State mulls workers comp rate reduction

Accident in warehouse
The industry is recommending a 4.9% rate reduction.

No one spoke out at a brief Wednesday hearing on proposed workers compensation rates Florida employers should start to pay in January 2022, and insurance regulators were able to wrap up their questions about the National Council on Compensation Insurance request for a proposed 4.9% rate reduction in less than an hour.

The proposed cut is mostly driven by strong underwriting profits, a trend NCCI told the Office of Insurance Regulation staff at the meeting reviewing the Aug. 30 filing should continue. The National Council on Compensation Insurance reviews premium levels on behalf of most Florida insurance companies.

The underwriting profits are driven by reductions in workplace accidents. The increased use of technology, safer workplaces, improved risk management, and a long-term shift in jobs away from manufacturing, where injuries are more likely to occur, and to the service sectors are some of the reasons for the drop in accidents.

The NCCI’s proposed reduction is only a recommendation. Final rates must be approved by the state’s Insurance Commissioner. And rarely does the Commissioner approve the recommendation NCCI initially submits.

While Florida Insurance Commissioner David Altmaier told Florida Politics last month discussion of NCCI’s proposal to establish a workers compensation catastrophe fund was not likely to be discussed at the rate filing public hearing, there was a quick exchange about it between Greg Jaynes, an actuary at the insurance department, and Jay Rosen, the senior actuary for the Council.

NCCI has recommended a special assessment be levied on workers compensation policies to ensure there is enough premium to deal with claims stemming from a catastrophic event, such as a pandemic, industrial accident, hurricane, windstorm, or large motor vehicle accident. If approved, employers could be paying an additional $20 million annually in premiums to monetize the fund.

Because catastrophes aren’t considered mundane recurring events, the claims are not considered by NCCI when it develops recommendations for rates. That means premiums aren’t collected to cover the potential claims, which can put the workers compensation system at risk.

Jaynes noted there is a workers compensation catastrophe fund for claims stemming from acts of terrorism and asked Rosen whether the proposed assessment NCCI has asked permission to levy for the new fund would be modeled after one currently in place for acts of terrorism.

“Yes, the concept is not new in Florida. Catastrophe modeling has been used in other lines of business, for example, as it relates to hurricane exposure. But as you point out, the work comp terrorism provision that has been in existence for many years in Florida is a good analogy for this catastrophe provision,” Rosen said.

Workers compensation insurance is designed to assist workers who are injured on the job by providing them the health benefits they need to return to work, as well as their lost wages. In exchange, injured workers are prevented from suing their employers in circuit court for causing the injury.

While it’s designed to be a no-fault system that benefits both parties, employees often are required to hire attorneys to help them secure benefits. Employers, conversely, often complain about attorney involvement in what is supposed to be a self-executing system.

Jaynes finished his inquiry with a question about future rates.

He asked NCCI what type of filing for 2023 the state could expect to see if NCCI’s proposed 4.9% reduction was approved as submitted. Rosen said, based on a one-year trend in data, a 3.7% reduction would be the “starting point” for NCCI’s next filing.

“As you are aware, there are many things that could cause next year’s proposed rate level indication from that starting point, but a year of trend is negative 3.7%,” Rosen said.

Jaynes was pleased with Rosen’s response.

“Great. Potentially more good news to come. Thank you,” he said.

Christine Jordan Sexton

Tallahassee-based health care reporter who focuses on health care policy and the politics behind it. Medicaid, health insurance, workers’ compensation, and business and professional regulation are just a few of the things that keep me busy.


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