Workers' Compensation Rate Cut Under Consideration
Fewer workers are filing workers' compensation claims, helping lower the costs Florida employers will pay for insurance next year.
How big of a reduction in rates will be decided by Florida Insurance Commissioner David Altmaier, who held a rate hearing Wednesday in Tallahassee.
The National Council on Compensation Insurance, which proposes rates on behalf of all workers' compensation carriers, has proposed an overall average 9.6 percent reduction in premiums for 2018.
“It's one of the largest decreases in the last 10 years,” Jeff Eddinger, a senior division executive for NCCI, told Altmaier and five high-ranking staff members from the Office of Insurance Regulation. State Insurance Consumer Advocate Sha'Ron James also attended the meeting.
He said if the proposed filing is approved, workers' compensation rates will have decreased by 60 percent in Florida since 2003, when the state passed a sweeping workers' compensation law.
But Stephen Alexander, an actuary with the advocacy group Florida Workers' Advocates, testified that the rates should be reduced by 15.4 percent instead.
Altmaier is charged with reviewing the filing to ensure the proposed changes are not excessive, inadequate or unfairly discriminatory.
Altmaier will make the final decision but told reporters after the hearing he did not know when he would act on the rate filing.
“I want to make sure we are deliberate in our process,'' Altmaier says. “I don't want to put a timeframe on it. I just want to make sure we do a diligent job and come to the right decision.”
Alexander, formerly an actuary with the state's insurance consumer advocate, focused, in part, on underwriting in his proposal calling for deeper cuts.
NCCI has proposed a 2 percent underwriting profit in its rates for 2018, while Alexander is proposing a 4 percent underwriting loss. He said the 4 percent figure is consistent with carriers' experiences in other states where NCCI recommends workers' comp rates.
Alexander also told Altmaier, for example, the state should scrap a rule that discourages rate deviation in the workers' compensation market. Just three out of 242 carriers deviate from NCCI rates today, he said.
Altmaier said after the meeting he would review the recommendations.
Workers' compensation is a no-fault system meant to protect workers and employers. It is supposed to provide workers who are injured on the job access to medical benefits they need to be made whole. Those who are injured for at least eight days also are entitled to indemnity benefits, or lost wages. In exchange for providing those benefits, employers generally cannot be sued in court for causing injuries.
Florida businesses paid nearly $3.8 billion in workers' compensation premiums in 2016, up from about $2.8 billion in 2012. The costs for the mandatory coverage are the 33rd highest in the nation, according to NCCI.
While the system is supposed to be self-executing, injured workers hire attorneys when there are disputes over the amounts of benefits they should receive.
The proposed reduction in rates is in stark contrast to last year when NCCI requested a 19.6 percent increase in rates, the majority of which was attributable to a Florida Supreme Court ruling in a case where justices ruled that caps on attorneys' fees were unconstitutional. The Supreme Court, in a separate decision, also tossed out a restriction on benefits in the case of a St. Petersburg firefighter injured on the job.
Ultimately, the state approved a 14.5 percent increase last year.
NCCI's Eddinger said the 2018 rate filing was based on the two most recent years of data, 2014 and 2015, and, therefore doesn't contain much data from after the 2016 Supreme Court decisions.
“We won't really see post-data come in until next year or the year after that,” he said adding that about 5 percent of the claims data in the rate is impacted by the court decisions.
NCCI actuary Jay Rosen concurred.
Rosen told the panel that not much of the “data that has been impacted by these court decisions has been reported to NCCI, and therefore it is not reflected in this particular rate filing.”
Florida Workers' Advocates has pushed for changes to how workers' compensation rates are set and said Wednesday's testimony underscores why it's necessary.
While the majority of the hearing focused on the workers' compensation rates, Pensacola roofer Adam Purdy asked that Altmaier crack down on professional employer organizations, or PEOs, that deny workers' compensation coverage to undocumented workers.
It's a crime in Florida to file workers' comp claims using false identification. ProPublica/NPR reported this summer about Florida PEOS who report employees who file workers' compensation claims to the state and don't pay the benefits.
Altmaier said he would consider the PEO testimony.
“All the comments that were made today, we'll take under consideration including that one,” he says.