Higher Workers Compensation Rates for Florida
Tim Mosler

Higher Workers Compensation Rates for Florida

The Florida Office of Insurance Regulation (FLOIR) reached a decision this week on the rate impact of the recent Supreme Court rulings on workers compensation by granting contingent approval of a 14.5% rate increase effective December 1, 2016. This decision follows months of analysis and debate, a National Council on Compensation (NCCI) filing, and a public hearing.

The filing proposed by NCCI and under review by the FLOIR was for a 19.6% rate increase and had three separate components:

  • A 15% increase for the anticipated effect of the Supreme Court’s ruling in Castellanos vs. Next Door Company (Castellanos decision). The outcome of this case was the Court’s ruling that Florida’s attorney fee schedule was unconstitutional. Subsequent to the ruling, attorneys can request fees in excess of those calculated by the fee schedule. It’s expected that this will have an impact on the amount of time attorneys will dedicate to each claim and possibly on which workers compensation clients attorneys will represent.

  • A 2.2% increase for the anticipated effect of the Supreme Court’s ruling in Westphal vs. St. Petersburg. As a result of this decision, the maximum duration for temporary total benefits increased from two years to five years.

  • A 1.8% increase for revisions to the reimbursement rates for healthcare providers as promulgated in the Florida Workers Compensation Healthcare Provider Reimbursement Manual. 

Ultimately, the FLOIR agreed with the proposed increases for the latter two components, but only approved a 10.1% increase for the Castellanos decision, resulting in the combined increase of 14.5%. 

It is also noteworthy that the approval was granted only for new and renewal policies, not for the outstanding portion of current policies as was proposed in NCCI’s filing. In the short term, this decision mitigates the financial impacts for policyholders but intensifies the adverse impact for insurers. For example, a policy issued today will incur claims through August 2017, any of which could be affected by these changes. NCCI’s proposal was that insurers could collect additional premium for the months on that policy subsequent to the effective date of FLOIR’s approval. However, FLOIR’s decision is that the increase only apply to policies written after the effective date of the rate increase. The policy written today would not collect any additional premium.

The even larger issue for insurers is that the Castellanos decision can affect open claims all the way back to the 2003 reform that created the attorney fee schedule. The current rate increase does not provide in any way for the higher rates that would have been collected over the last thirteen years had the fee schedule not been in the place.

This could be very important as year-end approaches if these changes cause Florida’s workers compensation insurers to significantly increase their reserve levels with a corresponding negative impact on 2016 income.

Tim Mosler is a Senior Consulting Actuary based in Pinnacle’s Atlanta, Georgia office. He has worked in the property/casualty insurance industry since 1996 and consulting since 2001. Tim’s comprehensive career has focused on medical professional liability, workers’ compensation, general liability and commercial automobile. Tim is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Since 2007, he has been a member of the CAS Member Advisory Panel and in 2013 he was named to the CAS Committee on Health Care Issues. He is a past member of the CAS Examination Committee.

«February 2020»