NCCI proposed to the Florida Office of Insurance Regulation a rate increase of 19.6%.
What caused this?
- A 2.2 percent projected rate increase for the June 9th Florida Supreme Court decision in the case of Westphal v. City of St. Petersburg, in which the Florida Supreme Court found the 104-week statutory limitation on temporary total disability benefits in Section 440.15(2)(a), Florida Statutes, unconstitutional because it causes a statutory gap in benefits in violation of an injured worker’s constitutional right of access to courts. The Florida Supreme Court reinstated the 260-week limitation in effect prior to the 1994 law change.
- A 15 percent projected rate increase for the April 28th Florida Supreme Court decision in the case of Castellanos v. Next Door Company, which found the mandatory attorney fee schedule in Section 440.34, Florida Statutes, unconstitutional as a violation of due process under both the Florida and United States Constitutions.
- A 1.8 percent projected rate increase related to updates within the Florida Workers’ Compensation Health Care Provider Reimbursement Manual (HCPR Manual) per Senate Bill 1402. The manual became effective on July 1, 2016(1).”
Since this ruling in 1994 by the Florida Supreme Court, Florida has had a policy of allowing injured workers access to benefits for 104 weeks or 2 years. As a result of the supreme court ruling in the Westphal v. City of St. Petersburg this amount of time was ruled unconstitutional. Now a time period of 260 weeks or 5 years is the amount of required coverage for injured workers. In order to prepare for this increase in claims cost the insurance carriers within the state of Florida will have to raise rates on workers comp in order to make up for the increase in these benefits.
Castellanos v. Next Door Company was another ruling passed down by the Florida Supreme Court which ruled that the state’s mandatory attorneys’ fee schedule for workers’ compensation cases is unconstitutional. It ruled that it was unconstitutional under both Florida Law and the U.S. constitution as a violation of due process. This will make the amount paid out for injuries to be much higher as a result. This is the reason for this lawsuit being such a large portion of the proposed rate increase.
The 1.8% portion of the increase is a direct result of the new requirement within the Florida Workers’ Compensation Health Care Provider Reimbursement Manual (HCPR Manual) per Senate Bill 1402. meeting this requirement will cause new costs on both insurance agencies and carriers. A portion of these increased costs are being asked for in the rate increase.
What does that mean for businesses in the state?
As far as rates on premium go it means the state of Florida will go from being about the 30th most expensive state in the country to purchase coverage to just outside of the top ten as far as premium for workers’ compensation. Businesses in the state should prepare themselves for a significant increase in the amount they pay for workers’ comp insurance. Even if the full 19.5% increase is not approved, business owners’ should prepare for at least a double digit increase in the rate they pay for premium on work comp.
What can business owners do to deal with this rate increase?
Without cutting costs in other areas of your business, the main way an insurance agency and carrier can help a business owner in this situation is by offering a pay as you go option. With the Pay as you go option much less premium is due at the beginning of the term and premium is different each month based on the man hours worked at your business.
What does this mean for other states?
If other states do not already have policies similar to these in place you can expect other supreme courts to rule on this precedent and you may see some legislatures proactively change their policies to be in line with these rulings. Most states already abide by the 260 week time period and do not have limits on the amount of restitution amongst lawyers in workers’ compensation cases. For this reason a majority of states will not have to worry about a rate increase anywhere near this large.