True cost of workers’ compensation rulings pegged at $1.3 billion


Florida Supreme Court rulings in workers’ compensation cases will boost employers’ costs by 35.4 percent, adding $1.3 billion to the cost of doing business in the state, an economist warned Thursday during the Florida Chamber of Commerce’s Insurance Summit.

“This breaks into a $929 million annual increase in premiums for the insured employers and a $361 million increase in claims costs for the self-insured employers,” said Mike Helvacian, of the National Center for Policy Analysis.

That means smaller payrolls and annual raises, less hiring, and smaller starting wages, he said.

Helvacian blamed escalating attorney fees now that the court has lifted caps on attorney fees. The court did so in Castellanos v. Next Door Co., a ruling handed down last year. The high court lifted limits on total disability eligibility in a separate ruling.

The attorney fee caps were imposed in reforms the Legislature adopted in 2003, as were other restrictions on benefits intended to drive down the cost of administering claims. Before the reforms, Florida posted the highest workers’ compensation premiums in the country. Afterward, the cost savings contributed to to private employment growth at a rate nearly twice that in Alabama, Georgia, Mississippi and Alabama, Helvacian said.

Wage growth also exceeded that in Florida’s neighbors — at 3.4 percent compared to an average 2.7 percent.

The attorney fee caps, based on the amount of benefits earned for the client, and other reforms saved 28.6 percent in system costs, by Helvacian’s calculations. Without them, he expects costs to rise by that same percentage.

Helvacian appeared during a panel discussion during the Chamber gathering in Miami. Also participating was Chris Bailey, state relations executive with the National Council on Compensation Insurance, or NCCI, which proposes workers’ compensation premium rates in Florida.

Last year, NCCI proposed a 19.6 percent premium hike, although the Office of Insurance Regulation approved only an 14.5 percent increase. The rate, which began to take effect in December, is under attack in the 1st District Court of Appeal over alleged violation of the Sunshine Law.

Critics of Florida’s workers’ compensation system have questioned NCCI’s role in proposing rates for nearly all Florida insurers. These critics, including trial attorneys on key House and Senate Committees, argue insurers should compete against each other on rates — basing premiums on individual policy loss costs.

That’s a “red herring,” Bailey said — “truly, more of a distraction” from the real problem, And that, he said, is attorney fees.

Under Florida’s system, insurers compete on the “back end,” Bailey said — offer dividends and other inducements to lure business.

Lisa Miller, a Tallahassee lobbyist, counts herself among the system’s critics.

“Workers’ compensation is designed to protect injured workers. The best way to do that is competition on the front end and the back end,” Miller said.

“The best way to do that is re-engineer how we handle rates in Florida, and study the claims practices and go to loss cost.”





Michael Moline

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.

One comment

  • Mark L. Zientz

    February 3, 2017 at 9:53 am

    “It is my understanding that the denial was done with the hopes of posturing this claim for settlement…As of the date of the mediation, temporary partial disability benefits due and owing will be approximately $14,000.00. I would estimate that the value of this claim would certainly be in excess of $25,000.00. Future medical care would need to be determined, including, but not limited to, any need for future surgery”.
    The quote comes from an attorney testifying in a case now on appeal. The attorney worked for the carrier and this was his analysis of the case. The injured worker was owed $14,000.00 which the carrier wouldn’t pay in order to force a settlement at mediation for less than the claim was really worth. These tactics are common. The attorney representing the injured worker would have been entitled to a fee of $2,150.00 if the Judge awarded $14,000.00.That amount was mandated by the legislature before the Catellanos decision. The Supreme Court recognized that a fee of $2,150.00 regardless of the number of hours spent to obtain the benefit, no matter the stalling tactics of the carrier, no matter how difficult the case, was a reason that prevented injured workers from obtaining representation when their claims were wrongfully denied. Workers’ compensation carriers are the only carriers in Florida that are not subject to the good faith claims handling provsions of the state insurance code. The cost of workers’ compensation will go down when it becomes unprofitable to wrongly deny benefits. Don’t allow carriers to include in the rate base any costs of defense if the carrier loses. If you want to take advantage of people who don’t have the resources or the knowledge to fight back, get rid of the lawyers who are willing to represent them on a contingent fee basis.

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