Workers’ compensation insurance rates in Florida are on the rise. These rate increases are largely the result of recent decisions handed down by the Florida Supreme Court on a few key cases. Additionally, many expect rates to continue increasing throughout the next few years as a result of the recent litigation.
If the Florida Office of Insurance Regulation (OIR) adopts changes requested by the National Council on Compensation Insurance (NCCI), workers’ compensation rates could jump from 17.1% to 19.6%. NCCI is a non-profit organization that studies industry trends and is a licensed rating organization responsible for rate filings for workers’ compensation insurance companies in Florida
Understanding Reasoning Behind Rate Hikes
The NCCI does not request rate changes out of thin air. NCCI made the request to address the multitude of legal changes affecting workers’ compensation benefits in Florida. While the original combined average rate of 17.1% was expected to be sufficient to cover the projected increases in benefits, recent legal decisions have caused alarm for the organization and led them to amend their rate proposal to 19.6%. The factors that led to NCCI’s rate increase include the following:
- A 1.8% projected rate increase due to updates to the Florida Workers’ Compensation Health Care Reimbursement Manual which became effective on July 1, 2016.
- A 15% projected rate increase in connection with Castellanos v. Next Door Company, et al. (2016). In this case, the Florida Supreme Court ruled that attorneys representing injured workers are entitled to a reasonable fee and found the statutory fee schedule which capped attorneys’ fees for workers’ compensation cases to be unconstitutional under both the United States and Florida Constitutions. This ruling led to a 15% projected rate increase.
- A 2.2% projected rate increase related to the Westphal v. City of Saint Petersburg (2016) case in which the Florida Supreme Court found the 104-week (2 years) statutory limitation on temporary disability benefits to be unconstitutional as well. The statutory gap in benefits caused by the policy was considered to be in violation of injured workers' rights. A previous 260-week (5 years) limit has been reinstated.
NCCI has recommended an effective date of October 1, 2016 for the 19.6% increase. This increase would apply to new and renewed workers’ compensation insurance policies. Additionally, the 19.6% rate increase would apply to all policies in effect as of October 1, 2016 on a pro-rata basis for the remainder of the policy’s term. If accepted, the proposed increase will affect every workers’ compensation insurance policy in Florida.
Problems Piling Up
Many are skeptical that the new rate increase will benefit anyone in the state. Some believe the new changes could result in older claims being reopened. Many think that a drastic increase in future claims is also on the docket for Florida.
As the Florida Office of Insurance Regulation (OIR) has not officially approved anything, there is still a possibility the rate increase will not be accepted. However, most speculate that the workers’ compensation insurance market in the state would crumble if the increase is not accepted by OIR.
Either way, businesses in Florida should be paying attention to the decision coming from Florida's OIR. The rate increase should be accepted or rejected in the next few weeks. Hopefully, the result will be a solution that stabilizes Florida's workers’ compensation insurance market for the foreseeable future.