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Insurance office finds workers’ compensation market stable, competitive

Despite broad consternation over rising workers’ compensation insurance rates, Florida’s market is relatively stable and competitive, according to an analysis released Friday by the Office of Insurance Regulation.

The market “is served by a large number of independent insurers and none of the insurers have sufficient market share to exercise any meaningful control over the price of workers’ compensation insurance,” the report says.

Entrants to and withdrawals from the market produce “no market disruptions,” the report continues, signalling “that the Florida workers’ compensation market is well-capitalized and competitive.”

Furthermore, there have been no bankruptcies by insurers requiring the Florida Workers’ Compensation Insurance Guaranty Association to absorb policies.

“There are some good things about the workers’ compensation system — which is that the market is stable and very diverse, and that’s a good thing for the small business insurance consumer,” said Bill Herrle, Florida director for the National Federation of Independent Business.

The Florida Supreme Court threw the market into a tizzy last year by striking down elements of reforms passed in 2003 to drive down costs. They included a cap on attorney fees and limits on temporary disability payments.

The attorney fee ruling accounts for around 10 percent of the 14.5 percent premium hike approved the insurance office last year, according to ratings agency the National Council on Compensation Insurance.

The legality of that increase is before the 1st District Court of Appeal.

The report says the attorney fee provisions “were a significant factor in the decline of workers’ compensation rates and continues to impact them. It is also the case, however, that most of the improvements resulting from legislative changes may have been realized, as there were four rate increases from 2010 to 2014 after seven years of decreases following the 2003 reforms.”

The report points to additional price pressures, including the cost of drugs and of treatment in hospitals and ambulatory surgical centers, which are running ahead of the national averages.

The recent rate increase, which began to take effect last month and will roll out as employers buy new or renewed policies this year, has sparked calls for renewed reforms. Insurers and business groups have focused on controlling attorney fees, but the Legislature also may look at additional cost drivers.

Herrle, who serves on an Associated Industries of Florida task force on workers’ compensation reform, argued attorney fees are the chief enemy.

”We don’t need to be making changes to the rating process,” he said. “That dynamic is good. The dynamic that is not good is the (Supreme) Court cases.”

The report notes that, before the 2003 reforms, Florida tended to rank either No. 1 or No. 2 among the states in terms of high rates, according to data collected by the Oregon Department of Consumer and Business Services. It had dropped to No. 40 by 2010.

Even before last year’s rate hike, the state had climbed to No. 33.

Even so, Florida’s rates ranked below the national median.

Written By

Michael Moline is a former assistant managing editor of The National Law Journal and managing editor of the San Francisco Daily Journal. Previously, he reported on politics and the courts in Tallahassee for United Press International. He is a graduate of Florida State University, where he served as editor of the Florida Flambeau. His family’s roots in Jackson County date back many generations.

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