Milliman’s gradient A.I. platform brings first A.I. predictive analytics solution to the professional employer organization (PEO) market

Huge news announced today by Milliman in the world of artificial intelligence (see below press release).  Milliman’s gradient A.I. is the first solution of its kind to be applied to PEO underwriting and claims management.  We at Libertate have been working with Milliman on this project for the past 18 months as we always felt there weren’t enough tools in the marketplace to help our clients price and evaluate risk.  Let’s discuss in more detail this week in Houston at NAPEO’s Risk Management conference!  Call me for more details at 305.495.5173.


SEATTLE – MARCH 19, 2018 – Milliman, Inc., a leading global provider of actuarial, risk management, and technology solutions, today announced that gradient A.I., a Milliman predictive analytics platform, now offers a professional employer organization (PEO)-specific solution for managing workers’ compensation risk. gradient A.I. is an advanced analytics and A.I. platform that uncovers hidden patterns in big data to deliver a daily decision support system (DSS) for insurers, self-insurers, and PEOs. It’s the first solution of its kind to be applied to PEO underwriting and claims management.

“Obtaining workers’ compensation insurance capacity has been historically difficult because of the lack of credible data to understand a PEO’s expected loss outcomes. Additionally, there were no formal pricing tools specific to the PEO community for use with any level of credibility – until gradient A.I. Pricing within a loss sensitive environment can now be done with the science of Milliman combined with the instinct and intuition of the PEO,” says Paul Hughes, CEO of Libertate/RiskMD, an insurance agency/data analytics firm that specializes in providing coverage and consulting services to PEOs. “Within a policy term we can understand things like claims frequency and profitability, and we can get very good real-time month-to-month directional insight, in terms of here’s what you should have expected, here’s what happened, and as a result did we win or lose?”

gradient A.I., a transformational insurtech solution, aggregates client data from multiple sources, deposits it into a data warehouse, and normalizes the data in comprehensive data silos. “The uniqueness for PEOs and their service providers – and the power of gradient A.I. – emerges from the application of machine-learning capabilities on the PEOs data normalization,” says Stan Smith, a predictive analytics consultant and Milliman’s gradient A.I. practice leader. “With the gradient A.I. data warehouse, companies can reduce time, costs, and resources.”

To learn more, go to For more on how gradient A.I. and Libertate brought predictive analytics solutions to PEOs, go to

About Milliman

Milliman is among the world’s largest providers of actuarial, risk management and technology solutions. Our consulting and advanced analytics capabilities encompass healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit


EPLI Claims Reach Tipping Point Amid Anti-Sexual Harassment Movement

It would only be logical that based on the recent #meToo movement that frequency in sexual harassment events has and will increase.  The impact to carriers and on future premiums is yet to be understood, but would be expected to be material –

All the more reason to have a Professional Employer as your partner!

by Andrea Wells of

From Hollywood mogul Harvey Weinstein to famed television journalist Matt Lauer, to thousands of others speaking out through the social media movement #MeToo, sexual harassment allegations from individuals who claim to have been victimized by their employers and colleagues continue to surface.

The insurance industry is expecting a wave of employment practices liability insurance (EPLI) claims to roll in following the recent storm of sexual harassment allegations in entertainment, media, hospitality and other industries.

The current period represents a tipping point, according to Patrick Mitchell, management liability product head at Hiscox.

“In the past, employees feared retaliation and may not have reported harassment,” he said. Recent attention is likely to ease those fears. “So while retaliation is definitely possible, it appears now employees have the courage to report regardless of the consequences.”

Insurance experts say no industry or company is immune. While the initial wave of EPLI claims is likely to target high profile and large companies, there is the potential for a trickle-down effect on other industries, experts say.

“We’ve seen a lot of headlines for particular industries (entertainment/media), but the truth is, sexual harassment allegations can happen in any industry and in companies of all sizes,” Mitchell said.

“I think we’re seeing the tip of the iceberg,” agrees Jared Zola, a partner and insurance recovery expert at the law firm Blank Rome. While today it’s high-profile alleged bad actors being targeted who are very public figures in politics, media and entertainment, he thinks there will soon be “a flood of claims from employees or former employees at companies in every industry of every size.”

The likelihood of an employer being hit by a discrimination charge of any kind is higher than employers may realize. In 2016, U.S. companies had at least a 10.5 percent chance of having an employment charge filed against them, according to The Hiscox Guide to Employment Lawsuits, which was compiled using the latest data on employment charge activity from the Equal Employment Opportunity Commission (EEOC) and its state counterparts. Employment charges are often the first step toward employment suits. Employment discrimination charges can be based on race, sex, disability, age, national origin, religion, color and others in addition to sexual harassment. Most employers with at least 15 employees are covered by EEOC laws.

EEOC data from 2016 show that retaliation is the most common discrimination charge filed and is named in nearly half of all charges (45.9 percent). However, in many cases, more than one category can be cited in an EEOC discrimination filing.

Watershed Moment

Rick Betterley, president of Betterley Risk Consultants Inc., and author of The Betterley Report, believes this period will be seen as a watershed moment similar to what happened in 1991 when Anita Hill accused Clarence Thomas, President George H.W. Bush’s Supreme Court nominee, of sexual harassment when the two worked together. Betterley sees this moment as a significant turning point not only in U.S. employment, but also in employment-related insurance.

While the recent surge in sexual harassment allegations has not yet translated into claims, it’s most likely only a matter of time before the EPLI claims start arriving. When they do, there is most likely to be coverage for those employers that have purchased EPLI coverage.

“This is not a situation with an insurance company saying, ‘We never planned on covering that.’ They did plan on it. They wrote the policies to cover it. EPLI grew out of the Clarence Thomas hearings and Anita Hill’s testimony. That’s a big part of where this coverage started,” Betterley said.

At the same time, he believes the insurance industry can handle the claims. “It could be a big deal for the line, but I don’t see it as wrecking the line either,” he said.

EPLI has been a mature market for many years, with growth averaging 4.4 percent over the past four years in the United States, according to Betterley’s recently released Employment Practices Liability Insurance Market Survey 2017.

Potential Claims

Betterley foresees most claims activity stemming from the recent storm in sexual harassment allegations targeted at larger and/or prominent employers and suggests they may even be limited to only higher risk industries.

“There are some industries where you would say that the underwriters are already looking more carefully, thanks to the last couple of months, than maybe they would have been before. Entertainment’s one of them,” he said.

Underwriters are also likely to closely watch companies whose leaders have a more visible public profile.

“Let’s say it is an investment banking firm (with a high-profile CEO). … As an underwriter, they’re already paying closer attention to those industries or scenarios … the famous person or the entertainment person, but now they’re paying even closer attention,” Betterley said.

However, the insurance effects will not be restricted to industries being more closely scrutinized by underwriters. The problem of sexual harassment will eventually spill into all industries, according to Betterley, because employees who believe they’ve been harmed are now less likely to remain silent than before the current outpouring.

“If they brought a case against the employer, they perhaps didn’t have a great lawyer, maybe they settled for $25,000, or didn’t really push the allegation at all,” Betterley said. “Now, they’re reading about people getting millions and millions of dollars (in settlements). They’re saying, ‘I’m not going to settle as easily as I might have before.’”

Betterley compares it to what the insurance industry saw in the medical liability market years ago.

“I remember having a client say, ‘Our typical med-mal claim used to be $800,000, but people have been reading about lottery winners and CEOs with tens or hundreds of millions of dollars of compensation.’ All of a sudden, $800,000 is ‘paltry.’ Well, no, it’s not, but if you believe it is, then you won’t settle as quickly,” he said. “I think the same thing will happen with EPLI.”


The industry will feel the impact because there’s not much dispute that sexual harassment is covered as a wrongful practice under an EPLI policy.

“The policy provides coverage for a wrongful employment practice, which is a defined term. One of the prongs of what a wrongful employment practice is, is sexual harassment,” Zola said.

The definition of sexual harassment under an EPLI policy can be some “actual or alleged sexual advance that is unwelcomed, that has a purpose of creating an intimidating or hostile work environment,” Zola explained. This can encompass a broad set of circumstances, however, where there’s unwelcomed attention brought on an employee by another individual at the company that creates an uncomfortable work environment. That circumstance is probably enough to trigger coverage, according to Zola.

Joe Kelly, vice president and employment practices liability practice leader at Sompo International, a Bermuda-based global specialty insurer and reinsurer, agrees that there’s no question that sexual harassment is covered under EPLI policies.

“The EPLI contract is very straightforward in covering claims of sexual harassment so there’s no coverage issue,” Kelly said.

However, one issue that could affect the recent wave of sexual harassment allegations is the statute of limitations for coverage to be triggered.

The statute of limitations for filing a discrimination charge with the EEOC is 180 days. The statute does vary by state so it’s possible there’s a window of opportunity to file in a certain state beyond the 180 days, Kelly stated.

Some claimants are choosing to file under RICO (Racketeer Influenced and Corrupt Organizations Act), which does not expressly establish a period of limitations. “We saw this with some of the Weinstein claims and now there’s a group of women bringing a claim under RICO,” he said. “That’s one reason why they might bring charges under RICO.”

Another reason claims might be filed under RICO, according to Kelly, is that damages can be much higher.

Sexual harassment coverage is commonly broad, with no sublimit for sexual harassment, according to Marie-France Gelot, senior vice president of the insurance and claims counsel at Lockton. Coverage under an EPLI policy goes to both employees, and in most policies today, also for third parties including clients, customers and vendors. “It’s not just employees, it’s a vendor of the company, a customer of the company.” Any party – employee, customer, vendor – alleging they are sexually harassed by someone from the insured employer can trigger coverage, she said.

Some policies provide broader coverage than others, so it’s important for employers and their agents and brokers to review all terms and conditions, she said.

For example, many EPLI policies have bodily injury exclusions, but some don’t, notes Gelot. “The bodily injury exclusion in a sexual harassment conversation would draw a very hard line if harassment leads to something like rape,” she said. “But I’ve had cases where you had a rape by an employee that the EPLI insurer has had to cover despite the fact that the company didn’t want the carrier to cover it. The carrier had to cover it because there was no bodily injury exclusion, and the coverage was so broad.”

Another example, according to Zola, is that coverage could possibly be voided if certain individuals in a workplace knew about the alleged harassment.

“The real question is going to be who does the policy identify as being a person whose knowledge is sufficient to exclude coverage,” Zola said. “The language is different on policies, but some typical language is fact, circumstance, situation or event that reasonably would be regarded as a basis for a claim. That language being imprecise, I think, is fertile grounds for factual disputes as to when a company or officers or directors of a company should have known that a claim was likely based on the knowledge they had at the time.”

Zola says this can be seen in the media allegations that some “bad actors” had certain reputations for activities that would be considered sexual harassment. “The question is who at the company knew about that reputation and whether rumor and reputation are sufficient to exclude a claim based on the policy language,” Zola said.

The size of the claim makes a difference when it comes to knowledge-based exclusions, he added.

“The claims that I’ve handled in the past involving sexual harassment allegations, there was no media spotlight on them, and so, there wasn’t this deep-dig by the media and by the public into what people at the company knew or didn’t know about the allegations,” Zola said. Even so, an employer’s knowledge of harassment by an alleged harasser is a defense that the insurance companies will pursue through discovery rather than in the media, he said.

Other lines of insurance, including directors and officers (D&O), could potentially be involved as well.

“The idea with D&O policies is, especially for public companies, if there are widespread allegations, that the directors or officers failed to protect their fiduciary obligations to the shareholders by allowing a culture of impropriety,” Zola said.

When allegations are made, stock prices may drop, which can lead to “very serious derivative suits” that could be covered by D&O insurance.

Zola says general liability could be another line to come into play for allegations of bodily injury in certain states. According to Zola, in states like New York, sexual harassment can rise to a level of emotional distress even without any physical touching. “This is considered bodily injury, as that word is used in a general liability policy. In all states, physical touching that leads to damages is considered bodily injury,” he said. “It depends on the allegations by the claimant, but it could implicate both of those lines as well.”

In Kelly’s view, general liability would have excluded this type of coverage, but the D&O coverage could play a role as it can in cyber.

“We saw this with cyber where there were cyber breaches but then there were follow-on derivative suits brought on behalf of the company against the board of directors for failing to put the proper controls in place to prevent a breach,” said Sompo International’s Kelly. “You could have the exact same type of derivative suit for failing to supervise the CEO of the company who is a known harasser or failing to remove that person if there was a known event that occurred, and the board didn’t act appropriately.”

Time to Review

Lockton’s Gelot said this is a time for employers and agents/brokers to review policy wording carefully.

“You have some policies today that have specific wording meant to narrow the scope of covered sexual harassment – and those policies would drive a clear distinction between behavior that is insurable versus behavior that is so egregious that to insure it would be offensive or outright against public policy,” she said. That might include wording in some policies that the policy will cover “everything except harassment that is deemed licentious or immoral or sexual abuse or exploitation or abuse of child.” Not all policies contain such wording, she said.

EPLI Going Forward

The disturbing recent spate of workplace sexual harassment complaints could have positive effects for the industry and the EPLI market as well, experts say.

“Anytime there’s a major event in any line of insurance, it always raises awareness,” said Kelly. “Major senior level execs and the boards are even being called out on what they are doing (to prevent such behavior) and they are asking what kind of EPLI coverage do we have?”

These executives better make sure that they not only have EPLI coverage, but also that their limits are adequate, Kelly said, noting that this type of questioning is going to drive more demand in the market and potentially higher limits.

In 2016, gross written premium for EPLI was $2.1 billion, according to MarketStance, and it estimates a possible bump to $2.3 billion or more for 2017-2018.

There are many smaller employers that still do not purchase the coverage. Roughly seven out of 10 businesses don’t carry EPLI, according to

But just how market growth will be affected following the attention on sexual harassment in the workplace remains to be seen, Betterley said. Small commercial accounts, while forecast to grow most rapidly over the next year, have the lowest take-up rates for EPLI coverage, he said.

“I think it (the recent attention) will have an impact,” Betterley said. “I don’t know that I’ve seen it just yet. One impact perhaps is that if you’ve got a potential insured that has not been buying EPLI, now they will want to buy.”

Those employers that haven’t purchased the coverage might get a tougher reception from insurance markets, he added. “The underwriter is going to be really interested in the why now? A good answer, I guess, would be, ‘Have you read the newspaper?’” While insurers may be glad to gain more insureds, they may be more cautious about taking on employers that until now haven’t been buying coverage, he said.

Hiscox’s Mitchell says it’s difficult to predict how EPLI insurers will react to a rise in sexual harassment claims in 2018, but it’s likely to be a mix of changes in premium rates, retentions and restructuring coverage. For now, one thing is certain. “It’s something all insurance companies will be monitoring closely,” he said.

All Hands on Deck in Tallahassee

From our friends at the Florida Association of Professional Employer Organizations (“FAPEO”).    It could not be said in a more powerful manner the need to continue advocacy for the PEO industry as we continue to grow and be an even more powerful piece of supporting workers’ compensation for the employees of the State of Florida.  I look forward to seeing you there — This will take place on Feb 19-20 2018.



From: Robert Skrob
Sent: Thursday, January 18, 2018 9:35 AM
Subject: Lies and Insults in the Lawmaking Process


You’ve had a string of successful years in the PEO industry. Market share has increased and payrolls grown.


This makes our enemies angry.


Some people outside of the PEO industry are on the losing side of your growth. When you sign-up a new client that has never worked with a PEO before, that means they are canceling other relationships.


Rather than make their offering more competitive, many of those canceled provider complain to lawmakers. They accuse your company of cheating the system, fraud, and failing to pay for injuries. Sure, in the process they do everything they accuse you of, but the reality is lawmakers don’t know that.


Lawmakers hear a lot of negative misinformation from people outside the PEO industry.


That’s why it’s important for you to tell the other side of the story. To explain to your lawmakers exactly how you help worksite employees get better benefits, help your clients focus on growing their business and how you help government improve compliance and collect more taxes.


On February 13-14, we’ll host the Florida PEO CEO Legislative Summit. This event is free, I attached a brochure with more details.  Just RSVP so we can save you a seat.

Here is the hotel information:

There is block of rooms at the Doubletree Hotel located at 101 S. Adams Street in Tallahassee, FL. FAPEO has arranged a special rate of $169.00 per night for this event. You can make your reservation for the night of February 13th using this link: or by calling 1-877-800-2652 and mention that you are with FAPEO.

This event will give you insights into workers’ compensation reform efforts, insider information on how the reshuffle created by lawmakers moving into the Trump administration will impact the lawmaking process and a time to weigh in on issues impacting the PEO industry.


Plus, we’ll use the opportunity of having you in Tallahassee to set up meetings for you with your local lawmakers to educate them on how the decisions they make impact your PEO and the clients and co-employees you serve.


Our lawmakers will make decisions on hundreds of issues over the next few weeks. Few lawmakers understand what you do and yet they hear a lot of nonsense from those who want to make your PEO less competitive. While we work hard to educate each lawmaker about the PEO industry, there’s nothing as powerful as hearing directly from a company within his or her community.


A briefing from you about your company is a lot more powerful than David Daniel or I giving legislators a presentation about the PEO industry in theory.


Make your plans now for February 19-20. I attached a brochure with additional details.  Just send Suzanne or me an email to RSVP.



Approved WC Legal Fees up 36 percent in 16-17, what will the 17-18 fiscal year look like?

Injured workers racked up nearly $186 million in approved legal fees in 2016-2017, a 36 percent increase from the previous year, a state report on the workers’ compensation insurance system shows.  This is with the Castellanos v. Next Door Company ruling, which repealed restrictive attorney fees caps, only being in place for 7 out of 12 month in the 16 -17 fiscal year.

In all, attorneys’ fees in the workers compensation system totaled nearly $440 million during the 2016-2017 fiscal year. The majority — nearly $254 million — were forked out by employers defending workers’ compensation claims.

Issued by the Office of the Judges of Compensation Claims, the 2016-2017 annual report notes that $185.6 million in approved legal fees for injured workers is the highest amount paid in nearly a decade and is attributable to a 2016 Florida Supreme Court ruling.

“Clearly, there is a trend suggested of increasing claimant attorneys’ fees in the wake of (the ruling),” the report, released last month, notes.

The report shows that in 2016-2017, more than $75 million in hourly fees were approved for claimants’ attorneys, a nearly 200 percent increase from the $25.8 million in hourly fees that were approved the previous year.

During the same period, the report shows that fees paid to workers’ compensation attorneys under legislatively approved fee caps decreased about 31 percent.

It is the second consecutive year that legal fees increased for injured workers and employers and reverses what had been a five-year trend of lower legal costs for both sides in workers’ compensation cases.

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.

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.

Florida businesses faced some of the highest workers’ compensation costs in the country in the early 2000s. Business interests argued that attorney involvement — legal fees in the aggregate totaled $427 million in fiscal year 2002-2003 — was the reason for the high costs.

The Legislature responded by passing a sweeping rewrite of the workers’ compensation system in 2003 that, among other things, tied the recovery of plaintiff attorneys’ fees to percentages of the amount of recovered benefits. The law was tweaked in 2009 to make clear that workers’ compensation judges were precluded from awarding additional hourly fees for plaintiffs’ attorneys.

But in a 2016 ruling known as Castellanos v. Next Door Company, the Florida Supreme Court ruled that the restrictive fee caps violated injured workers’ due process rights and authorized judges to award fees outside the fee schedule if adhering to it yielded unreasonable results.

Business interests lobbied the Legislature earlier this year to, at a minimum, limit the hourly rates that attorneys could charge. But lawmakers did not approve a change.

Despite the marked increase in legal costs for 2016-2017, the report notes that when adjusted for inflation, aggregate attorneys’ fees in Florida workers’ compensation have decreased by more than $100 million over the past 14 years.


Florida’s Workers’ Comp Rate Decrease By Industry

FORT MYERS, Fla., Nov. 27, 2017 /PRNewswire/ — What goes up must come down is a fundamental law of gravity and roller coasters.  But it is also starting to become an appropriate depiction for Florida workers’ compensation rates, according to Mark Webb, senior vice president of Lykes Insurance.

“In what is heralded as good news for employers, the Florida Insurance Commissioner approved an amended filing on Nov. 9, 2017 ordering an average decrease of 9.5 percent in workers’ compensation rates effective Jan.1, 2018,” says Webb. “This decrease was slightly more than the 9.3 percent decrease proposed by the NCCI in August.”

Webb notes that this is an average decrease. The actual decrease is allocated among classifications by industry as follows:

Office and Clerical -11.5 percent
Goods and Services -10.6 percent
Manufacturing -10.3 percent
Contracting -7.19 percent
Miscellaneous -8.3 percent

This decrease was filed based on a reduction in claim frequency over the two years prior to 2016.  However, it does not take into consideration the two Supreme Court decisions in 2016 that brought the 14.5 percent increase last December: the Castellanos and Westphal decisions.

These two cases resulted in retroactive changes to claimant attorney compensation and impairment benefits.  Few deny that these court decisions are and will continue bringing upward pressure on the cost of claims, and it seems unlikely that the Florida legislature will take any action on reforms to address this issue, especially in the wake of a rate decrease.  According to Logan McFaddin, Southeast Director for the Property Casualty Insurers Association of America, “Experience data relating to the impact of Castellanos and Westphal continues to mature and will likely be reflected in future rate filings.”

This sentiment was reflected in the order from the Insurance Commissioner that directed the NCCI in future recommended rate filings to provide a detailed analysis of the impact of Castellanos, including reopening of older claims, changes in reserves and settlement rates, changes in claim frequency and severity, increasing attorney involvement, and fees paid to attorneys.

One issue that needs to be acknowledged is the possibility of a mid-term cancellation and re-write of a workers’ compensation policy to take advantage of the new rates. While it is uncertain how willing insurance carriers will be to embrace this action, this should be evaluated on a case by case basis, because there are some reasons for concern over this strategy.

First, a mid-term change will eliminate any potential dividends that may be earned on a policy. Also, carriers may choose to apply a short rate cancellation penalty if a policy is cancelled and moved to another carrier. The short rate penalty is approximately 10 percent of the unearned premium, which, if applied, would completely negate any advantage of the 9.5 percent rate decrease. Finally, if rates do go back up next year, the policyholder would be moving up the date that the policy would be impacted by the higher rates.

“The bottom line is, as usual, uncertainty prevails,” Webb concludes. “With the uncertainty surrounding the market impact and future rates, it is important to not allow a rate decrease to bring complacency to the significance of safety and claims management in your workers’ compensation program.  We strongly suggest working with your advisors and advocates to help you prepare for whatever the future may hold for workers’ compensation.”


Patriot National Stock Drops 60% After Disclosure of Forbearance Agreement

Latest on Patriot National as posted by Seeking Alpha….

About: Patriot National, Inc. (PN)|By: Carl Surran, SA News Editor

Patriot National (PN -64.1%) plunges by more than 60% after disclosing it has entered into a forbearance agreement with its lenders, and that much of its revenue and cash flow will cease.

PN is in default of its credit Agreement due to the failure to deliver timely financial statements, non-payment of interest due Nov. 1 and the failure to comply with financial covenants.

Based on the company’s deteriorating financial condition, PN says it is terminating ~250 employees, or one-third of its workforce.

Workers’ Comp Drug Spend Continues to Drop, According to CompPharma’s 14th Annual Survey of Prescription Drug Management

MAGGIE VALLEY, N.C.–(BUSINESS WIRE)–CompPharma’s 14th Annual Survey of Prescription Drug Management in Workers’ Compensation showed an average 11 percent reduction in payers’ pharmacy spend, driven by a 13.3 percent reduction in opioid cost. The survey analyzed the 2016 pharmacy cost data of 23 workers’ compensation insurance carriers, third-party administrators, self-insured employers, and state funds.

Working with their pharmacy benefit managers, payers cut one of every six dollars in opioid spend, which the report called a “truly remarkable result.” In contrast, across all payer types, pain medication use declined by a scant 1 percent (Quintiles IMS).

“Clearly the efforts of workers’ comp regulators, payers, desk-level staff, PBMs and prescribers have paid off,” said Joseph Paduda, president of CompPharma, LLC. “While we have much left to do, this represents a dramatic improvement in the lives of thousands of patients.”

Payers are far from complacent, with all respondents expressing grave concerns about the risk of opioid addiction or dependency. Most are continuing to refine and improve programs to help patients address pain while minimizing use of opioids, relying on physician and/or pharmacist review of claims, early identification of potentially risky prescribing, and increased use of drug testing.

In contrast, compound drug utilization and spend has dropped dramatically and is no longer of great concern to payers.

A complimentary copy of the 2016 survey can be downloaded from

Florida Orders Workers’ Comp Rate Decrease of 9.8%

Florida Insurance Commissioner David Altmaier has ordered a statewide overall workers’ compensation rate decrease of 9.8 percent, a slightly higher decrease than the 9.6 percent decrease filed by the National Council on Compensation Insurance (NCCI) back in August.

Altmaier’s order disapproving NCCI’s 2018 rate filing was issued by the Florida Office of Insurance Regulation on Tuesday, and stated NCCI’s rate request be amended and refiled by Nov. 7, 2017.

Altmaier’s order cited NCCI’s 2 percent allowance for profit and contingencies in its rate filing as the reason for rates being disapproved. The order states that the refiling should contain a profit and contingencies provision no greater than 1.85 percent.

The rate decrease will come as a welcome surprise for many Florida businesses that were expecting additional rate increases after the Florida Supreme Court issued two decisions – Castellanos v. Next Door Company and Westphal v. City of St. Petersburg, – in 2016 that sent rates up by double digits this year.

“Using new data, this experience based filing proposes a decrease in rate level based on data from policy years 2014 and 2015 valued as of year-end 2016,” the order states. “While some of the experience used as the basis for this filing occurred before the recent Florida Supreme Court decisions, a portion of the experience period includes claims that occurred after the decisions.”

At a rate hearing in mid-October, NCCI said a decline in claims frequency due, in part, to safer workplaces, enhanced efficiencies in the workplace, increased use of automation, and innovative technologies were partly behind the recommended decrease. NCCI said this trend is not unique to Florida but countrywide, and is expected to continue in the future.

According to OIR’s order, from 2011 to 2015, the cumulative decreases in the indemnity and medical loss ratios were 19.9 percent and 12.3 percent, respectively. The primary reason for the declining loss ratios is a significant reduction in the lost-time claim frequency which declined by 45 percent from 2001 to 2015 with over 8 percent of the decline occurring in 2014 and 2015.

“Even after considering the impact of the Castellanos and Westphal decisions, other factors at work in the marketplace combined to contribute to the indicated decrease, which included reduced assessments, increases in investment income, decline in claim frequency, and lower loss adjustment expenses,” the order states.

However, the order also mandates that NCCI provide detailed analysis of the effects of the Castellanos decision by the Florida Supreme Court in future filings, which accounted for 10.1 percent of the 14.5 percent increase in Florida workers’ compensation rates this year.

“To ensure workers’ compensation rates are not excessive, inadequate or unfairly discriminatory … it is imperative that additional quantitative analysis be conducted to determine the effect the Castellanos decision is having on the Florida workers’ compensation market and the data used to support future rate filings,” the order states. “The analysis may include alternative data sources and should examine changes to the Florida workers’ compensation market that are attributed to or observed as a result of the recent court decision.”

Approval of a revised rate decrease is contingent on the amended filing being submitted with changes as stipulated within the order. If approved by OIR, the revised rate decrease would become effective on Jan. 1, 2018 for new and renewal business.

Read Order: Florida OIR Workers’ Compensation Insurance Rate Decrease

By Amy O’Connor of | November 2, 2017