Florida: Commissioner approves 6.8 percent cut in WC rates

Employers in Florida will likely see their workers' compensation rates drop in 2010, state insurance officials said.

Insurance Commissioner Kevin McCarty recently approved an average statewide rate decrease of 6.8 percent beginning Jan. 1, 2010, for all new and renewal workers' comp policies. The National Council on Compensation Insurance had recommended a rate cut in its filing submitted in August. The rate filing organization noted that the decline was primarily due to a significant reduction in claims frequency. However, officials said there are signs that the pace of improvement has moderated.

McCarty said the rate decrease will produce an estimated savings of more than $166 million for Florida employers and represents the seventh consecutive decline in workers' comp rates since lawmakers passed comprehensive legislative reforms in 2003, which instituted provisions for enhanced fraud compliance, revised permanent and temporary disability definitions, set new parameters for attorney and physician compensation, and improved dispute resolution procedures. Cumulative statewide rates have fallen by 63.2 percent since the passage of Senate Bill 50A.

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The rate cut comes as welcomed news to employers. Insurance experts were concerned about a potential increase in rates after the Florida Supreme Court eliminated the statutory caps on attorney's fees in 2008, saying that the reforms made it difficult for workers to hire attorneys, especially in cases that would generate small attorney's fees. However, lawmakers passed House Bill 903 earlier this year to reinstate the caps. McCarty said the Legislature and the governor should be commended for enacting the law.

"If it were not for this legislation, the workers' compensation industry in Florida would likely have proposed rate increases instead of decreases in 2010," he said.

At a rate hearing in early October, McCarty listened to testimony from NCCI, industry experts and the public before rendering his decision. While he said the reduction was justified, the commissioner took exception to some of NCCI's methodologies, including its calculation of policyholder dividends, cost of capital, investment yields, minimum premiums, and proposed roofing rate.

Insurers pleased. The Property Casualty Insurers Association of America applauded the rate cut, which it said will place Florida among the lowest 10 states in the country for workers' comp rates. William Stander, assistant vice president for PCIAA, said the announcement is a major victory for employers in the state, especially in the middle of a recession.

"The workers' compensation reforms passed in 2003 continue to deliver results to employers and the Florida marketplace," he said. "This year, lawmakers passed H.B. 903 to reaffirm the statutory prohibition on hourly attorney's fees, which had been one of the biggest cost drivers in the workers' compensation system."

Stander said the legislation ensured that the 2003 reforms will "continue to control costs and provide affordable workers' compensation rates."

Read more at the WORKERSCOMP Forum^TM homepage.

November 16, 2009

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