Florida Touts Workers’ Comp Market Competition But Warns on Court Rulings

Florida’s workers’ compensation market remains competitive and well-capitalized, with loss ratios that are among the lowest among larger states, according to a report from the state’s insurance regulator.

At the same time, the report warns, several pending court cases and an erosion of costs savings from reforms enacted in 2003 could throw a monkey wrench into the market’s otherwise stable operations.

The 2014 Florida Workers’ Compensation Annual Report by the Office of Insurance Regulation notes that six of the market’s 10 largest writers are now based in Florida, up from four the year before, writing 28 percent of the premiums. The largest insurer, Bridgefield Employers Ins. Co., a Liberty Mutual company, had 11.34 percent of the market, and the largest 10 insurers had a cumulative 42.62 percent of the market.

After Bridgefield, the largest writers in the state are Zenith, FCCI, RetailFirst, Technology Insurance Co. of New Hampshire, Twin City Fire, Amerisure, FFVA, Comp Options and Guarantee.

The report also looks at the top writers by group. In 2013, the five largest insurer groups comprised 40.5 percent of the market. Liberty Mutual Group is the largest provider of workers’ compensation insurance in Florida with 16.9 percent of the total market, followed by Travelers Group, Hartford Fire & Casualty Group, Fairfax Financial Group, AmTrust NGH Group, FCCI Mutual Insurance Group, American International Group, RetailFirst Group, Zurich Insurance Group and Amerisure Company Group.

According to the report, private insurers write more than 95 percent of workers’ compensation in the state, making Florida one of the most competitive markets of the largest states in the country and one of only two that do not rely largely on state-created residual market entities.

The analysis found that the market is still being helped by reforms passed by the 2003 Florida Legislature. This year’s 5.2 percent overall reduction in rates, effective in January 2015, is the first rate reduction in four years. Updated reimbursement schedules for hospital inpatient and outpatient services has resulted in a 0.8 percent rate decrease, according to the report.

Loss Ratios

Florida’s loss ratios — 50.77 for a direct loss ratio and 57.10 for a direct loss ratio plus defense cost containment costs — are second only to Texas among the big states. Both of these measures are lower than reported for the Florida market in 2012 (55.53 and 62.89, respectively).

While costs for physicians’ services and supplies here are below the national average, the costs for drugs, hospital inpatient, hospital outpatient and ambulatory surgical center services continue to be higher in Florida than the national average.

The 2003 reforms resulted in a 64.7 percent reduction in rates by 2010, with Florida going from having the highest rates in the country in 2000 to 40th highest in 2010. However, rate increases over the past several years caused the state to slip to 29th highest and, this year, to 28th highest.

The report raises concern that the gains in lowering costs from 2003-2010 could be eroded further as the result of several court cases. The cases include one over whether the 104-week statutory cap on temporary total disability benefits is unconstitutional; another questioning the constitutionality of the statutory attorney fee formula; a third expected to decide whether a workers’ compensation exclusion in an employer liability policy — which is intended to protect employers from tort liability to their employees –bars coverage of an employee’s tort judgment obtained in a separate negligence suit against the employer, and a fourth appealing a ruling that found the exclusive remedy provision of the Workers’ Compensation Act unconstitutional.

The OIR says the cases have the potential to affect future costs and rates.

A copy of the full report is available in the new Insurance Journal Research Center at https://www.insurancejournal.com/ research/research/floridas-workers-compensation- market-annual-report-2014/