecting benefits for an additional 156 weeks.
This court case prompted the NCCI to recommend a 2.2% average workers comp premium increase throughout the state, which the Florida Office of Insurance Regulation approved.
S.B. 1402: Passed by the Florida state legislature after an update to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual, this state senate bill is the main reason for the additional 1.8% premium increase in Florida.
What’s Next?
Most experts expect the Florida legislature to make adjustments to the workers comp system during the spring session. The Florida legislature has enacted sweeping changes in the past; in 2003, for example, it made changes that impacted permanent total income and death benefits, added construction industry exemptions, strengthened compliance enforcement and expanded investigation of carrier claims handling.
These changes pushed Florida from the most expensive state in the country for workers comp down to 33rd place. Even with a 14.5% increase, Florida would still be only the 23rd most expensive state in the country for workers comp.
Such an increase would impact new and existing policies, which would make many business owners likely to shop around when it’s time for their next renewal. But so far, most carriers have not yet made sweeping changes to their workers comp approach in Florida and are currently reevaluating their books of business. A few insurers have decided to limit coverage, especially in parts of the market where they have experienced considerable loss in the past. But in general, carriers seem to be taking a wait-and-see approach.
For other states throughout the U.S., the Castellano vs. Next Door Company decision could impact other states throughout the U.S. that have fee schedules, because lawyers or injured workers may decide to challenge them in state courts. As a result of the Florida rulings, some states may even proactively change the fee schedules.
Walt Capell is president & owner of The Insurance Shop LLC.
