Due to three recent court rulings, Florida businesses will soon see a 14.5% average rate increase on their workers’ compensation insurance. While the new rates affect every business that is required to carry workers’ compensation, the good news is that the increase will not be made mid-term in your policy. It will be effective for all new or renewal policies as of December 1, 2016. This means that your policy rate will not increase until you renew it or purchase a new one on or after December 1. This will affect all businesses regardless of which insurance company you work with.
Why is the rate increasing?
Over the past year, there have been several legislative factors that have contributed greatly to the rate increase. For starters, in 2003, the State of Florida passed a law that capped attorney’s fees in workers’ compensation cases. Plaintiff’s attorneys representing employees could only receive a flat fee, according to a schedule described in state statutes, regardless of how many hours they worked. On the flip side, the attorneys representing the insurance companies had no such limitation. Theoretically, they could drag a case out, billing hourly the whole time, while the employee’s attorney would have to keep working the case without additional compensation.
However, the Florida Supreme Court recently determined that those caps were unconstitutional (Castellanos v. Next Door Company). Now, the insurance company will pay for the plaintiff’s attorney as a part of the whole claim without the caps. This ruling resulted in a 10.1% statewide average rate increase. For employees, nothing changes in terms of what they can recover. However, they should be mindful that their attorney may want to keep the case open as long as possible (i.e., not settle) in order to make more money. This can be a problem for an employee that wants to return to their job.
In another important case affecting the rate increase—Westphal v. City of St. Petersburg—the Florida Supreme Court ruled that the state’s 104-week cap on temporary benefits is unconstitutional when the worker is totally disabled and incapable of working, but has not yet reached maximum medical improvement. The ruling stated that the limitation is unconstitutional because it is a denial of the injured worker’s right to access the courts. This ruling resulted in a 2.2% statewide average rate increase.
Thirdly, new legislatively-mandated updates to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual (HCPR Manual) are responsible for a 1.8% statewide average rate increase.
Combined, these three recent legal changes mean that workers’ compensation rates will increase an average of 14.5%. As your insurance agency we would like you to know that we are working to understand these changes as quickly as possible. In 2003, when the mandatory fee schedule was put into place, we saw on average workers’ compensation rates decrease throughout the next 10 years over 60%. That being said, we believe now is the time to focus on the details.
Ways to alleviate future claims or increased claim costs:
1. Prevent claims through the promotion of safety and loss control.
2. Adopt a pre-employment screen process and improve hiring practices.
3. Quickly report workers’ compensation claims.
4. Follow up on all claims and monitor all claims for possible fraud.
5. Embrace a return to work policy for light or modified duty.
6. Manage your claim with guidance from your Wilson, Washburn and Forster Insurance agent and carrier.
7. Use Experience Modification Reviews to review open claims and open reserves during.
8. Take advantage of the two percent safety credit and five percent drug free credit.
9. Adopt dividend programs, which are based on availability and loss history.
If you have specific questions regarding this, please feel free to call us anytime at 305.666.6636. We are here to help you in any way possible.