Insurance Journal

August 24, 2012

Florida employers may see their workers’ compensation rates increase as the National Council on Compensation Insurance announced it is seeking a statewide average 6.1 percent rate hike on behalf of insurers.

If approved, the NCCI filing would mark the third consecutive increase, following a 7.8 percent jump in 2011 and 8.9 percent in 2012.

While there have been hikes the past few years, the overall trend of rates in the state has been down for the past decade. Employers’ rates have gone down an average 56 percent since lawmakers rewrote the state’s workers’ compensation law in 2003.

The Office of Insurance Regulation said it would review the NCCI filing in anticipation of a public hearing to be held in October.

If approved, the new rates would take effect Jan. 1, 2013.

“A careful review and thorough analysis of this rate filing will be performed to evaluate its potential effects on Florida’s workers’ compensation insurance marketplace and employers,” said OIR in a statement.

If approved as filed, all five major classifications would see an average increase. Manufacturing classes would increase by an average 4.8 percent, contracting classes by 7.4 percent, and office and clerical classes by 4.3 percent. Goods and service classes would increase by 6.7 percent while miscellaneous classes would increase by 5.6 percent.

According to NCCI documents, the proposed 6.1 percent increase is being driven by a 6.8 percent increase in the experience and trend portion of the filing.

NCCI noted that there are three factors affecting the state’s recent loss experience including the fact that after nine years of decreases in claims frequency, the claims frequency rate has increased by an average 4.5 percent in 2009 and 2010.

Additionally, the average indemnity cost per case that is in excess of wage growth has remained relatively flat since 2006. At the same time, the average medical cost per case in excess of wage growth has increased since 2006.

The industry says that the savings produced by the 2003 workers’ compensation reforms have been exhausted.

NCCI said that “it has been has necessary to adjust the very optimistic outlook, or trend, underlying rates to reflect that significant ongoing experience improvements are no longer occurring and are no longer expected.”

Still, the 2003 reforms did produce savings.

In terms of average loss cost, since 2003 this went from $2.62 per $100 of payroll to a low of $1 per $100 of payroll. Taking into effect the current filing, the average loss cost would be $1.14 per $100 of payroll, which brings Florida in line with other Southeast states.

The OIR said that it will submit several proposals to state lawmakers next year in an effort to reduce some workers’ compensation costs.

The first is a proposal that would reduce the amount paid to physicians who repackage drugs and redistribute them from their office. The issue gained attention this year after NCCI reported that the cost of repackaged drugs translated into a 2.5 percent increase in 2012 rates, resulting in $62 million in additional cost to employers.

State lawmakers considered lowering reimbursements on physician-dispensed drugs so they would be paid the same amount as pharmacies, which receive three times the drug manufacturer’s wholesale price, plus a $4.18 dispensing fee. However, the proposal failed in the face of strong opposition from drug makers.

The other OIR proposals would address the reimbursement rates for hospital inpatient treatment and the amount paid for outpatient and ambulatory surgical center treatment.

Workers compensation premium recovery continues to be the best option for brokers to help their clients as rates increase. Brokers can demonstrate to their clients savings with a better underwriting profile to enter the new marketplace with.