Florida Workers' Compensation Rates Plummet Again
Tuesday, August 28, 2018
NCCI Recommends 13.4% Rate Reduction in Florida
Bill Herrle
The National Council on Compensation Insurance announced Monday afternoon that it is recommending a 13.4% decrease in rates for Florida, the second straight year that the rating organization has recommended a reduction in the state.The cut comes two years after a 14.5% rate increase on the heels of Castellanos v. Next Door Co., which struck down statutory limits on attorneys’ fees, and Westphal v. City of St. Petersburg, which held that a 104-week cap on temporary disability benefits was unconstitutional.If approved by the Florida Office of Insurance Regulation, the latest reduction will mean that workers’ compensation rates for next year will be about 10% lower than they were before the Castellanos and Westphal decisions. That’s roughly what the rates were before the 2003 reform package passed by the Florida Legislature that limited legal fees and benefits duration.A small-business group predicted that Monday’s filing will spark economic growth.“The small-business economy in Florida is hot, and it’s going to get a lot hotter as a result of today’s great news from NCCI,” said Bill Herrle, executive director of the National Federation of Independent Business in Florida. “Lower workers’ comp rates equal a direct reduction in small-business owners’ expenses, which means big things for growth.”A claimants’ attorney said the filing simply puts rates back to their correct level, and that the court rulings have had a much smaller impact that insurers had feared.“Attorneys’ fees are a product of how well an insurance adjuster handles claims,” said Mark Zientz, a Miami attorney who filed an amicus brief in the Castellanos case. “If they’re handled correctly, there’s no need for high attorney fees.”The rate reduction shows that insurance carriers since Castellanos have been more careful with claims, which helps them avoid expensive litigation, he said.The size of the recommended rate reduction was not surprising, Zientz said, because “from 2003 to 2015, rates were inflated for no good reason.”An explanation of the filing from the NCCI notes that the rate reflects fewer losses by insurers, which is largely the result of a long-term and nationwide decline in the number of claims filed by injured workers.Some claimants’ attorneys have said the drop in claims reflects a greater emphasis on workplace safety; shows that because of reduced benefit levels in some states, some workers don’t bother with filing claim; and shows that a growing number of U.S. workers are now considered independent contractors, not employees who receive benefits.The NCCI did not dismiss the court rulings altogether but said that full impact of the two cases will not be known for years to come. So far, though, “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.”The NCCI obtained data from the state’s largest workers’ compensation carriers, and the data is consistent with NCCI’s initial assessment of how Castellanos would impact the Florida marketplace, the organization said. Most carriers reported some amount of claim cost increases, but many insurers were not materially affected.The ratio of claimant attorney fees to benefit settlement amounts has climbed, from 13% in 2014 to 22% through June of this year, the NCCI filing said, quoting data from the Florida Division of Administrative Hearings.Indeed, last week at the Workers’ Compensation Institute’s annual conference in Orlando, Florida’s Deputy Chief Compensation Judge David Langham presented data that showed the impact of Castellanos may be felt for a number of years.Although the number of petitions filed in compensation claims has remained relatively flat for the past decade, claimants’ attorneys’ fees climbed 36% in fiscal 2016-2017, the year after the court ruling, Langham said at the conference. In 2017-2018, claimants’ attorneys’ fees increased another 7%.Despite that, paid loss ratios have dropped significantly since 2010, most sharply since 2015, the NCCI filing data shows.“The primary driver behind the recommended rate decrease is the long-term decline in claim frequency offsetting increases in claim severity, and cost increases from the Castellanos and Westphal court cases,” the filing’s explanatory memo reads. “Policy year 2017 will be the first full policy year post-Castellanos, but the full effects of that court decision will not materialize for several years to come.”Also at the WCI conference last week, Florida Insurance Commissioner David Altmaier predicted that the expected NCCI rate recommendation would be the determining factor on whether legislation would be introduced next spring to address attorneys’ fees. On Monday, Altmaier’s office did not comment on the filing before the close of business.If recent history is a guide, the lower rates may mean that a further attempt to cap attorneys’ fees will be all but forgotten in the 2019 legislative session. A 9.5% rate reduction earlier this year surprised many and took some steam out of employers’ demands for new limits on fees.Herrle’s statement Monday did not mention the cost of lawyers.“Small-business owners are reporting record high levels of optimism, according to NFIB’s Small Business Optimism Index, and news like lower workers’ comp rates fuels their confidence,” Herrle said. “Small-business owners are in the driver’s seat, and Florida’s economy can look forward to the results — increased job growth, increased wages, and unprecedented expansion overall for the small-business sector.”
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