Ratemaking Challenges in Today’s Atypical Workers’ Compensation Environment
By Brett Foster
At NCCI’s Annual Issues Symposium 2019, a video shown on the underwriting market cycle discussed the ebbs and flows of the workers compensation industry and how the market has changed since the 1990s.
Soft market typically refers to periods when coverage is widely available and insurance companies lower prices to actively compete for market share. During a soft market, industry reserve deficiencies may build as companies release reserves to offset increasing underwriting losses. On the other hand, hard market generally describes periods of relatively higher prices, tightening underwriting standards, and reserve strengthening.
Today’s workers compensation environment is healthy and competitive. However, industry stakeholders have described the current market as atypical, displaying a hybrid of both SOFT-market and HARD-market characteristics.
Workers’ Comp Rates Set to Drop 7.5 Percent in 2020
There’s good news to share about your workers’ compensation rates. Job creators will continue to see rates drop in 2020.
The Florida Chamber’s 15-year-long fight against high workers’ comp rates has helped lead to rates dropping by more than 65 percent over the years. Fixing Florida’s workers’ comp system is a Florida Chamber priority, and it has helped lead to Florida become one of the nation’s top business climates in the country.
And today, Florida insurance regulators approved a further rate reduction – decreasing rates by an average of 7.5 percent effective January 1, 2020 for new and renewal policies. Much of the decrease is due to an improved loss experience, a decline in the frequency of claims thanks to technology, safer workplaces, improved risk management and a change in industry makeup. These trends have more than offset the increase in attorney fees due to the 2016 Florida Supreme Court decision, Castellanos v. Next Door Company.
But we can’t let our guard down.
Just last week, Senate President Designate Wilton Simpson said during the Florida Chamber’s Future of Florida Forum that rates could be even lower if Florida hadn’t faced a $1.5 billion increase in system costs after the Court’s Castellanos decision.
That’s why the Florida Chamber’s Workers’ Comp Task Force is continuing to stand on the front lines in protecting workers, while also working to reduce cost drivers like attorney fees.
Share Your Advice
If you believe your workers’ comp rates are still too high, sign our petition today to join with job creators as we seek solutions to Florida’s workers’ comp system. Want to learn more about cost drivers in the workers’ comp system? Click HERE to see what the state has to say.
NCCI Seeks to Decrease Workers’ Compensation Rates
Florida Record, September 16, 2019
TALLAHASSEE — The National Council on Compensation Insurance (NCCI) has filed a proposed rate drop for workers’ compensation rates with the Florida Office of Insurance Regulation for the third year in a row.
Florida Chamber of Commerce director of business, economic development and innovation policy Carolyn Johnson, however, said a number of factors are preventing further rate decreases.
“While workers’ comp rates will decrease for now, NCCI has made it clear that Florida Supreme Court decisions are exerting upward pressure on system costs. Workers’ comp carriers are experiencing increases in attorney fees, litigated claims are taking longer and generally costing more,” Johnson said in a statement provided to The Florida Record.
“These factors have reduced the potential further rate decrease that could have been provided to job creators.”
Lawmakers Take Steps to Lower the Cost of Doing Business in Florida
On April 16, two Florida Chamber-backed targeted tax reform bills passed through the House and Senate— HB 7123 and SB 1112. Carolyn Johnson, Director of Business, Economic Development and Innovation Policy provides us with an update on the two tax packages and what they mean for Florida’s job creators.
HB 7123 will now move to the House floor, while SB 1112 has one more committee stop before moving to the floor.
Thank you to bill sponsors Representative Bryan Avila and Senator Joe Gruters for continuing to take the necessary steps to lower the cost of doing business.
We will keep you up-to-date as these bills move forward.
1. ICYMI from Florida Politics: Senate bill to make internet marketplaces all pay sales taxes passes panel.
2. Sign the petition today to create a more competitive and equitable tax system in Florida.
Florida Chamber Bottom Line: NCCI Is Leading the Way in Florida Worker’s Compensation Marketplace
In the latest Florida Chamber Bottom Line, Dawn Ingham, State Relations Executive for the National Council on Compensation Insurance (NCCI) discusses NCCI’s role in Florida’s workers’ compensation marketplace and the trends affecting this system.
“We’re seeing some positive trends affecting Florida’ workers compensation marketplace. Employment growth and wage growth here in Florida are higher than the national average,” Ingham said.
Making Florida More Competitive
Join business leaders, industry experts, elected officials and community leaders for the Florida Chamber’s Insurance Summit, and hear from and network with industry leaders on the important issues facing insurers, business leaders and consumers. Click here to be the first to know when registration opens.
Fixing Florida’s Workers’ Comp System
The Florida Chamber’s Workers’ Comp Task Force knows an unstable and unpredictable workers’ comp system leaves injured workers and job creators footing the bill. Business growth requires workers’ compensation premiums to be fair and not inflated by unnecessary costs, and an improved business climate overall will allow Floridians to get back to work and reduce the cost of living for families and small businesses.
Florida’s Competitiveness Agenda
From increases in rates by 14.5% due to cases ruled by the Florida Supreme Court (Castellanos v. Next Door Company and Westphal v. City of St. Petersburg) to a proposed decrease to 9.6%, the instability of the workers’ comp. system leaves attorneys and trial lawyers benefiting off injured workers.
Plaintiff attorney maneuvers like we’re seeing with workers’ comp. are reflective of a larger lawsuit abuse problem in Florida. In fact, according the American Tort Reform Association Florida is the worst legal climate in the nation, second only to California. And that’s important, because a state’s lawsuit environment is likely to impact important business decisions a such as where to locate a company or whether or not to expand.
Keeping our workers’ comp system fair and not inflated by trial lawyer tactics and other unnecessary costs will help lower the cost of doing business in Florida. The Florida Chamber has a long history of helping to keep Florida’s workers’ comp system working. As a result, workers’ comp rates were lowered by more than 60 percent in the last 15 years, and we will continue to fight for policies and workers’ comp reform that will reduce rates, protect injured workers and bring stability to the system.
The Fight for Free Enterprise Continues
With rates fluctuating significantly, the Florida Chamber is leading the effort to reform workers’ comp. To secure Florida’s future, we must keep Florida’s workers’ comp system working.
How are increased workers’ comp rates impacting your business? Let us know by contacting Carolyn Johnson at email@example.com.
Rising Attorney Fees Could Lead to Workers’ Comp Reform This Legislative Session
In what could be an indication that workers’ comp reform is on the horizon this session, the House Insurance and Banking Subcommittee yesterday focused on the status of the workers’ comp system and attorney fees.
Office of Judges of Compensation Claims Deputy Chief Judge David Langham presented to the committee that, while the number of new cases and petitions for benefits have remained largely unchanged since 2016, attorney fees have increased dramatically since the Florida Supreme Court’s ruling in Castellanos v. Next Door Company, which resulted in a 14.5 percent, or $1.5 billion, workers’ comp rate increase on Florida job creators.
In the first year post-Castellanos, attorney fees have risen 36 percent, an increase to $186 million – the highest in claimant attorney fees that have been paid in over a decade.
Additionally, hourly attorney fees have increased from roughly $150 an hour in 2014-2015 to over $250 in 2018-2019. Adding to the figure is $254 million paid in the defense of workers’ compensation claims.
Because of decreased frequency and severity in claims, workers’ comp rates in Florida and the majority of the country have decreased over the last two years. Despite these decreases, Florida’s workers’ comp rates are still roughly 10 percent higher than they could be because attorney fees remain uncapped. Attorney fees for trial lawyers are expected to continue to grow by 10 percent in 2019.
The 2020 rate filing will be the first filing to fully encompass post-Castellanos behavior, and it is expected that upward pressure from attorney fees will be reflected in the rate.
- Interested in being a part of the solution? Join the Florida Chamber Workers’ Compensation Task Force by contacting Carolyn Johnson at 850-521-1235 or firstname.lastname@example.org.
- Register for the Florida Chamber’s annual Legislative Fly-In, where business leaders will engage with elected officials and learn details about the upcoming Legislative Session.
Workers’ Comp Rates Decrease by 13.8 Percent
Automation and Employers’ Efforts to Create Safer Workplaces Produce Short-Term Rate Reduction, but Increased Attorney Fees Poised to Have Greater Impact on Future Rates
On Friday, November 9, 2018, the Office of Insurance Regulation (OIR) approved an average 13.8 percent decrease in workers’ comp rates to take effect January 1, 2019 for new and renewal policies. This is based on the National Council on Compensation Insurance’s (NCCI) filing for a 13.4 percent decrease to OIR at the end of August, 2018. When making its filing, NCCI pointed to improved loss experience as the reason for the decrease. More information and an analysis of NCCI’s August filing can be found here.
In a statement, Florida’s Chief Financial Officer Jimmy Patronis said:
“A workers’ compensation insurance decrease of 13.8 percent amounts to almost a half billion dollars in savings for Florida’s business community who support local economies, employ our neighbors, and give back to our communities. We must continue to do all we can to support and fuel Florida businesses, the backbone of our economy. While today’s news is good news, we must keep a close watch on Florida’s workers’ compensation insurance market so that we don’t go back to the time of skyrocketing rates.”
The Florida Chamber will continue to advise businesses on the impact of rising attorney fees and other cost drivers to the system. Friday’s rate decrease is good news for Florida job creators, but employers should be prepared for potential rate increases on the horizon as attorney fees continue to exert pressure on the workers’ comp system. As more time passes following the Castellanos decision in April 2016, these increased costs will be included in future experience rate filings.
Does Florida’s Workers’ Comp System Work For You?
Join us in advance of the 2019 Legislative Session to discuss workers’ comp and other issues important to Florida’s job creators by registering for the 2019 Florida Chamber of Commerce Legislative Fly-In on February 19-21, 2019.
CFO Jimmy Patronis Announces Additional Workers’ Comp Cost Reductions for Florida Businesses
On June 13, 2018, Florida Chief Financial Officer (CFO) Jimmy Patronis announced additional workers’ compensation cost reductions that will save carriers an estimated nearly $20 million in 2019, allowing carriers to help further alleviate costs on Florida businesses. These reductions are a direct result of the sound financial management of the Workers’ Compensation Administration Trust Fund (WCATF) and the Special Disability Trust Fund (SDTF), two funds that workers’ compensation carriers contribute to.
CFO Jimmy Patronis said, “Just last month, we announced that a 1.8 percent decrease in workers’ compensation rates could mean a $79.5 million savings for Florida businesses. Reducing the cost of doing business for workers’ compensation carriers by $20 million means additional savings could be passed on to Florida businesses, easing financial burdens. Anytime we can reduce the cost of doing business we should. Doing so supports our neighborhood businesses and ultimately, both our local and state economy.”
Workers’ Comp Rates Decrease 1.8 Percent Next Month
On May 1, the Florida Office of Insurance Regulation approved a law-only filing that decreases workers’ comp rates by 1.8 percent, effective June 1, 2018. This decrease is the result of the federal tax cut package signed into law at the end of last year, the Tax Cuts and Jobs Act, which produced an increase to many carriers’ profit and contingency margins. In response, the National Council on Compensation Insurance filed a corresponding rate decrease to offset the increases to insurance carriers.
What This Means for You
As a result of federal tax reform, job creators will experience lowered costs of doing business in the form of needed workers’ comp rate relief. However, this relief may only be temporary. The result is modest, albeit temporary, rate relief for businesses across the state of Florida.
It is expected that the National Council on Compensation Insurance will file its annual experience filing in late summer, and rate increases could be on the horizon. The fact remains that while businesses across the state have continued to become safer and the severity of claims have decreased, attorney fees remain a cost driver in Florida’s workers’ comp system. Recent data by the Office of Judges of Compensation Claims show that attorney fees increased by 36 percent over the previous year, and hourly attorney fees have jumped by 200 percent.
The experience rate filing expected in late summer will start to reflect some of this new data as a result of the Florida Supreme Court’s 2016 decision in Castellanos v. Next Door Company.
Join the Task Force
We need your help in pushing legislators to enact meaningful and comprehensive workers’ comp reform by addressing skyrocketing attorney fees. Join the Florida Chamber of Commerce’s Workers’ Compensation Task Force by contacting Carolyn Johnson at (850) 521-1235 or email@example.com.
New Workers’ Comp Data Shows Skyrocketing Fees
Attorney fees in workers’ compensation cases are drastically increasing, according to newly released data from the Office of Judges of Compensation Claims (the Office).
Deputy Chief Judge David Langham presented the new findings during the Florida Chamber’s Capitol Days in Tallahassee.
Just as predicted after the Florida Supreme Court’s ruling in Castellanos v. Next Door Company, the 2016-2017 annual report by the Office shows that attorney fees for injured workers increased by 36 percent over the previous year, totaling $186 million. This amount is the highest in claimant attorney fees that have been paid in over a decade.
Hourly attorney fees jumped by nearly 200 percent- from $25.8 million prior to the court decision to $75 million after. The statutory attorney fee during the same time frame decreased 31 percent.
Adding to the figure is $254 million paid in the defense of workers’ compensation claims. Florida is one of the few states where the employer/carrier pays both defense and injured worker’ attorney fees.
The Florida Supreme Court issued the Castellanos decision in April 2016, which declared the current attorney fee structure unconstitutional. This resulted in a 14.5 percent, or $1.5 billion, increase on Florida job creators. Prior to the Castellanos decision, workers’ comp premiums had decreased by nearly 60 percent after the legislature passed Florida Chamber-backed reforms in 2003 to first address attorney fees.
The Florida House is expected to pass its workers’ comp bill, HB 7009 by Rep. Danny Burgess, later this week. The Senate has not filed major workers’ comp reforms for this session.
Help us create a solution that brings certainty back to employers and workers and join the Workers’ Comp Task Force today!
Florida Chamber Jobs Agenda Seeks Workers’ Comp Fix
As a business leader, you know all too well the fight for free enterprise never ends. The cost of doing business is a daily reminder of the challenges job creators face.
Florida’s business community has faced a $1.5 billion impact from workers’ compensation rates that remain 14.5 percent higher than they should be. Florida’s bottom five legal environment is an open invitation for “gotcha” lawsuits that cost Florida families an average of $3,400 each year in lawsuit abuse costs. And discouraging and discriminatory tax policies, like the Florida-only business rent tax, are uncompetitive.
Despite the economic, political and demographic shifts that have placed Florida in a fragile position, I believe Florida’s best days are yet to come. By reducing the cost of living and cost of doing business, redoubling efforts on workforce and investing in infrastructure, Florida’s economy will continue to strengthen jobs, wages and opportunities for Floridians.
Year after year, the Florida Chamber has been at the forefront of solving issues that impact the competitiveness and future of Florida’s business climate. And the Florida Chamber’s 2018 Jobs Agenda – reinforced by the united support of Florida’s business community – once again will be the driving force to create economic opportunity and grow jobs.
Legislative leaders, including House Speaker Richard Corcoran, former House Speaker Will Weatherford, more than a dozen members of the Florida Senate and House of Representatives, along with Florida Chamber Board Chair Bob Grammig joined us at Florida’s Capitol recently as we unveiled the jobs agenda, and called on lawmakers to strengthen Florida’s economy, spur smart growth, and create jobs and economic opportunity.
Among the 41 priorities on the 2018 Jobs Agenda is a fix to Florida’s workers’ comp system. By addressing the true cost drivers of the system, including attorney fees, Florida can experience stability to the system and lower unnecessary costs.
See What Others Are Saying
“I think workers’ comp is one of the biggest issues facing the state of Florida, especially if you put it in the context of working families. There is a tremendous amount of pressure for companies, like mine, that provide basic services to keep wages low.” – Senator Keith Perry, Florida Chamber Bottom Line.
“A competitive and predictable workers’ comp system that protects workers and job creators is vital to making Florida more competitive. Lawmakers should consider the long-term ramifications for the future of the state if they fail on reform this session.” – Carol Roberts, President and CEO, Bay County Chamber of Commerce.
“When it was first developed it had a good purpose. But, by the time you allow government to take over and attorneys to get involved, it has been completely run amuck. – Todd Gates, Southwest Florida Region Chair, Florida Chamber Board of Directors and Founder and Chairman of GATES.
Workers’ Comp Task Force
The 2018 Legislative Session begins January 9, and the Florida Chamber and its Workers’ Comp Task Force will once again be leading the charge to reform Florida’s broken workers’ comp system. As a leader in Florida’s business community, your help is needed.
Here are three ways you can help:
- Share this message,
- Join our Worker’s Comp Task Force,
- Engage with our lead lobbyists on this issue, Carolyn Johnson (firstname.lastname@example.org) for in-depth legislative details.
As always, thank you for your support of the Florida Chamber of Commerce.
Todd Gates: Florida’s Workers’ Compensation System Has “Completely Run Amuck”
Todd Gates, a member the Florida Chamber Board of Directors and Chair of Southwest Florida Regional Board, talks about the workers’ compensation system, rate hikes and the challenges it presents to job creators in this installation of the Florida Chamber’s Series on Free Enterprise Podcast.
“When it was first developed it had a good purpose. But, by the time you allow government to take over it and attorneys to get involved, it has been completely run amuck,” Gates said. “The cost of doing business – especially for small or medium-sized businesses – to carry the workers’ comp is incredible. It is outrageous, to be honest with you as far as the cost.”
Gates explains how the Castellanos Supreme Court case that eliminated the limits on attorneys fees has had a major impact on businesses and the proposed 9.5 percent workers’ comp rate decrease is only temporary.
“Our industry has seen a huge increase in claims cost as well as an uncertainty in the system itself. When you have uncertainty in this type of business, it becomes very challenging to actually do business,” Gates said. “The decrease is kind of a fallacy. The rate decrease is only using 2014 and 2015 data. It basically ended roughly six months before the Castellanos court decision. The rates are still 14.5 percent higher as a result of the court decision despite the decrease.”
The Florida Chamber of Commerce Workers’ Comp Task Force is committed to fighting for Florida business leaders like you. Click here to learn more about the Florida Chamber’s Workers’ Comp Task Force.
Despite Rate Decrease, Workers’ Comp Reform Should Be Top of Mind for Lawmakers
This August, the National Council on Compensation Insurance (NCCI) recommended an average Florida workers’ comp premium decrease of 9.6 percent effective January 1, 2018. This comes following two landmark Florida Supreme Court cases that brought uncertainty to the state’s workers’ compensation system and in turn raised rates by 14.5 percent in 2017.
While the 9.6 percent rate decrease is welcome and business owners should be relieved, the problem still persists.
NCCI recommended a decrease, not because of any reform or changes, but because it is using claims data from 2014 and 2015.
Unfortunately, too many groups are laying down the sword despite Florida having among the highest workers’ compensation rates in the Southeast, with rising rates leading to a $1.5 billion cost shift for Florida businesses. Various organizations and associations have openly proclaimed that the fight for reform is unlikely this year.
The truth is that business owners will soon experience sticker shock after their workers comp rates skyrocket again and they will be knocking at their lawmaker’s door, asking “Why didn’t you do something about this?”
Florida was once hailed as a leader on workers’ comp reform but our current workers’ compensation system is unsustainable for the state. Fees and claims will continue to rise, hampering Florida’s business climate and causing our 46th ranked legal system to fall even further.
A competitive and predictable workers’ compensation system that protects workers and job creators is vital to making Florida more competitive. Lawmakers should consider the long-term ramifications for the future of the state if they fail on reform this session. Hopefully, it will spark the urge to fix our broken workers’ compensation system.
Authored by Carol Roberts, President & CEO of Bay County Chamber of Commerce
Tentative Workers’ Comp Rate Proposal Announced
On August 28, 2017, the National Council on Compensation Insurance (NCCI) recommended a 9.6 percent workers’ comp rate decrease to Florida’s Office of Insurance Regulation, effective January 1, 2018. If approved, this decrease is temporary relief for Florida job creators who faced a 14.5 percent increase that took effect earlier this year.
While we are still reviewing the specifics of the rate proposal, of particular interest to job creators is the decision by NCCI to only utilize 2014 and 2015 claims data for this rate proposal. This means that claims from 2016, which were not subject to trial attorney fee caps overturned by the court in last April’s Castellanos decision, are largely not included in the rate proposal.
In April 2016, Florida’s activist Supreme Court ruled against small businesses and injured workers and in favor of trial lawyers in Castellanos. By throwing out Florida’s attorney fee structure, the cost of lawsuits have increased significantly, and in some instances, trial lawyers are receiving attorney fees as high as $400 an hour.
During the 2017 session, the Florida Legislature failed to pass meaningful workers’ comp reform, despite the $1.5 billion cost this rate increase had on job creators, their employees and customers. The Florida Chamber’s Workers’ Comp Task Force has been working over the summer to improve upon last year’s legislation in the hopes of getting the Legislature to act in 2018. Unfortunately for businesses, until the Legislature passes reforms, costs can continue to increase. And while a rate decrease would be great news for businesses, it doesn’t make the chances of meaningful workers’ comp reform next session more favorable.
This rate still must be approved by the Office of Insurance Regulation. The Florida Chamber will continue to keep you informed of ongoing ratemaking process and legislative action.
Here Are Two of the Ways You Can Make Your Voice Heard